Section 43A of Income Tax Act, 1961: Special provisions consequential to changes in rate of exchange
Updated: Oct 14
Regardless of any other provisions of this Act, if an assessee purchases an asset in a previous year from a nation outside of India for the purposes of his business or profession, and as a result of a change in the exchange rate in the prior year following the purchase of the asset, the assessee's liability as expressed in Indian currency (as compared to the liability existing at the time) increases or decreases.
(a) The full or a portion of the asset's cost, or (b) the full or a portion of the money he directly borrowed from someone else.
Regardless of the method of accounting used by the assessee, the amount by which the liability as stated above is so increased or decreased during such previous year and which is considered at the time of making the payment shall be added to, or, as the case may be, deducted from—
1. the actual cost of the asset as defined in clause (1) of section 43; or
2. The amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35.
3. the amount of capital expenditures listed in section 35A; or
4. the amount of capital expenditure mentioned in clause (ix) of section 36's sub-section (1); or
5. the cost of acquiring a capital asset for the purposes of Section 48 that is not a capital asset referred to in Section 50,
And the sum obtained after such an addition or deduction is considered to be the asset's actual cost, the amount of capital expenditure, or, as applicable, the cost of acquisition of the capital asset as stated.
The amount to be added to, or, as the case may be, subtracted from, the actual cost, expenditure, or cost of acquisition at the time of making the payment under this section shall be so determined where an addition to, or deduction from, the actual cost, expenditure, or cost of acquisition has been made under this section, as it stood immediately before its substitution by the Finance Act, 2002, on account of an increase or reduction in the liability as aforesaid.