S.A. BUILDERS LTD. vs COMMNR. OF INCOME TAX, CHANDIGARH

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 by the assessee was made using borrowed funds, thus justifying the disallowance of interest. The judgment confirmed the lower courts' findings and dismissed the appeals of the assessee, reinforcing the principle that interest disallowance is warranted when funds are diverted without interest charges.