S. A. Builders Ltd. .. Petitioner vs Commissioner Of Income Tax (Appeals) ...

The Supreme Court addressed the issue of disallowance of interest under the Income Tax Act, specifically examining the nexus between borrowed funds and advances made to a subsidiary. The Court upheld the Tribunal's decision that the entire amount of Rs. 82 lakhs advanced was from borrowed funds, thus justifying the disallowance of interest. The Court confirmed the findings of the lower authorities and dismissed the appeals of the assessee, reinforcing the principle that interest disallowance is warranted when funds are diverted without interest to related parties under Section 36(1)(iii) of the Income Tax Act.