Charges paid to electricity board on account of failure to consume contracted amount of electricity is an allowable expenditure:

AO disallowed business expenditure being payment made by the assessee to the electricity board on the count that the same was expended towards penalty. ITAT observed that the assessee had to pay higher charges to the electricity board for failing to consume contracted amount of electricity, which as per the agreement would result into higher rate of electricity charges. Hence, ITAT held that such amount could not have been disallowed. While holding so, ITAT permitted the AO to verify that the charges were levied for the period prior to the sale of property. On Revenue’s appeal, Hon’ble High Court also held that merely because the assessee failed to consume minimum committed electricity and therefore ended up paying higher rate of electricity, such payment cannot be categorised as penalty. ITAT had, therefore, correctly deleted the disallowance. Accordingly, Revenue’s appeal was dismissed.

[CIT Vs. Rajkot Jilla Co. Op. Cotton Marketing Union Ltd. – Tax Appeal No.797 of 2013]

Depreciation on computers installed in factory premises is allowable @ 60%:

Assessee installed certain computers in its factory premises and claimed depreciation available on computers i.e. @ 60%. AO restricted claim of depreciation to 20% after holding that such computers should be treated either as office appliances failing which they would form part of plant and machinery and in either case, depreciation shall be available at 20%. CIT(A) allowed depreciation on such computers @ 60%. On Revenue’s appeal, ITAT, while deciding the issue in assessee’s favour, held that it cannot be said as a universal proposition of law that computers are always used only in offices and not in manufacturing activities. On further appeal, Hon’ble High Court held that had AO shown that computers formed part of integrated manufacturing process, his stand that the same would form part of plant and machinery might have had some basis. In the given case, no such material was there on record. It was not as if computers cannot be installed for direct use in manufacturing activity and thereby forming part of machinery used in such activity. There may be number of ways in which installation of a computer may enhance and improve the efficiency. Also there was nothing on record to suggest that computers were part of plant and machinery. Hence, it was held that decision of CIT(A) and ITAT treating the same as simplicitor computers and granting de[recitation at the rate prescribed under the law calls for no interference. Resultantly, Revenue’s appeal was dismissed.

[CIT Vs. Gujarat Alkalies and Chemicals Ltd. – Tax Appeal No.942 of 2013]