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of <h1>Tax Appeal Success: Investment Allowance Granted for Currency Fluctuations</h1> <h3>COMMISSIONER OF INCOME TAX Versus GUJARAT SIDDHEE CEMENT LTD.</h3> The appeal regarding the entitlement to investment allowance on increased plant and machinery costs due to foreign exchange rate fluctuations was allowed ... - Issues involved:Whether investment allowance is available on the increased cost of plant and machinery due to fluctuation in the foreign exchange rate.Analysis:Issue 1: Investment allowance entitlement based on foreign exchange rate fluctuationThe primary issue in this appeal was the entitlement of the assessee to investment allowance based on the fluctuation of the foreign exchange rate affecting the cost of plant and machinery. The Tribunal, in paragraph 7 of its order, referred to a decision by the Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat Fertilisers (259 ITR 526). The Court held that investment allowance is permissible on the actual cost enhanced due to fluctuations in the exchange rate of foreign currency. The Court emphasized that when Section 43A(1) is invoked, and an increase in liability is considered as actual cost, such adjusted cost becomes the basis for investment allowance calculations. Consequently, the Tribunal allowed the appeal based on this principle, following the precedent set by the Gujarat High Court.Issue 2: Application of legal precedentThe Tribunal's decision was based on the precedent established by the Hon'ble Gujarat High Court in the case of CIT Vs. Gujarat Fertilisers. The Court had previously ruled that investment allowance could be claimed on the adjusted cost resulting from foreign exchange rate fluctuations. By aligning with this precedent, the Tribunal found no substantial question of law to arise in the current appeal. Therefore, the appeal was dismissed, affirming the decision regarding the entitlement to investment allowance in light of foreign exchange rate variations.In conclusion, the judgment clarified the entitlement of the assessee to investment allowance based on the increased cost of plant and machinery resulting from fluctuations in the foreign exchange rate. The decision was supported by the legal precedent set by the Hon'ble Gujarat High Court, emphasizing the significance of adjusted costs in determining investment allowance eligibility. The dismissal of the appeal signified the alignment of the Tribunal's decision with established legal principles, ensuring consistency in the application of tax laws related to investment allowances and foreign exchange rate impacts on asset costs.
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