1. The assessee's contention in this appeal is that the lower authorities are not justified in disallowing the assessee's interest claim to the extent of Rs. 4,025. The assessee is a firm of chartered accountants. The assessee claimed interest payment of Rs. 23,781 on loans, which were said to have been raised for the purpose of construction of the property at No. 29, Coats Road, T. Nagar, Madras, used for the purposes of the profession. The account of the partner, Shri E.V. Subramanian, showed opening and closing debit balances of Rs. 20,559 and Rs. 29,305 (excluding loss of Rs. 16,787, relating to the preceding assessment year 1977-78). The ITO disallowed interest of Rs. 4,025 relating to the above debit balance as under :Interest at 18 per cent on Rs. 20,599 3,700Interest on Rs. 4,652 (mean average of Rs. 9,305, at 18 per cent) 325 4,025 Before the AAC, in appeal against the above disallowance, the assessee contended that the loans on which interest was paid were borrowed wholly for the purpose of the profession. The AAC observed that even if a particular loan taken was immediately used for the purpose of business but if subsequently surplus cash was available and the same was not applied for the repayment of the loan but was used for non-professional expenditure, the loan loses its character of being a borrowing made wholly and exclusively for the purposes of business or profession. According to the AAC, the assessee's balance sheet showed the following position :Partner E.V. Neelakantan 0.05 0.12Loans 1.37 1.35Bank O.D. 0.09 0.06 1.51 1.53Business assets 1.20 1.15Partner E.V. Subramanian (Loan) 0.17 0.17Partner E.V. Subramanian (O.D) 0.14 0.21 1.51 1.53 The AAC held that part of the interest amount did not represent interest on capital borrowed for the purpose of profession and, hence, a portion thereof should be disallowed under Section 36(1)(ia) of the Income-tax Act, 1961 ('the Act'). The AAC held that 11 per cent of the interest claim, i.e., Rs. 2,600, should be disallowed, thus, giving partial relief.
2. We have heard the parties and are of the view that the assessee is entitled to succeed. The assessee's plea before us is that the loans taken by the assessee were for the purpose of the business, being mainly for the purpose of acquiring the property used for the profession and that there was no diversion of borrowing for personal purposes. The department has not established any nexus between any borrowing and the overdrawing by the partner. The AAC's proposition that even if a loan is immediately used for business purposes but the subsequent surplus cash is not applied for the repayment of the loan, interest would not be allowable under Section 36(1)(ia), is not acceptable. It is now well settled that where an assessee borrows money for the purpose of its business and has also capital, any subsequent withdrawal for his personal use would be presumed to be out of his capital and would not entitle the department to disallow a part of the interest paid in the absence of evidence to show a direct link between the borrowing and personal use-CIT v. Gopikrishna Muralidhar  47 ITR 469 (AP).
3. In the circumstances we are of the view that there is no justification for the disallowance of interest.
4. The assessee's next ground is that the AAC failed to consider the additional ground before him on 1-3-1980, regarding the property income. This point does not arise out of the AAC's order. It is open to the assessee to approach the AAC for redress.