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DCIT, Circle 2(1), New Delhi. Vs. Barista Coffee Company Ltd., Shop No.55, Community Centre, Basant Lok Market, Vasant Vihar,
May, 08th 2015
       IN THE INCOME TAX APPELLATE TRIBUNAL
            DELHI BENCHES : A : NEW DELHI

 BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM

                        ITA No.3587/Del/2013
                       Assessment Year : 2008-09


DCIT,                              Vs. Barista Coffee Company Ltd.,
Circle 2(1),                           Shop No.55, Community Centre,
New Delhi.                             Basant Lok Market,
                                       Vasant Vihar,
                                       New Delhi.
                                       PAN: AABCB5798A

                          CO No.301/Del/2014
                        (ITA No.3587/Del/2013)
                       Assessment Year : 2008-09

Barista Coffee Company Ltd.,       Vs. DCIT,
Shop No.55,                            Circle 2(1),
Community Centre,                      New Delhi
Basant Lok Market,
Vasant Vihar,
New Delhi.
PAN: AABCB5798A

  (Appellant)                              (Respondent)


               Assessee By     :    Shri K. Sampath, Advocate &
                                    Shri Raja Kumar, Advocate.
               Department By   :    Ms Y. Kakkar, DR
                                                                ITA No.3587/Del/2013
                                                                  CO No.301/Del/2014

             Date of Hearing             :    06.05.2015
             Date of Pronouncement       :    07.05.2015


                                  ORDER
PER R.S. SYAL, AM:
     This appeal by the Revenue and Cross Objection by the assessee

arise out of the order passed by the CIT(A) on 14.3.2013 in relation to

the assessment year 2008-09.

2.   The only ground raised by the Revenue in its appeal is against the

deletion of disallowance of Rs.28,12,079/- out of repairs and

maintenance expenses treated by the Assessing Officer (AO) as capital

expenditure.      Succinctly, the AO, during the course of assessment

proceedings, observed that a sum of Rs.30,40,193 was claimed as

deduction, which was, in fact, on account of purchase of `Plant and

machinery' as under:-

     Bill Date      Vendor        Amount              Items
     11.01.2008     Cimbali SPA       Rs.2793683.23 LA Cimbali Coffee machine
                                                      Junior grinder silver & LA
                                                      Cimbali Inoxba TUV coffee
                                                      grinders.
                    Cimbali SPA         Rs.121237.62
                    Cimbali SPA         Rs.125271.95
     Total                             Rs.30,40,193/-


                                     2
                                                          ITA No.3587/Del/2013
                                                            CO No.301/Del/2014

3.   As the assessee is engaged in the business of Coffee bars, the AO

opined that the Coffee machines and coffee grinders constituted its

capital assets. He held such assets to be profit earning apparatus and not

eligible for deduction as repairs and maintenance. On being called upon

to explain its stand, the assessee stated that the expenditure was not

much and was of revenue nature. Treating the purchase of these Coffee

machines and coffee grinders from LA Cimbali, SPA as capital

expenditure, the AO allowed depreciation on it amounting to

Rs.2,28,014/-. This resulted into an addition of Rs.28,12,079/-. The ld.

CIT(A) deleted this addition.




4.   After considering the rival submissions and perusing the relevant

material on record, it is observed that though the assessee stated before

the AO that the expenditure of Rs.30.40 lac was of revenue nature, but it

changed its stand before the ld. CIT(A) and contended that these

machines were, in fact, capitalized by the assessee voluntarily and the

observations of the AO in this regard were wrong. It is evident that

there is an apparent contradiction between the stand taken by the


                                    3
                                                          ITA No.3587/Del/2013
                                                            CO No.301/Del/2014

assessee before the AO on one hand and the ld. CIT(A) on the other.

The ld. AR vehemently argued that the amount was, in fact, capitalised

and not taken to revenue account. However, our attention was not

invited towards any material to substantiate such explanation. In our

considered opinion, the ends of justice would meet adequately if the

impugned order on this issue is set aside and the matter is restored to the

file of AO. We order accordingly and direct the AO to verify the view

canvassed by the assessee before the ld. CIT(A) in arguing that this

amount was, in fact, capitalized for the purposes of claiming

depreciation. If such a claim is found to be correct, then, of course,

there cannot be any question of making addition for Rs.28.12 lac. If, on

the other hand, the sum of Rs.30.40 lac is found to have been claimed as

revenue expenditure, then, the addition of Rs.28.12 lac be restored,

inasmuch as the expenditure incurred towards coffee machines and

coffee grinders is otherwise a capital expenditure, being a profit earning

apparatus of the assessee.




                                     4
                                                          ITA No.3587/Del/2013
                                                            CO No.301/Del/2014

5.   The first ground of the assessee's cross objection is against the

confirmation of addition of Rs.18,207/- u/s 43B of the Act. During the

course of assessment proceedings, it was noticed by the AO from the tax

audit report that a sum of Rs.18,207/-, being amount of work contract

tax remained unpaid before the filing of return within the meaning of

section 43B. Further, it was observed that the assessee did not add this

amount in the computation of total income. The AO made addition for

the said sum. It was argued before the ld. CIT(A) that the tax auditor

inadvertently qualified the audit report by mentioning that the said sum

was contract tax disallowable u/s 43B of the Act. The ld. AR contended

that there is no amount of tax payable by the assessee. We find that there

is an absence of details in this regard to demonstrate as to whether or not

the sum of Rs.18,207/-, in fact, remained payable as work contract tax.

Under such circumstances, we set aside the impugned order and remit

the matter to the file of AO for vetting the assessee's contention in this

regard. If it is found on such examination that work contract tax to that

tune, in fact, remained unpaid before the filing of return of income, then,


                                     5
                                                          ITA No.3587/Del/2013
                                                            CO No.301/Del/2014

the disallowance should be sustained and in the otherwise situation the

issue be decided as per law.

6.   The next ground is against confirmation of disallowance of

Rs.88,370/- on account of personal expenses. The facts apropos this

ground are that the assessee claimed deduction for entertainment

expenses amounting to Rs.95,899/- which included personal expenses of

director Partha Dutta Gupta amounting to Rs.45,992/- for Pizza and

dinners, etc.   Staff welfare expenses amounting to Rs.19,55,074/-

included personal expenses of Shri Partha Dutta Gupta amounting to

Rs.42,378/-. The AO made total addition of Rs.3,37,784/- by treating

such total amount,     including a sum of Rs.88,370/-,        as personal

expenses u/s 37(1) of the Act. The assessee is aggrieved against the ld.

CIT(A) sustaining the addition to the extent of Rs.88,370/- comprising

two amounts, namely, Rs.45,992/- and Rs.42,378/-.




7.   After considering the rival submissions and perusing the relevant

material on record, it is found that the assessee is a limited company.

There is no dearth of judicial precedents holding that there cannot be any

                                    6
                                                          ITA No.3587/Del/2013
                                                            CO No.301/Del/2014

disallowance of expenses in the hands of company on account of

personal use by its Directors. The Hon'ble Gujarat High Court in Sayaji

Iron and Engineering Company vs. CIT (2002) 253 ITR 749 (Guj) has

held that there cannot be any disallowance of personal expenses for cars

on account of personal use by the director. It has been further held that

no disallowance can be made even by treating such expenditure as not

having been incurred for the business purpose. Similar view has been

taken by the Delhi Bench of the Tribunal in several cases including Dy.

CIT vs. Haryana Oxygen Ltd. (2001) 76 ITD 32 (Del). In view of the

above decisions, we hold that the ld. CIT(A) was not justified in

sustaining the disallowance to this extent. This ground is allowed.

8.   The last ground is against the confirmation of disallowance on

account of repairs and maintenance expenses of Rs.1,78,578/- by

treating it as capital expenditure. The facts apropos this ground are that

the assessee purchased Printed frosted films amounting to Rs.1,98,419/-

and treated it as revenue expenditure. The AO held such amount to be

capital in nature. After allowing depreciation @ 10%, he disallowed the


                                    7
                                                           ITA No.3587/Del/2013
                                                             CO No.301/Del/2014

remaining amount of Rs.1.78 lac.         The ld. CIT(A) confirmed the

disallowance.

9.     Having heard both the sides and perused the relevant material, we

find that the nature of expenditure incurred by the assessee to the tune of

Rs.1.98 lac is not emanating either from the assessment order or the

impugned order. Unless true nature of such expenditure is deduced, one

cannot reach a positive conclusion about the same being a capital or

revenue. Under such circumstances, we set aside the impugned order on

this score and send the matter back to the file of AO for elaborately

discussing the nature of such expenditure and then deciding the issue

afresh as per law, after entertaining objections from the assessee.

10.    In the result, the appeal of the Revenue is allowed for statistical

purposes and the CO of the assessee is partly allowed.

       The order pronounced in the open court on 07.05.2015.

            Sd/-                                          Sd/-

       [A.T. VARKEY]                             [R.S. SYAL]
     JUDICIAL MEMBER                         ACCOUNTANT MEMBER
Dated,07th May, 2015.
                                     8
                                  ITA No.3587/Del/2013
                                    CO No.301/Del/2014

dk
Copy forwarded to:
     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT

                           AR, ITAT, NEW DELHI.




                       9

 
 
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