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Section 43A as it is stood before the 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 acasewhere the payment was not actually made and the 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. The assessee even under unamended provision is entitled to benefit of the loss claimed by the assessee to the tune of Rs. 39.78,92,211/- on account of settlement of forward contracts in the previous year, which was shown as loss while computing the taxable income of the assessee.

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Sec. 43A of Income Tax Act, 1961 – Business Loss – Depreciation loss claimed by assessee arising due to forward contracts as these contracts stood terminated during the current assessment year and the corresponding amount was deemed to be added to the value of the assets even when these assets had not been acquired or payments made.

Facts: (i) Whether the tribunal was correct in holding that a sum of Rs. 39,78,92,211/- should be treated as a depreciation loss as claimed by the assessee as arising due to forward contracts as these contracts stood terminated during the current assessment year and the corresponding amount was deemed to be added to the value of the assets even when these assets had not been acquired or payments made? (ii) Whether the Tribunal was correct in proceeding to hold that no interest under Section 234B can be levied on the amount of tax payable under Section 115JB as clause (h) to Explanation 1 to Section 115JB was inserted with retrospective effect by Finance Act, 2008 which could not have anticipated during the current assessment year 2005-06 and consequently reading the provision which was not within its jurisdiction?

Held, that by way of an amendment in the year 2002, the requirement of making of payment was inserted. The assessee even under unamended provision is entitled to benefit of the loss claimed by the assessee to the tune of Rs. 39.78,92,211/- on account of settlement of forward contracts in the previous year, which was shown as loss while computing the taxable income of the assessee. We agree with the view taken by the Tribunal on this issue. Accordingly, the first substantial question of law is answered against the revenue. It is pertinent to mention here that clause (h) to second proviso to Section 115JB(2) has been incorporated with effect from 01.04.2001. The retrospective operation of the aforesaid provision has not been challenged by the assessee and therefore, the aforesaid provision has to be given effect to. The Tribunal clearly acceded to its jurisdiction in holding that no interest could be levied under Section 234B of the Act. In the result, the second substantial question of law is answered in favour of the revenue and against the assessee – CIT Vs. JSW STEEL LIMITED [2020] 424 ITR 227 (KARN)