Section 43A
The section states that if an assessee acquires an asset from a foreign country for business or professional purposes, and a subsequent change in the exchange rate of the involved currencies causes an increase or decrease in liability (expressed in Indian rupees), adjustments can be made. This liability may arise at the time of payment for the asset, either partially or in full, or during the repayment of money borrowed (directly or indirectly) in foreign currency specifically for acquiring the asset.
The liability may also include any associated interest. In such cases, the values related to the asset’s cost or the borrowed amount can be adjusted to reflect the changes in liability resulting from the exchange rate fluctuations.
- the actual cost of the asset under section 43(1)
- the amount of capital expenditure incurred on scientific research under section 35(1)(iv)
- the amount of capital expenditure incurred by a company for promoting family planning amongst its employees under section 36(1)(ix)
- the cost of acquisition of a non-depreciable capital asset falling under section 48.
The amount arrived at after making the above adjustment shall be taken as the amount of capital expenditure or the cost of acquisition of the capital asset, as the case may be.
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.
Where the assessee has entered into a contract with authorised dealer as defined in section 2 of the Foreign Exchange Management Act, 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, for adjustment under this section shall be computed with reference to the rate of exchange specified therein.