ITAT Mumbai: No U/s 36(1)(iii) Disallowance If Own Funds Exceed Advances

Fairchem Organics Limited Vs ACIT (ITAT Mumbai) ITAT Mumbai: No Disallowance U/s 36(1)(iii) When Interest-Free Funds Exceed Advances – Presumption Applies in Favour of Assesse In this case, the assessee company made capital advances for purchase of plant & machinery while having substantial borrowings. The AO alleged diversion of interest-bearing funds and disallowed proportionate interest u/s 36(1)(iii), which was upheld by CIT(A). The ITAT held that the assessee had sufficient own funds (equity & reserves) and strong internal accrals far exceeding the capital advances. In such ...