TMI Blog2003 (12) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... provided part of the finance required directly, and agreed to remain liable for the additional finance which the assessee was to secure - question referred is, therefore, answered in negative and in favour of the Revenue and against the assessee. - - - - - Dated:- 8-12-2003 - Judge(s) : R. JAYASIMHA BABU., S. R. SINGHARAVELU. JUDGMENT The judgment of the court was delivered by R. JAYASIMHA BABU J.-The assessment year is 1984-85. The question referred is, "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the deposits of Rs. 15 lakhs made by Southern Investments with the assessee-company were not to be connected with the Bangalore project to say that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee every month for the purpose of construction. The agent firm was also required to pay a sum of Rs. 10 lakhs as security deposit on execution of the agreement and make a further deposit of Rs. 5 lakhs at the time of approval of the plans for construction. The deposit so made was to bear interest at the rate of 24 per cent. The amount of that deposit was to be adjusted by the agent from the sale receipts of the project. The agent enjoyed a similar right to adjust the interest on that amount of deposit, and for that purpose the interest was to be calculated on the monthly balance. The agent was to pay to the assessee the sum of Rs. 140 lakhs even if the agent failed to realise the sum by effecting sales of the portions of the building. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work-in-progress under the project 'Palm Tree Place'..." That view of the Assessing Officer was affirmed in appeal by the Commissioner. The Commissioner, after considering the terms of the contract, concluded that, "Thus, the tenor of the agreement shows that it was entered into with the specific purpose of financing the Bangalore project known as the 'Palm Tree Place Project' and the deposit received was to enable the assessee to finance this project. The deposit was also taken by the assessee as a guarantee that a minimum final sale value would be obtained for this project by the agent." The Commissioner further noted that there was no material to hold that the sum of Rs. 15 lakhs received under this agreement for this project had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sustain the Tribunal's view that the deposit was not linked to the project. The deposit indeed was obtained solely for the purpose of financing the part of the cost of the project and the interest paid for obtaining such finance--though the amount is described in the agreement as security deposit--was in fact an expenditure which was in relation to this project and no other project. The use of the words "additional finance" in clause II (b) of the agreement reinforces this view as the deposit paid under the agreement has been regarded by the parties as part of the finance required for the project and for obtaining additional finance, the agent had agreed to take the risk involved in obtaining such finance and also be responsible and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that all interest paid on the deposit even if it be regarded as finance cost was required to be excluded from the cost of the project. In the same accounting standard at para. 8.8 it has been made clear that, "However, in some circumstances general administrative expenses, development costs and finance costs are specifically attributable to a particular contract and are sometimes included as part of accumulated contract cost" Thus, all that the accounting standard provides is that if the finance cost and other costs such as the general administration and selling cost, research and development cost are contract specific then, such costs are required to be included as part of the project cost In cases where such costs are specifically a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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