TaxTMI 
TaxTMI 
2013 (1) TMI 111
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.... its letter dated 24.01.2001, the assessee claimed that it commenced business on 01.07.1997 and that its Bangalore office was functional in April 1997 for which capital was received in that year. It further stated that in July 1997, personnel were recruited and that discussions with clients for rendering consultancy services were initiated prior to July 1997. It was also seeking opportunities to provide services for mining and related projects in India. The assessee claimed as expenditure, incurred under several heads - travel and conveyance, consultancy expenses, salary, wages, bonus, postage, telephone and telex, business promotional expenses and rent. It claimed that being a service provider, it needed good infrastructure and personnel with expertise in the field. Consequently, it had to make its presence felt in the market and expenses were mainly incurred for business promotion purposes during that year. The assessee entered into a contract with CIDCO and filed a copy of the same and also mentioned about another contract with RIO TINTO Orissa limited w.e.f. 01.06.1996. 3. The AO, by his order dated 01.02.2001, confirmed the assessment for the concerned Assessment year 1998-....
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.... of the Hon'ble Courts, particularly the observations of the Apex Court in Expire Jute Co. Ltd. v. CIT 124 ITR 1 as cited above indicates that where the expenditure has been incurred in connection with the efficient day to day running of business activities, the same is to be regarded as revenue expenditure. The quantum of expenditure is not the test for determination of whether or not any expense is deductible. The disallowance of 80% of total expenditure by the assessing officer is on adhoc basis without specifying and establishing that any enduring benefit has arisen to the appellant. The addition of Rs. 3,01,74,830/-made in the assessment is without any proper basis and unsupported by concrete and sufficient material. The same is therefore ordered to be deleted. This ground of appeal is therefore decided in favour of the appellant." 5. The revenue had carried the matter in appeal to the Income Tax Appellate Tribunal (ITAT), which dismissed it (ITA 240/Del/2002), by its order dated 30.11.2007. The Tribunal held as follows: "7. In the instant case the impugned expenditure was incurred on account of postage, telephone, telex, travelling and conveyance etc., the genuineness o....
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....argued that there was no material on record in the proceedings before the income tax authorities at any point of time that any work was done or performed by the assessee. No evidence or details of the work done or the terms of agreement or compensation received, services offered were furnished; it could not, therefore, be concluded that the assessee had actually carried-on any commercial or business activity so as to earn income. Ms. Rashmi Chopra, learned counsel for the Revenue contended that the impugned judgment of the Tribunal cannot be sustained because it completely overlooked the circumstance that for the assessment year 1998-99, its (ITAT's) previous order had only upheld the CIT(A)'s order, treating the expenditure as revenue expenditure. Consequently, there was no question of a finding that the assessee had set-up business nor was there any positive conclusion about the date of commencement of business. It was also argued in this context that the personnel on whom expenditure was incurred were, in fact, not carrying-out business or promoting business of the assessee, but the business of the entities to which they were seconded. Reimbursement of such expenditure could not....
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....had examined the matter thoroughly. Learned counsel pointed-out that the agreement between the assessee and ACC-CRA Exploration Ltd was, in fact, a part of the record. This clearly mentioned that the services may be provided to or procured from its affiliated company as may be reasonably requested from the company, i.e. the client. It was also agreed that consultancy fee had to be paid based on the number of hours put in by the personnel, including the seconded personnel, which was the actual cost incurred by the service provider or its affiliated corporation. It was submitted that reimbursement of salary of such seconded personnel did not lead to any inference that the assessee had not carried-on business. It was also emphasized that the receipts, therefore, being in the nature of reimbursement were without the element of profit and that the deductions were made on cost basis. 14. This Court has considered the submissions of the parties. The ITAT, after considering the previous order of the AO and the CIT(A), for the first year, Assessment Year 1998-99, concluded as follows in respect of Assessment Year 2001-02: "....the fact is that the assessee has taken all steps so as to....
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....tention of the Assessing Officer, who called for certain details from the assessee. Para 5.1 of his order for that year, reproduces details of the response received from the assessee which discloses as to when exactly it opened its offices and when it had commenced negotiations and entered into contracts for providing services and also that it had recruited personnel. Thereafter, the AO, accepting the assessee's submissions regarding commencement of business, confirmed the assessment under Section 143(3), allowing certain expenditure and disallowing others. That part of the order with regard to the commencement of business, as claimed by the assessee, was confirmed by the Commissioner(A) and later by the Tribunal in its order. 18. This Court notices the decision in Investment Ltd. v. CIT [1970] 77 ITR 533 (SC) that indicates that the findings in regard to the nature and character of investment for one year is good and cogent evidence for later assessment years. The revenue's arguments, seen from one perspective, appear to be sound and persuasive. There can be no absolute proposition that a question once decided is conclusive as regards the assessee and the revenue. However, cert....