VXL INDIA LTD vs. ASSTT C I T

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TAXAP/469/1999HC GujaratGJHC24025799199911 November 2008Bench: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE SMT. JUSTICE ABHILASHA KUMARI3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeals in favour of the assessee. It was common ground between the parties that the issue was no longer res integra in light of the Full Bench judgment of the Gujarat High Court in CIT Vs. Gujarat State Fertilizers Co. Ltd. (2003) 259 ITR 526. The Tribunal's impugned order, which followed the Division Bench judgment in CIT Vs. Windsor Foods Ltd. (1999) 235 ITR 249, was overruled by the Larger Bench decision in CIT Vs. Gujarat State Fertilizers Co. Ltd. (supra). Consequently, all the substantial questions of law were answered in the negative, meaning in favour of the assessee and against the revenue. The appeals were allowed in terms of this finding, with no order as to costs. The operative direction was to allow the appeals and place a copy of the judgment in connected matters.

What were the facts?

The appeals were filed by VXL India Ltd. (the assessee) against the Income Tax Officer (the revenue) concerning assessment years not explicitly stated in the provided text. The appeals challenged an order passed by the Income Tax Appellate Tribunal (ITAT). The core of the dispute revolved around the assessee's entitlement to investment allowance under Section 32A read with Sections 43A(1) and 43 of the Income Tax Act, 1961, specifically concerning the additional cost incurred due to fluctuations in foreign exchange rates. The ITAT had initially followed a Division Bench judgment of the High Court in CIT Vs. Windsor Foods Ltd. (1999) 235 ITR 249.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant was not entitled to investment allowance under section 32A read with section 43A(1) and section 43 of the I.T. Act, 1961, in respect of the additional cost or any part thereof which it suffered in rupee terms because of the fluctuations in the conversion rate of foreign exchange? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the incremental cost arising on account of fluctuations in rate of exchange did not accrue in the current assessment year? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the incremental cost arising on account of fluctuations in rate of exchange accrues only in the year of payment as per section 43A of the Income tax Act, 1961? Assessee's contention: The assessee argued that it was entitled to investment allowance on the additional cost incurred due to foreign exchange fluctuations. The judgment does not explicitly record the assessee's arguments beyond what is implied by the questions of law. Revenue's contention: The revenue contended that the incremental cost due to foreign exchange fluctuations did not accrue in the current assessment year and accrues only in the year of payment, thus disentitling the assessee to the investment allowance. The judgment does not explicitly record the revenue's arguments beyond what is implied by the questions of law.

Which sections of the Income-tax Act were involved?

Section 32A,Section 43A(1),Section 43

AI-generated summary — verify with the full judgment below

TAXAP/46719/1999 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 467 of 1999 WITH TAX APPEAL No. 468 of 1999 To TAX APPEAL No. 470 of 1999 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA Sd/- HON'BLE SMT. JUSTICE ABHILASHA KUMARI Sd/- ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= VXL INDIA LTD. - Appellant(s) Versus INCOME TAX OFFICER - Opponent(s) ========================================================= Appearance : MS NITI SHETH WITH MS VAIBHAVI PARIKH FOR MRS SWATI SOPARKAR for Appellant(s) : 1, MRS. M.M.BHATT for Respondent. NOTICE SERVED for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HON'BLE SMT. JUSTICE ABHILASHA KUMARI Date : 11/11/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

TAXAP/46719/1999 2/3 JUDGMENT 1. The Appeals have been admitted on 16.10.2000 framing following identically worded substantial questions of law in each of the Appeal. “(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant was not entitled to investment allowance under section 32A r/w section 43A(1) and section 43 of the I.T Act, 1961 in respect of the additional cost or any part thereof which it suffered in rupee term because of the fluctuations in the conversion rate of foreign exchange?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the incremental cost arising on account of fluctuations in rate of exchange did not accrue in the current assessment year?

(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in concluding that the incremental cost arising on account of fluctuations in rate of exchange accrues only in the year of payment as per section 43A of the Income tax Act, 1961?"

2.

Heard learned Advocates appearing for the respective parties. It is common ground between the

TAXAP/46719/1999 3/3 JUDGMENT parties that the issue raised by the questions is no longer res integra in light of Full Bench judgment of this Court in the case of CIT Vs. Gujarat State Fertilizers Co. Ltd. (2003) 259 ITR 526. 3. As can be seen from the impugned order of the Tribunal, which is a common order dated 16.06.1999, the Tribunal has followed the Division Bench judgment in the case of CIT Vs. Windsor Foods Ltd. (1999) 235 ITR 249 which has since been overruled by the Larger Bench decision in the case of CIT Vs. Gujarat State Fertilizers Co. Ltd. (supra). In the circumstances, it is not necessary to set out facts and contentions in detail. 4. All the questions are accordingly answered in the Negative i.e. in favour of the assessee and against the revenue in each of the Appeals. The Appeals are accordingly allowed in the aforesaid terms with no order as to costs. Registry is directed to place copy of this judgment in all connected matters. Sd/- (D.A. Mehta, J.) Sd/- (Smt. Abhilasha Kumari, J.) M.M.BHATT

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