INCOME TAX ACT, 1961

Section 43A

Depreciation - Adjustment of fluctuation in respect of foreign exchange liabilities - Allegation of revenue that subject assets were not acquired and no actual payment was made by assessee -

Revenue challenged order of Tribunal holding that a sum of Rs. 39,78,92,211 should be treated as a depreciation loss as claimed by assessee as arising due to forward contracts as these contracts stood terminated during relevant assessment year and corresponding amount was deemed to be added to the value of assets even when these assets were not acquired or no payments were made. Held: Section 43A as it is stood before amendment required an assessee to revalue the foreign exchange liability at the end of every previous year and provide for the increase or decrease as a result of foreign exchange fluctuation. The aforesaid adjustment has to be made even in a case where payment was not actually made and adjustments have to be made on the basis of the liability as on the last day of the previous year. By way of an amendment in the year 2002, the requirement of making of payment was inserted. Assessee even under un-amended provision is entitled to benefit of the loss claimed by assessee to the tune on account of settlement of forward contracts in the previous year, which was shown as loss while computing the taxable income of assessee. Accordingly, substantial question of law was answered against revenue and in favour of assessee.

Followed:Star India P. Ltd. [2006 TaxPub(DT) 0352 (SC)]

REFERRED : Jt. CIT v. M/s. Rolta India Ltd. (2011) 330 ITR 470 (SC) : 2011 TaxPub(DT) 0806 (SC); Assst. CIT v. Elecon Engineering Co. Ltd. (2010) 322 ITR 20 (SC) : 2010 TaxPub(DT) 1606 (SC); CIT v. Jupiter Bio-Science Ltd. (2013) 352 ITR 113 (Karn) : 2012 TaxPub(DT) 0432 (Karn-HC); JSW Steel Ltd. v. Asstt. CIT 2010 TaxPub(DT) 1981 (Bang-Trib)

FAVOUR : In assessee's favour

A.Y. :

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