Foreign exchange gain or loss on capital assets
This query is : Resolved
12 July 2012
Two Capital Assets Purchased from outside India on 01 Jan, 2012 for $5000 & $ 10,000 respectively when the Excbange Rate was $1=Rs. 50
$ 5,000 of Asset 1 was paid on Mar 1, 2012 when the Exchange Rate was $1 - Rs. 52 and $ 10,000 relating to Capital Asset 2 still being unpaid as at Mar 31, 2012 when the rate of exchange was $1= Rs. 54.
In the Profit and Loss Account of the company, as per the Statutory books, Foreign Exchange Loss stood at Rs. 50,000, Realized Foreign Exchange Loss being Rs. 10,000 ($5,000*2) and Unrealized Foreign Exchange Loss being Rs. 40,000 ($10,000*4). What would be the impact of the above loss while Computation of Income as per the Income Tax Act.
$ 5,000 of Asset 1 was paid on Mar 1, 2012 when the Exchange Rate was $1 - Rs. 52 and $ 10,000 relating to Capital Asset 2 still being unpaid as at Mar 31, 2012 when the rate of exchange was $1= Rs. 54.
In the Profit and Loss Account of the company, as per the Statutory books, Foreign Exchange Loss stood at Rs. 50,000, Realized Foreign Exchange Loss being Rs. 10,000 ($5,000*2) and Unrealized Foreign Exchange Loss being Rs. 40,000 ($10,000*4). What would be the impact of the above loss while Computation of Income as per the Income Tax Act.
Hitendra Jain
(Expert)
12 July 2012
Section 43A deals with such situation.
As far as $ 10000 asset is concerned since payment is still due no effect shall be made on account of cost / expenditures.
For $ 5000 assets the original cost ($ 5000 x50 = INR 2,50,000.00) shall be increased by INR 10,000.00.
If asset is stock in trade then expenditure regarding purchase / acquisition shall be increased by INR 10,000.00.
Except above the whole loss on foreign exchange shall be ignored.
As far as $ 10000 asset is concerned since payment is still due no effect shall be made on account of cost / expenditures.
For $ 5000 assets the original cost ($ 5000 x50 = INR 2,50,000.00) shall be increased by INR 10,000.00.
If asset is stock in trade then expenditure regarding purchase / acquisition shall be increased by INR 10,000.00.
Except above the whole loss on foreign exchange shall be ignored.
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