It is vide resolution dated May 16, 2006 of the Government of Gujarat, the Assessee was sanctioned a subsidy which was to be adjusted against electricity duty payable by Assessee to the state government for the subsequent financial year 2006-07. For the AY 2006-07, the Assessee claimed to have adjusted the outstanding balance of electricity duty against the grant received from the Government. The Commissioner (Appeals) disallowed the deduction under section 43B of the Act considering the fact that the subsidy had been granted for settlement of dues pertaining to the financial year 2006-07 and due to lack of evidence substantiating such adjustment for the impugned year before the due date of filing of the return, no deduction under section 43B was warranted.

Before the Hon’ble Tribunal, the Assessee made an alternate claim to allow such expense in the succeeding year since the Assessee was able to sufficiently demonstrate that the electricity dues outstanding as at the end of AY 2006-07 was not outstanding at the end of the succeeding year. The Hon’ble Tribunal post inspecting the financials of the Assessee took a view that it can be safely presumed that the outstanding electricity liability for the month of March 2006 were not outstanding and thus stood adjusted against the Government grant. Accordingly, the alternate claim of the Assessee was accepted, and the claim was allowed in the succeeding year. (AY. 2006-07)