ARIJIT PASAYAT J.

( 1 ) LEAVE granted.

( 2 ) CHALLENGE in this appeal is to the judgment of a Division Bench of the gujarat High Court dismissing the appeal filed by the present appellant. The appeal was filed under Section 260a of the Income Tax Act, 1961 (in short the `act' ). The question relates to the effect of Section 43a of the Act. The effect of fluctuation of foreign exchange rate resulting in increase of cost of plant and machinery was the dispute.

( 3 ) RESPONDENT (hereinafter referred to as the `assessee') claimed increased amount as deduction as investment allowance on account of increase in the cost of plant and machinery on account of exchange rate fluctuation. The assessing officer disallowed the claim on the ground that plant and machinery in respect of which there has been increase were installed in the earlier years. Therefore, there is no scope for provision for investment allowance in the year under assessment. It referred to the letter of the assessee dated IT/jam/95-96/1226 dated 16. 2. 1996 making such claim. The assessee preferred an appeal before the Commissioner of Income tax (Appeals) (in short `cit (A)' ). The disallowance made by the assessing officer was upheld by the CIT (A) on the ground that no arguments were advanced and no factual details were furnished regarding the alleged fluctuation on account of foreign exchange rate. The matter was carried in further appeal by the assessee before the Income Tax Appellate Tribunal, rajkot (In short `tribunal') which allowed the claim placing reliance on a decision of the Gujarat High Court in Commissioner of Income Tax v. Gujarat Fertilizers (2003 (259) ITR 526 ). Revenue preferred an appeal under Section 260a of the Act before the High Court. By the impugned judgment the High Court upheld the view of the Tribunal referring to the judgment of Gujarat Fertilizers's case (supra ).

( 4 ) IN support of the appeal, learned counsel for the appellant submitted that the subject matter of controversy is covered by a decision of this Court in Commissioner of Income Tax, Madras v. Lucas TVS Ltd, Padi Chennai (2008 (1) SCC 674 ). He also relied on the decision in Commissioner of income Tax v. Arvind Mills (1992 Supp (2) SCC 190 ).

( 5 ) LEARNED counsel for the assessee-respondent on the other hand submitted that Lucas TVS's case (supra) related to an entirely different question and, therefore, the view expressed by the High Court does not suffer from any infirmity.

( 6 ) THE assessment year in the present case is 1993-94 relating to the previous year 1992-93. In terms of Section 43a (1) the liability decreases or increases due to foreign exchange rate in the previous year. If that is not the position, there is no application of Section 43a (1 ). Section 32a deals with investment allowance. Section 43a deals with special provisions consequential to changes in rate of exchange of currency. It is to be noted that Arvind Mills's case (supra) did not deal with investment allowance under Section 32a of the Act. It in fact related to "development rebate" under Section 33. It is to be noted that Section 43a in the present form was substituted by the Finance Act, 2002 w. e. f. 1. 4. 2003. Prior to its substitution section 43a as inserted by the Finance Act, 1967 w. e. f. 1. 4. 67 and amended by Direct Tax Laws (Amendment) Act, 1987 w. e. f. 1. 4. 1989 contained sub-section (2 ). The said sub-section as it stood at the relevant point of time clearly stated that the provisions of sub-section (1) shall not be taken into account in computing the actual cost of assets for the purpose of deduction on account of development rebate under Section 33.

( 7 ) IN Arvind Mills's case (supra) it was observed inter-alia as follows:

"13. It may also be mentioned that the Ministry of Finance, by its letter of 4th January, 1967, sometime earlier to the enactment of Section 43a had clarified its stand on certain points raised by the Federation of Indian Chambers of commerce and Industry. The fir