The court emphasized that the interest liability can be worked out only at the end of the joint venture and that the assessing Officer was not justified in disallowing the assessee claims for deduction of the interest.

V. B. GUPTA, J.

( 1 ) PRESENT appeal has been filed by the Revenue challenging the order dated 20th October, 2004 passed by the Income Tax appellate Tribunal, Delhi Bench, 'e' (in short as 'tribunal') in ITA no. 9621/d/90 and 142/del/91 for the assessment year 1988-89.

( 2 ) THE Assessee is an Association of Person (in short AOP) consisting of children and grand children of Late Shri Shiv Raj Bahadur and his wife who owned property bearing No. 9, Raj Narain Road, Civil Lines, Delhi. By an agreement dated 1st June, 1981, his children joined together to form the AOP with the common object of re-developing the property and to build flats on the plot.

( 3 ) THE market value of the property was Rs. 30 lacs and after getting necessary permission, the AOP proceeded to construct 24 flats. The members of the AOP were credited with their share in the property which was valued at Rs. 30 lacs and these amounts were shown in the balance sheet prepared by the AOP for the year ending 31st March, 1982, (assessment year 1982-83 ). A return of income was filed by AOP for this assessment year showing the "nil income".

( 4 ) IN respect of year ending 31st March, 1988, which is the year under appeal, the Assessee submitted return of income showing a loss of Rs. 16,49,310/-in which interest payment of Rs. 15,86,219/- was claimed as deduction. The interest so claimed related to the amounts given to the AOP by its member. The assessing Officer while completing the assessment noticed that the interest has been worked out for the period 30th June, 1980 to 31st March, 1988. It was represented by the Assessee before the Assessing Officer that the interest liability can be worked out only at the end of the joint venture and, therefore, assessee did not calculate the interest from year to year and did not show any interest income in the earlier years since it was charged for the first time. The Assessee had deducted tax from the interest liability and deposited the same with the Government and, therefore claimed that interest should be allowed as deduction.

( 5 ) THE Assessing Officer rejected the claim of the Assessee holding that the interest accrues from year to year and, therefore, the Assessee ought to have

claimed the same from year to year since beginning and ought to have deducted the tax from the interest on year to year basis. Further, there is no provision for allowing the interest and the interest claimed is an afterthought.

( 6 ) AGGRIEVED against the order, the Assessee preferred an appeal before the Commissioner of Income Tax (Appeals) who partly allowed the appeal of the assessee.

( 7 ) THEREAFTER the Assessee as well as the Revenue filed cross-appeals before the Tribunal and vide the impugned order Tribunal partly allowed the appeal of the Assessee and dismissed the appeal filed by the Revenue.

( 8 ) THE first issue raised by the Revenue in this case is as to whether the tribunal was right in allowing the interest payable by the Assessee for the period 30th June, 1980 to 31st March, 1988 in the previous year relevant to the assessment year 1988-89.

( 9 ) THE main objection raised by the Assessing Officer is that the interest claimed represents interest for more than one year and hence cannot be allowed.

( 10 ) THIS objection is not sustainable because it is only when the entire project has been completed then the question of Profit or Loss could be ascertained and this fact has also been notified by the Assessee to the assessing Officer by way of a note in the Profit and Loss A/c for the year ending 30th June, 1981. The Profit and Loss A/c has been filed along with the return of income filed for that year in March, 1985 and the objection of the assessing Authority that the claim is an after thought, cannot be accepted because of the same note given in the Profit and Loss A/c. Further, it is nobody's case that Assessee did not borrow any money from its members. Thus, the Assessing Officer in our opinion was not justified in disal