Commissioner of Income Tax vs S.I. Property Development Ltd.

R. Jayasimha Babu, J.—The assessee carries on construction activity. It had two projects, one of which had been completed in the previous years relevant to the assessment years and the other project was incomplete. The assessment years are 1987-88 and 1988-89. The expenditure incurred on overheads of the head office was shown in the books of account as having been allocated to the project which was complete and no part of the administrative expenses was shown against the project which was incomplete.

The Assessing Officer found fault with that method and sought to allocate a part of that expenditure to the incomplete project. On appeal, the assessee''s point was accepted. That having been confirmed by the Tribunal, the Revenue is in appeal before us.

Learned counsel for the Revenue submitted that the method followed by the assessee conveys a distorted picture as the expenditure incurred for the head office is an expenditure which is relatable not only to the projects completed during the year but also to all other projects, which the company had taken on and which may not yet have been completed.

There is substance in the submission. However, one cannot lose sight of the fact that the method followed by the assessee is a method which had been followed by it consistently and which had been accepted by the Revenue in the earlier years. Having regard to the Revenue''s own approach to the matter which resulted in the assessee continuing to adopt the same method year after year, it would not be fair to the assessee to change that method in these years.

Learned counsel for the Revenue submitted that the method adopted by the assessee in the earlier years had not been brought up before this court by way of a reference as the Revenue implications were small. That reason however does not erase the fact that the method adopted by the assessee had been accepted and that, over the years, had become the method consistently followed by the assessee.

We, therefore, answer the question, viz., "whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting disallowance of Rs. 14,28,410 and Rs. 9,75,653 for the assessment years 1987-88 and 1988-89, respectively, being the overhead expenses attributable to the incomplete project ''Lake Shore Manor Project ?" in favour of the assessee and against the Revenue.