TaxTMI 
TaxTMI 
2003 (12) TMI 35
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....uction of the project?" The assessee entered into an agreement on January 5, 1983, with a partnership firm, Southern Investments, which is referred to in the body of the agreement as a firm which owns a trade mark "S.I.". The assessee-company is part of the same group as is obvious from the very name of the assessee. The agreement sets out, inter alia, that the assessee had entered into an agreement with the owners of a plot on Palmgrove Road, Bangalore, that it had nominated three persons to purchase the property, that it was required to provide finance to those persons for the purchase of the property; that the projected cost of construction was Rs. 75 lakhs; that the firm which had experience in the real estate field had agreed to act ....
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....ed by the assessee, purchase unsold portions at the value determined by the assessee. Under the head "Obligations of the builders" it was set out in that agreement, that the construction was to be put up by the assessee in consultation with the agent and that the assessee was not in any manner to delay or withhold the construction of the project and that it was the obligation of the assessee to "...arrange at the risk and cost of the agent any additional finance required to continue and complete the proposed constructions". The assessee was required to pay to the agent a fee of 8 per cent. of the total sale receipts as marketing fee. The assessee claimed from its profits for this assessment year a sum of Rs. 3.2 lakhs which it had paid to....
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....er project or that it had treated the same as part of its general working capital. The assessee, however, was successful in persuading the Tribunal not to treat this as part of the project cost. The Tribunal while accepting the assessee's case held, "Thus it is clear that the funds made available to the assessee were not so inextricably connected with the project so as to say that the interest paid thereon was the cost of construction of the project." It is evident from the recitals as also the mutual obligations set out in this agreement that the agreement was in relation to a project which was for construction of a multi-storeyed building on the land described in the schedule to that agreement; that the cost of the land was Rs. 20 lakh....
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.... Learned senior counsel for the assessee, however, submitted that as the Assessing Officer had used the term "work-in-progress", this finance cost could not possibly be regarded as part of the work-in-progress and that the treatment of this interest as part of the work-in-progress was wholly unjustified. Though this argument on the face of it looks attractive, all that the Assessing Officer has said is that it had been the practice of the assessee-company to account for all the expenditure in relation to a project which was incomplete at the end of the assessment year as part of work-in-progress and that the assessee was in error in not including this cost also, which was related to the project, in that amount which the assessee has describ....