Law:

Section:

Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital Where assessee-firm had given interest-free advance to Karta of HUF which was a partner through Karta and Tribunal's finding was that it was evident from balance sheet of assessee-firm that there was sufficient fund in account of HUF and no evidence was available on record to show that borrowed funds were not utilized by assessee for its own business but were diverted as advance to members of HUF free of interest, there was no justification in making disallowance out of interest paid on borrowed funds, Tribunal's finding being a finding of fact did not call for any interference [In favour of assessee] The assessee-firm had given interest-free advance to the Karta of HUF which was a partner through Karta and the Tribunal's finding was that it was evident from the balance sheet of the assessee-firm that there was sufficient fund in the account of the HUF and no evidence was available on record to show that the borrowed funds were not utilized by the assessee for its own business but were diverted as advance to the members of the HUF free of interest. Held that, there was no justification in making disallowance out of interest paid on borrowed funds. The Tribunal's finding being a finding of fact did not call for any interference. CASES REFERRED TO CIT v. Hotel Savera [1999] 239 ITR 795 (Mad.) (para 12), Munjal Sales Corporation v. CIT [2008] 298 ITR 298 (SC) (paras 7, 11) and Tirupati Trading Co. v. CIT [2000] 242 ITR 13 (Cal.) (paras 5,10) Rajeev Shrivastava for the Appellant. Moolchand Jain for the Respondent. JUDGMENT Dhirendra Mishra, J.-The appellant/Revenue's appeal under section 260A of the Income-tax Act, 1961 (for brevity "the Act") against the order of the Income-tax Appellate Tribunal, Nagpur (for brevity "the. Tribunal") has been admitted by this court on the following substantial question; of law : "Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in deleting the addition of Rs. 15,44,750 being disallowance out of interest equivalent to the amount of interest receivable by the respondent on interest free loan in view…

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