https://www.taxtmi.com/caselaws?id=783127 The Tribunal allowed the assessee-firm's appeal and deleted the disallowance of interest expenditure u/s 36(1)(iii). It held that mere routing of partners' drawings through an interest-bearing overdraft account, resulting in negative capital balances, does not establish a direct nexus between borrowed funds and non-business advances. On facts, the assessee had substantial interest-free funds (partners' capital and trade liabilities) more than sufficient to cover partners' withdrawals, and the overdraft was not shown to be raised primarily for partners' personal use. The negative capital balance arose from a non-cash diminution already disallowed earlier. Accordingly, the interest remained for business purposes and disallowance was unsustainable. en-us Fri, 05 Dec 2025 00:00:00 +0530 Wed, 10 Dec 2025 08:41:43 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=783127 The Tribunal allowed the assessee-firm's appeal and deleted the disallowance of interest expenditure u/s 36(1)(iii). It held that mere routing of partners' drawings through an interest-bearing overdraft account, resulting in negative capital balances, does not establish a direct nexus between borrowed funds and non-business advances. On facts, the assessee had substantial interest-free funds (partners' capital and trade liabilities) more than sufficient to cover partners' withdrawals, and the overdraft was not shown to be raised primarily for partners' personal use. The negative capital balance arose from a non-cash diminution already disallowed earlier. Accordingly, the interest remained for business purposes and disallowance was unsustainable. Case-Laws Income Tax Fri, 05 Dec 2025 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=783127