In CIT v Gujarat Siddhi Cement Ltd (SC), the taxpayer had acquired Plant and Machinery, the price of which was payable in foreign exchange. During the previous year relevant to the Assessment Year 1993-94 (being a year subsequent to the year of installation of the Plant and Machinery), consequent to an adverse fluctuation in the rate of exchange, the cost of the Plant and Machinery stood increased, pursuant to the provisions of Section 43-A of the Income-tax Act, 1961 ("Act"). The taxpayer claimed the Investment Allowance under Section 32-A of the Act, in respect of the increase in the cost of the Plant and Machinery. This claim was negatived by the Assessing Officer for the reason that the Plant and Machinery had been installed in an earlier year and not in the year in which the increase in its cost had occurred. In appellate proceedings, while the Commissioner(Appeals) upheld the disallowance, the Appellate Tribunal and the High Court directed acceptance of the taxpayer's claim.
Upon the Revenue preferring an appeal to the Supreme Court, the Court held that its decision in CIT v Arvind Mills (1992 Supp (2) SCC 190) was concerned with the allowability of the Development Rebate under Section 33 and not the Investment Allowance under Section 32-A and that, at the relevant time, sub-section (2) of Section 43-A (omitted subsequently) specifically disentitled a taxpayer from claiming the Development Rebate in respect of cost increases attributable to foreign exchange rate fluctuations. In effect, the Court held that the ratio of Arvind Mills (supra) had no application to the Investment Allowance under Section 32-A and that, accordingly, the Investment Allowance could not be denied in respect of the increased cost, even if such increased cost occurred in a year different from the year of installation of the relevant asset.
Upon the Revenue preferring an appeal to the Supreme Court, the Court held that its decision in CIT v Arvind Mills (1992 Supp (2) SCC 190) was concerned with the allowability of the Development Rebate under Section 33 and not the Investment Allowance under Section 32-A and that, at the relevant time, sub-section (2) of Section 43-A (omitted subsequently) specifically disentitled a taxpayer from claiming the Development Rebate in respect of cost increases attributable to foreign exchange rate fluctuations. In effect, the Court held that the ratio of Arvind Mills (supra) had no application to the Investment Allowance under Section 32-A and that, accordingly, the Investment Allowance could not be denied in respect of the increased cost, even if such increased cost occurred in a year different from the year of installation of the relevant asset.
