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TMI Blog2013 (1) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the Appeals may be stated as under: Respondent (in short, 'the assessee') is carrying on business in manufacturing sugar, ethanol, rectified spirit and co-generation of power and sales. For the assessment years 2001-02 and 2006-07, the assessee filed return of income on 30.10.2001 and on 5.11.2005, respectively. The assessee deducted total loss of Rs. 17,18,36,722/- for the assessment year 2001-02 and also showed subsidy amount of Rs. 93,75,000/- received from the Government of Karnataka under the head "Reserve and Surplus", The assessee declared income of Rs. 50,21,96,567/- for the assessment year 2006-07, without deducting subsidy of Rs. 1,87,50,000/- from the Government of Karnataka, from the total cost. Notices under Sections 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 with effect from 1.4.1999? (ii) Whether the Tribunal was correct in applying the principles of the Bombay High Court decision reported in 235 ITR 780 in the case of Menezes Pnarmaco which was rendered much prior to the introduction of Explanation 10 to Section 43(1) of the Income Tax Act, 1961 ? (iii) Whether the ITAT is correct in law in dismissing the appeal of the assessee by overlooking the fact that the first instalment of subsidy granted by the Government is not linked to supply of power to KEB Grid and hence, provisions of Explanation 10 to Section 43(1) is applicable to the case of the respondent assessee ?" 5. Learned Counsel for the Revenue submits that Explanation 10 to Section 43(1) is applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called), then, so much of the cost as it relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee: Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee." According to Explanation 10 and proviso to sub-section (1) of Section 43, of Income-tax Act, the subsidy amount shall be deducted in the actu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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