CIT Vs. RIO TINTO INDIA PVT LTD

JUDGEMENT

(1.) The present common judgment will dispose of five appeals. The following common question of law arises for consideration:

(2.) The brief facts necessary to decide the case are that the assessee was incorporated on 19.12.1996 to provide technical services for and give technological support to the Indian mining industry. It claimed commencement of business with effect from 01.07.1997. Upon examination of its income tax returns, the AO directed certain queries with regard to the income and expenditure claimed by it. In reply, by 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 1998-99 after considering the assessee's expenses. The AO concluded as follows: