Disallowance of interest u/s 36(1)(iii) - The AO had disallowed...

Disallowance of interest u/s 36(1)(iii) - The AO had disallowed the interest claimed by the assessee on advances made to its Director, citing a lack of nexus between the advances and the business activities of the assessee. The assessee contended that the advances were made for business purposes and out of commercial expediency. - The Appellate Tribunal recognized the importance of establishing a clear nexus between the advances and the business activities of the assessee. It also emphasized the need to verify the availability of interest-free funds with the assessee at the time of advancing the loan. - The ITAT ordered the AO to examine the additional evidence provided by the assessee and provide an opportunity for the assessee to substantiate its case.