INCOME TAX ACT, 1961

Section 43A

Depreciation - Actual cost - Foreign exchange loss on acquision of fixed assets - Allowability

Assessee claimed expenditure amounting to Rs. 2,16,47,192 for foreign fluctuation loss in respect of fixed assets and disallowed the Rs. 1,63,41,273 only out of Rs. 2,16,47,192 while computing total income of concerned assessment year. AO required assessee to explain the difference of Rs. 53,05,919 (Rs. 2,16,47,192 Rs. 1,63,41,273). Assessee explained that amount of Rs. 2,16,47,192 was adjusted in computing actual cost of assets for computing income tax depreciation on assets, as per provision of section 32. Assessee voluntarily disallowed loss arising on foreign exchange and no further disallowance was to be made. However, AO made disallowance of foreign exchange fluctuation loss of Rs. 53,05,919. Held: Assessee had disclosed foreign exchange loss on acquisition of fixed assets at Rs. 2.16 crores (approx) against which foreign exchange gain of Rs. 53,05,919 against Capital Work-in-Progress 'CWIP' was adjusted and balance of Rs. 1.63 crores (approx.) was added back in computation of income. Admittedly, foreign exchange loss on acquisition of fixed assets totaling to Rs. 1.63 crores (approx.) was not allowable as an expenditure in view of section 43A. Further, foreign exchange gain of Rs. 53,05,919 was to be adjusted against aforesaid loss and net amount of Rs. 1.63 crores (approx.) having been offered to tax, warranted no further disallowance in the hands of the assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 37(1), Expln. 92)

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