https://www.taxtmi.com/caselaws?id=784932 Partial disallowance of interest under section 36(1)(iii) was challenged on the basis that substantial interest income arose from interest charged to partners and there was no nexus between borrowings and interest-free advances. The charging of interest to partners was held to neutralise any allegation of diversion because the assessee was compensated for use of funds, rendering the existence of debit balances legally irrelevant. The appellate disallowance rested on assumption rather than evidence and conflicted with findings of availability of interest-free funds and absence of nexus; accordingly the disallowance could not be sustained. en-us Thu, 08 Jan 2026 00:00:00 +0530 Tue, 13 Jan 2026 18:09:40 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=784932 Partial disallowance of interest under section 36(1)(iii) was challenged on the basis that substantial interest income arose from interest charged to partners and there was no nexus between borrowings and interest-free advances. The charging of interest to partners was held to neutralise any allegation of diversion because the assessee was compensated for use of funds, rendering the existence of debit balances legally irrelevant. The appellate disallowance rested on assumption rather than evidence and conflicted with findings of availability of interest-free funds and absence of nexus; accordingly the disallowance could not be sustained. Case-Laws Income Tax Thu, 08 Jan 2026 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=784932