https://www.taxtmi.com/caselaws?id=788522 Interest on borrowed funds is disallowable only where the revenue establishes a direct nexus between the borrowings and non-business advances, or shows absence of commercial expediency. Where sufficient interest-free funds are available, a presumption arises that capital advances are made from those funds. On the financial statements, the assessee had substantial interest-free funds and the capital advances were comparatively small; the revenue did not prove that borrowed funds were diverted to the impugned advances. The advances were also stated to be for purchase of capital goods for business purposes. The ITAT Mumbai deleted the disallowance of interest under section 36(1)(iii). en-us Fri, 20 Mar 2026 00:00:00 +0530 Tue, 24 Mar 2026 08:12:24 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=788522 Interest on borrowed funds is disallowable only where the revenue establishes a direct nexus between the borrowings and non-business advances, or shows absence of commercial expediency. Where sufficient interest-free funds are available, a presumption arises that capital advances are made from those funds. On the financial statements, the assessee had substantial interest-free funds and the capital advances were comparatively small; the revenue did not prove that borrowed funds were diverted to the impugned advances. The advances were also stated to be for purchase of capital goods for business purposes. The ITAT Mumbai deleted the disallowance of interest under section 36(1)(iii). Case-Laws Income Tax Fri, 20 Mar 2026 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=788522