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2020 (6) TMI 751 - AT - Income TaxAccrual of interest - CIT(A) held that interest of assessee has accrued for F.Y. 2008-09 and not 2007-08 - as per DR assessee had paid to its sister’s concern to buy lands on behalf of assessee and made a huge payment of advance - HELD THAT:- From the records we notice that it was submitted before CIT(A) that the funds were arranged by TATA sons and no interest bearing funds were utlilized to advance. In order to facilitate the transfer of lands from Unitec Group to the assessee, it was agreed to conduct due diligence and accordingly MOU was entered. We notice that AO observed that these funds were utilized to acquire the UAS License and it is only make to believe transaction. We do not agree with the AO that how the funds were utilized by Unitec group is irrelevant and what is relevant is, whether Unitec held the lands as per MOU on the date of transaction and whether due diligence activities were carried on or not. In the records, we found that there is evidence of existence of above said conditions and no contrary evidence was brought on record by revenue. In our view, the transaction entered by the assessee seems to be genuine and within the business dealings. It is also relevant to note that as soon as the period given for carrying out due diligence over, Assessee modified the MOU entered and accordingly purchased only those lands which are as per agreement terms and for the balance advanced amount claimed interest @18.5%. AO has calculated the interest from the date of entering the agreement (MOU) and date of payment on 10.10.2007. But, it is natural for the assessee to allow time to the other party to carry out due diligence as per terms of MOU. It is between the parties to decide, how much time to allow in the execution of contract. Therefore, assessee has given time up to 05.04.2008. Beyond that, assessee has claimed penal interest and declared the same in its financial statement in the subsequent assessment year. In our view, the action of the assessee in this transaction is within the business acceptable practices. Therefore, we are inclined to accept the findings of Ld. CIT(A). - Decided against revenue.
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