law: The Income-Tax Act, 1961
  43. Definitions of certain terms relevant to income from profits and gains of business or profession.-
  In section 28 to 41 and in this section, unless the context otherwise requires-
  (1) "actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority:
  1[Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967 2[, but before the 1st day of March, 1975,] and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees:]
  3[Provided further that where the assessee incurs any expenditure for acquisition of any asset or part thereof in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost.]
  Explanation 1.-Where an asset is used in the business after it ceases to be used for scientific research related to that business and a deduction has to be made under 4[clause (ii) of sub-section (1)] of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the amount of any deduction allowed under clause (iv) of sub-section (1) of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
  5[Explanation 1A.-Where a capital asset referred to in clause (via) of section 28 is used for the purposes of business or profession, the actual cost of such asset to the assessee shall be the fair market value which has been taken into account for the purposes of the said clause.]
  6[Explanation 2.-Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by-
  (a) the amount of depreciation actually allowed under this Act and the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
  (b) the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the relevant block of assets.]
  Explanation 3.-Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the 7[Assessing Officer] is satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the 7[Assessing Officer] may, with the previous approval of the 8[Joint Commissioner], determine having regard to all the circumstances of the case.
  1[Explanation 4.-Where any asset which had once belonged to the assessee and had been used by him for the purposes of his business or profession and thereafter ceased to be his property by reason of transfer or otherwise, is re-acquired by him, the actual cost to the assessee shall be-
  (i) the actual cost to him when he first acquired the asset as reduced by-
  (a) the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
  (b) the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the relevant block of assets; or
  (ii) the actual price for which the asset is re-acquired by him, whichever is less.]
  2[Explanation 4A.-Where before the date of acquisition by the assessee (hereinafter referred to as the first mentioned person), the assets were at any time used by any other person (hereinafter referred to as the second mentioned person) for the purposes of his business or profession and depreciation allowance has been claimed in respect of such assets in the case of the second mentioned person and such person acquires on lease, hire or otherwise assets from the first mentioned person, then, notwithstanding anything contained in Explanation 3, the actual cost of the transferred assets, in the case of first mentioned person, shall be the same as the written down value of the said assets at the time of transfer thereof by the second mentioned person.]
  Explanation 5.-Where a building previously the property of the assessee is brought into use for the purpose of the business or profession after the 28th day of February, 1946, the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its acquisition by the assessee.
  3[Explanation 6.-When any capital asset is transferred by a holding company to its subsidiary company or by a subsidiary company to its holding company, then, if the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied, the actual cost of the transferred capital asset to the transferee-company shall be taken to be the same as it would have been if the transferor-company had continued to hold the capital asset for the purposes of its business.]
  4[Explanation 7.-Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business.]
  1[Explanation 7A.-Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting company is an Indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business:
  Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company.]
  2[Explanation 8.-For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deemed never to have been included, in the actual cost of such asset.]
  3[Explanation 9.-For the removal of doubts, it is hereby declared that where an asset is or has been acquired on or after the 1st day of March, 1994 by an assessee, the actual cost of asset shall be reduced by the amount of duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944.]
  4[Explanation 10.-Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee:
  Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee.]
  1[Explanation 11.-Where an asset which was acquired outside India by an assessee, being a nonresident, is brought by him to India and used for the purposes of his business or profession, the actual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used in India for the said purposes since the date of its acquisition by the assessee.]
  5[Explanation 12.-Where any capital asset is acquired by the assessee under a scheme for corporatisation of a recognised stock exchange in India, approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the actual cost of the asset shall be deemed to be the amount which would have been regarded as actual cost had there been no such corporatization.]
  1[Explanation 13.-The actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD, shall be treated as 'nil',-
  (a) in the case of such assessee; and
  (b) in any other case if the capital asset is acquired or received,-
  (i) by way of gift or will or an irrevocable trust;
  (ii) on any distribution on liquidation of the company; and (iii) by such mode of transfer as is referred to in clauses (i), (iv), (v), (vi), (vib), 2[(xiii), (xiiib) and (xiv)] of section 47:]
  3[Provided that where any capital asset in respect of which deduction or part of deduction allowed under section 35AD is deemed to be the income of the assessee in accordance with the provisions of subsection (7B) of the said section, the actual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used for the purpose of business since the date of its acquisition.]
  (2) "paid" means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head "Profits and gains of business or profession";
  (3) "plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the purposes of the business or profession 4[but does not include tea bushes or livestock]5[or buildings or furniture and fittings];
  (4) (i) "scientific research" means any activities for the extension of knowledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries;
  (ii) references to expenditure incurred on scientific research include all expenditure incurred for the prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research;
  (iii) references to scientific research related to a business or class of business include-
  (a) any scientific research which may lead to or facilitate an extension of that business or, as the case may be, all businesses of that class;
  (b) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business or, as the case may be, all businesses of that class;
  (5) "speculative transaction" means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips:
  Provided that for the purposes of this clause-
  (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or
  (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or
  (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member;
  1[or] 1[(d) an eligible transaction in respect of trading in derivatives referred to in clause 2[(ac)] of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; 3[or]]
  3[(e) an eligible transaction in respect of trading in commodity derivatives carried out in a recognised association 4[, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),] shall not be deemed to be a speculative transaction.
  5[Provided further that for the purposes of clause (e) of the first proviso, in respect of trading in agricultural commodity derivatives, the requirement of chargeability of commodity transaction tax under Chapter VII of the Finance Act, 2013 shall not apply.]
  1 [6[Explanation 1].-For the purposes of 7[clause (d)], the expressions-
  (i) "eligible transaction" means any transaction,-
  (A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and
  (B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;
  (ii) "recognised stock exchange" means a recognised stock exchange as referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified by the Central Government for this purpose.]
  8[Explanation 2.-For the purposes of clause (e), the expressions-
  (i) "commodity derivative" shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013;
  (ii) "eligible transaction" means any transaction,-
  (A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognised association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognised association; and
  (B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act;
  (iii) "recognised association" means a recognised association as referred to in clause (j) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which fulfils such conditions as may be prescribed and is notified by the Central Government for this purpose;]
  (6) "written down value" means-
  (a) in the case of assets acquired in the previous year, the actual cost to the assessee;
  (b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Incometax Act, 1886 (2 of 1886), was in force:
  1[Provided that in determining the written down value in respect of buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, "depreciation actually allowed" shall not include depreciation allowed under sub-clauses (a), (b) and (c) of clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the purposes of the said clause (vi);]
  2[(c) in the case of any block of assets,-
  (i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,-
  (A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year;
  (B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and
  3[(C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced-
  (a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
  (b) by the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988 as if the asset was the only asset in the relevant block of assets, so, however, that the amount of such decrease does not exceed the written down value;]
  (ii) in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i).]
  Explanation 1.-When in a case of succession in business or profession, an assessment is made on the successor under sub-section (2) of section 170 the written down 1[value of any asset or any block of assets] shall be the amount which would have been taken as its written down value if the assessment had been made directly on the person succeeded to.
  2[Explanation 2.-Where in any previous year, any block of assets is transferred,-
  (a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or
  (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year.]
  3[Explanation 2A.-Where in any previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets of the demerged company for the immediately preceding previous year shall be reduced by the 4[written down value of the assets] transferred to the resulting company pursuant to the demerger.
  Explanation 2B.-Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the 5[written down value of the transferred assets 6***] of the demerged company immediately before the demerger.
  1[Explanation 2C.-Where in any previous year, any block of assets is transferred by a private company or unlisted public company to a limited liability partnership and the conditions specified in the proviso to clause (xiiib) of section 47 are satisfied, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the limited liability partnership shall be the written down value of the block of assets as in the case of the said company on the date of conversion of the company into the limited liability partnership.]
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  Explanation 3.-Any allowance in respect of any depreciation carried forward under sub-section (2) of section 32 shall be deemed to be depreciation "actually allowed".
  3[Explanation 4.-For the purposes of this clause, the expressions "moneys payable" and "sold" shall have the same meanings as in the Explanation below sub-section (4) of section 41.]
  4[Explanation 5.-Where in a previous year, any asset forming part of a block of assets is transferred by a recognised stock exchange in India to a company under a scheme for corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the written down value of the block of assets in the case of such company shall be the written down value of the transferred assets immediately before such transfer.]
  5[Explanation 6.-Where an assessee was not required to compute his total income for the purposes of this Act for any previous year or years preceding the previous year relevant to the assessment year under consideration,-
  (a) the actual cost of an asset shall be adjusted by the amount attributable to the revaluation of such asset, if any, in the books of account;
  (b) the total amount of depreciation on such asset, provided in the books of account of the assessee in respect of such previous year or years preceding the previous year relevant to the assessment year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes of this clause; and
  (c) the depreciation actually allowed under clause (b) shall be adjusted by the amount of depreciation attributable to such revaluation of the asset.]
  6[Explanation 7.-For the purposes of this clause, where the income of an assessee is derived, in part from agriculture and in part from business chargeable to income-tax under the head "Profits and gains of business or profession", for computing the written down value of assets acquired before the previous year, the total amount of depreciation shall be computed as if the entire income is derived from the business of the assessee under the head "Profits and gains of business or profession" and the depreciation so computed shall be deemed to be the depreciation actually allowed under this Act.]
  1. Ins. by Act 20 of 1967, s. 33 and the Third Schedule (w.e.f. 1-4-1968).
  2. Ins. by Act 25 of 1975, s. 7 (w.e.f. 1-4-1975).
  3. Ins. by Act 7 of 2017, s. 16 (w.e.f. 1-4-2018).
  4. Subs. by Act 46 of 1986, s. 8, for "clause (i), clause (ii) or clause (iii) or sub-section (1) or sub-section (1A)" (w.e.f. 1-4-1988).
  5. Ins. by Act 13 of 2018, s. 12 (w.e.f. 1-4-2019).
  6. Subs. by Act 46 of 1986, s. 8, for Explanation 2 (w.e.f. 1-4-1988).
  7. Subs. by Act 4 of 1988, s. 2, for "Income-tax Officer" (w.e.f. 1-4-1988).
  8. Subs. by Act 21 of 1998, s. 3, for "Deputy Commissioner" (w.e.f. 1-10-1998).
  1. Subs. by Act 46 of 1986, s. 8, for Explanation 8 (w.e.f. 1-4-1988).
  2. Ins. by Act 33 of 1996, s. 17 (w.e.f. 1-10-1996).
  3. Ins. by Act 10 of 1965, s. 14 (w.e.f. 1-4-1965).
  4. Ins. by Act 20 of 1967, s. 16 (w.e.f. 1-4-1967).
  1. Ins. by Act 27of 1999, s. 26 (w.e.f. 1-4-2000).
  2. Ins. by Act 23 of 1986, s. 9 (w.e.f. 1-4-1974).
  3. Ins. by Act 21 of 1998, s. 18 (w.e.f. 1-4-1994).
  4. Ins. by s. 18, ibid. (w.e.f. 1-4-1999).
  5. Ins. by Act 14 of 2001, s. 26 (w.e.f. 1-4-2002).
  1. Ins. by Act 33 of 2009, s. 17 (w.e.f. 1-4-2010).
  2. Subs. by Act 14 of 2010, s. 13, for "(xiii) and (xiv)" (w.e.f. 1-4-2011).
  3. The proviso ins by Act 7 of 2017, s. 16 (w.e.f. 1-4-2018).
  4. Ins. by Act 22 of 1995, s. 12 (w.e.f. 1-4-1962).
  5. Ins. by Act 32 of 2003, s. 20 (w.e.f. 1-4-2004).
  1. Ins. by Act 18 of 2005, s. 14 (w.e.f. 1-4-2006).
  2. Subs. by Act 21 of 2006, s. 11, for "(aa)" (w.e.f. 1-4-2006).
  3. Ins. by Act 17 of 2013, s. 9 (w.e.f. 1-4-2014).
  4. Subs. by Act 25 of 2014, s. 15, for "recognised association" (w.e.f. 1-4-2014).
  5. Ins. by Act 13 of 2018, s. 12 (w.e.f. 1-4-2019).
  6. The Explanation renumbered as Explanation 1 by Act 17 of 2013, s. 9 (w.e.f. 1-4-2014).
  7. Subs. by s. 9, ibid., "this clause" (w.e.f. 1-4-2013).
  8. Ins. by s. 9, ibid. (w.e.f. 1-4-2014).
  1. Ins. by Act 15 of 1965, s. 6 (w.e.f. 1-4-1962).
  2. Ins. by Act 46 of 1986, s. 8 (w.e.f. 1-4-1988).
  3. Ins. by Act 27 of 1999, s. 26 (w.e.f. 1-4-2000).
  1. Subs. by Act 46 of 1986, s. 8, for "any asset" (w.e.f. 1-4-1988).
  2. Subs. by s. 8, ibid., for Explanation 2 and Explanation 2A (w.e.f. 1-4-1988).
  3. Ins. by Act 27 of 1999, s. 26 (w.e.f. 1-4-2000).
  4. Subs. by Act 10 of 2000, s. 19, for "book value of the assets" (w.e.f. 1-4-2000).
  5. Subs. by s. 19, ibid., for "value of the assets as appearing in the books of account" (w.e.f. 1-4-2000).
  6. The words "as appearing in the books of account" omitted by Act 32 of 2003, s. 20 (w.e.f. 1-4-2004).
  1. Ins. by Act 14 of 2010, s. 13 (w.e.f. 1-4-2011).
  2. The proviso omitted by Act 10 of 2000, s. 19 (w.e.f. 1-4-2000).
  3. Ins. by Act 46 of 1986, s. 8 (w.e.f 1-4-1988).
  4. Ins. by Act 14 of 2001, s. 26 (w.e.f. 1-4-2002).
  5. Ins. by Act 18 of 2008, s. 12 (w.e.f. 1-4-2003).
  6. Ins. by Act 33 of 2009, s. 17 (w.e.f. 1-4-2010).
  1[43A. Special provisions consequential to changes in rate of exchange ofcurrency.-
  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.]
  1. Subs. by Act 20 of 2002, s. 21, for section 43A (w.e.f. 1-4-2003).
  1[43AA. Taxation of foreign exchange fluctuation.-
  (1) Subject to the provisions of section 43A, any gain or loss arising on account of any change in foreign exchange rates shall be treated as income or loss, as the case may be, and such gain or loss shall be computed in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145.
  (2) For the purposes of sub-section (1), gain or loss arising on account of the effects of change in foreign exchange rates shall be in respect of all foreign currency transactions, including those relating to-
  (i) monetary items and non-monetary items;
  (ii) translation of financial statements of foreign operations;
  (iii) forward exchange contracts;
  (iv) foreign currency translation reserves.]
  1. Ins. by Act 13 of 2018, s. 13 (w.r.e.f. 1-4-2017).
  2[43B. Certain deductions to be only on actual payment.-
  Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of-
  3[(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or]
  (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 4[or]
  4[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 5[or]
  5[(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 6[or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement 7[governing such loan or borrowing; or]
  8[(e) any sum payable by the assessee as interest on any 9[loan or advances] from a scheduled bank 10[or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank] in accordance with the terms and conditions of the agreement governing 11[such loan or advances], 12[or]
  12[(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his 13[employee, or]]
  14[(g) any sum payable by the assessee to the Indian Railways for the use of railway assets,] shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him:
  1[Provided that nothing contained in this section shall apply in relation to any sum 2*** which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in whichthe liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.
  *
  *
  *
  *]
  Explanation 4[1].-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him:]
  5[Explanation 2.-For the purposes of clause (a), as in force at all material times, "any sum payable" means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law.]
  6[Explanation7[3].-For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause (c)8[or clause (d)] of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
  9[Explanation 3A.-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
  10[Explanation 3B.-For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) of this section is allowed in computing the income, referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2001, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
  1[Explanation 3C.-For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.]
  2[Explanation 3D.-For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (e) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid.]
  3[Explanation 4.-For the purposes of this section,-
  (a) "public financial institutions" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); 4[(aa) "scheduled bank" shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11;]
  (b) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
  (c) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing longterm finance for industrial projects and 5[eligible for deduction under clause (viii) of sub-section (1) ofsection 36].]
  6[(d) "co-operative bank", primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P.]
  2. Ins. by Act 11 of 1983, s. 18 (we.f. 1-4-1984).
  3. Subs. by Act 26 of 1988, s. 12, for clause (a) (w.e.f. 1-4-1989).
  4. Ins. by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989).
  5. Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989).
  6. Ins. by Act 12 of 1990, s. 13 (w.e.f. 1-4-1991).
  7. Subs. by Act 33 of 1996, s. 18, for "governing such loan or borrowing" (w.e.f. 1-4-1997).
  8. Ins. by s. 18, ibid. (w.e.f. 1-4-1997).
  9. Subs. by Act 32 of 2003, s. 21, for "term loan" (w.e.f. 1-4-2004).
  10. Ins. by Act 7 of 2017, s. 17 (w.e.f. 1-4-2018).
  11. Subs. by Act 32 of 2003, s. 21, for "such loan" (w.e.f. 1-4-2004).
  12. Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002).
  13. Subs. by Act 28 of 2016, s. 23, for "employee" ( w.e.f. 1-4-2017).
  14. Ins. by s. 23, ibid. (w.e.f. 1-4-2017).
  1. Ins. by Act 11 of 1987, s. 10 (w.e.f. 1-4-1988).
  2. The words "referred to in clause (a) or clauses (c) or clause (d) or clause (f)" omitted by Act 32 of 2003, s. 21 (w.e.f. 1-4-2004).
  3. The second proviso omitted by s. 21, ibid. (w.e.f. 1-4-2004).
  4. The Explanation numbered as Explanation 1 thereof by Act 4 of 1988, s. 15 (w.e.f. 1-4-1989).
  5. Ins. by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984).
  6. Ins. by Act 4 of 1988, s. 15 (w.e.f 1-4-1989).
  7. Explanation 2 renumbered as Explanation 3 thereof by Act 13 of 1989, s. 9 (w.e.f. 1-4-1984).
  8. Ins. by Act 26 of 1988, s. 12 (w.e.f. 1-4-1989).
  9. Ins. by Act 33 of 1996, s. 18 (w.e.f. 1-4-1997).
  10.Ins. by Act 14 of 2001, s. 27 (w.e.f. 1-4-2002).
  1. Ins. by Act 21 of 2006, s. 12 (w.e.f. 1-4-1989).
  2. Ins. by s. 12, ibid. (w. e. f. 1-4-1997).
  3. Ins. by Act 12 of 1990, s. 13 (w.e.f. 1-4-1991).
  4. Subs. by Act 27 of 1999, s. 27 (w.e.f. 1-4-2000).
  5. Subs. by Act 10 of 2000, s. 20 (w.e.f. 1-4-2000).
  6. Ins. by Act 7 of 2017, s. 17 (w.e.f. 1-4-2018).
  7[43C. Special provision for computation of cost of acquisition of certain assets.-
  (1) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of an amalgamated company under a scheme of amalgamation, is sold after the 29th day of February, 1988, by the amalgamated company as stock-in-trade of the business carried on by it, the cost of acquisition of the said asset to the amalgamated company in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the amalgamating company, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer by the amalgamating company.
  (2) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of the assessee on the total or partial partition of a Hindu undivided family or under a gift or will or an irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade of the business carried on by him, the cost of acquisition of the said asset to the assessee in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the transferor or the donor, as the case may be, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer (by way of effecting the partition, acceptance of the gift, obtaining probate in respect of the will or the creation of the trust), including the payment of gift-tax, if any, incurred by the transferor or the donor, as the case may be.]
  7. Ins. by Act 26 of 1988, s. 13 (w.e.f. 1-4-1988).
  1[43CA. Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.-
  (1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
  2[Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.]
  (2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).
  (3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.
  (4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received 3[by way of an account payee cheque or an account payee bank draft or by use of electronic clearing system through a bank account] on or before the date of agreement for transfer of the asset.]
  1. Ins. by Act 17 of 2013, s. 10 (w.e.f. 1-4-2014).
  2. Ins. by Act 13 of 2018, s. 14 (w.e.f. 1-4-2019).
  3. Subs. by s. 14, ibid., for "by any mode other than cash" (w.e.f. 1-4-2019).
  4[43CB. Computation of income from construction and service contracts.-
  (1) The profits and gains arising from a construction contract or a contract for providing services shall be determined on the basis of percentage of completion method in accordance with the income computation and disclosure standards notified under sub-section (2) of section 145:
  Provided that profits and gains arising from a contract for providing services,-
  (i) with duration of not more than ninety days shall be determined on the basis of project completion method;
  (ii) involving indeterminate number of acts over a specific period of time shall be determined on the basis of straight line method.
  (2) For the purposes of percentage of completion method, project completion method or straight line method referred to in sub-section (1)-
  (i) the contract revenue shall include retention money;
  (ii) the contract costs shall not be reduced by any incidental income in the nature of interest, dividends or capital gains.]
  4. Ins. by Act 13 of 2018, s. 15 (w.r.e.f. 1-4-2017).
  1[43D. Special provision in case of income of public financial institutions, public companies, etc.-
  Notwithstanding anything to the contrary contained in any other provision of this Act,-
  (a) in the case of a public financial institution or a scheduled bank or 2[a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or] a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts;
  (b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or 2[a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank or] the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier.
  Explanation.-For the purposes of this section,-
  (a) "National Housing Bank" means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);
  (b) "public company" means a company,-
  (i) which is a public company within the meaning of section 3 of the Companies Act, 1956 (1 of 1956);
  (ii) whose main object is carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; and
  (iii) which is registered in accordance with the Housing Finance Companies (NHB) Directions, 1989 given under section 30 and section 31 of the National Housing Bank Act, 1987 (53 of 1987);.
  (c) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);
  (d) "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36;
  (e) "State financial corporation" means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
  (f) "State industrial investment corporation" means a Government company within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing longterm finance for industrial projects.]
  1[(g) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P.]
  1. Subs. by Act 27 of 1999, s. 28, for Section 43D (w.e.f. 1-4-2000).
  2. Ins. by Act 7 of 2017, s. 18 (w.e.f. 1-4-2018).
  1. Ins. by Act 7 of 2017, s. 18 (w.e.f. 1-4-2018).