Munjal Sales Corporation vs Commissioner Of Income Tax,Ludhiana & ...

The Supreme Court addressed the disallowance of interest claimed under Section 36(1)(iii) and Section 40(b)(iv) of the Income-tax Act, 1961, in relation to interest-free advances made by the assessee to sister concerns. The Court held that the disallowance was justified as the advances were made from borrowed funds rather than the firm's own funds, establishing that deductions under these sections require a clear nexus between the funds used and the income generated. The appeals were dismissed, affirming the High Court's decision.