Section 43A of Income Tax Act "Special provisions consequential to changes in rate of exchange of currency"
43A. Notwithstanding anything contained in any other
provision of this Act, where an assessee has acquired any
asset in any previous year from a country outside India for
the purposes of his business or profession and, in
consequence of a change in the rate of exchange during any
previous year after the acquisition of such asset, there is
an increase or reduction in the liability of the assessee as
expressed in Indian currency (as compared to the liability
existing at the time of acquisition of the asset) at the
time of making payment-
(a) towards the whole or a part of the cost of the asset; or
(b) towards repayment of the whole or a part of the moneys
borrowed by him from any person, directly or indirectly, in
any foreign currency specifically for the purpose of
acquiring the asset along with interest, if any,
the amount by which the liability as aforesaid is so
increased or reduced during such previous year and which is
taken into account at the time of making the payment,
irrespective of the method of accounting adopted by the
assessee, shall be added to, or, as the case may be,
deducted from-
(i) the actual cost of the asset as defined in clause (1) of
section 43; or
(ii) the amount of expenditure of a capital nature referred
to in clause (iv) of sub-section (1) of section 35; or
(iii) the amount of expenditure of a capital nature referred
to in section 35A; or
(iv) the amount of expenditure of a capital nature referred
to in clause (ix) of sub-section (1) of section 36; or
(v) the cost of acquisition of a capital asset (not being a
capital asset referred to in section 50) for the purposes of
section 48,
and the amount arrived at after such addition or deduction
shall be taken to be the actual cost of the asset or the
amount of expenditure of a capital nature or, as the case
may be, the cost of acquisition of the capital asset as
aforesaid:
Provided that where an addition to or deduction from the
actual cost or 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, the
amount to be added to, or, as the case may be, deducted
under this section from, the actual cost or expenditure or
cost of acquisition at the time of making the payment shall
be so adjusted that the total amount added to, or, as the
case may be, deducted from, the actual cost or expenditure
or cost of acquisition, is equal to the increase or
reduction in the aforesaid liability taken into account at
the time of making payment.
Explanation 1.-In this section, unless the context otherwise
requires,-
(a) "rate of exchange" means the rate of exchange determined
or recognised by the Central Government for the conversion
of Indian currency into foreign currency or foreign currency
into Indian currency;
(b) "foreign currency" and "Indian currency" have the
meanings respectively assigned to them in section 2 of the
Foreign Exchange Management Act, 1999 (42 of 1999).
Explanation 2.-Where the whole or any part of the liability
aforesaid is met, not by the assessee, but, directly or
indirectly, by any other person or authority, the liability
so met shall not be taken into account for the purposes of
this section.
Explanation 3.-Where the assessee has entered into a
contract with an authorised dealer as defined in section 2
of the Foreign Exchange Management Act, 1999 (42 of 1999),
for providing him with a specified sum in a foreign currency
on or after a stipulated future date at the rate of exchange
specified in the contract to enable him to meet the whole or
any part of the liability aforesaid, the amount, if any, to
be added to, or deducted from, the actual cost of the asset
or the amount of expenditure of a capital nature or, as the
case may be, the cost of acquisition of the capital asset
under this section shall, in respect of so much of the sum
specified in the contract as is available for discharging
the liability aforesaid, be computed with reference to the
rate of exchange specified therein.