Section 43(5) of the Income Tax Act

Income-tax Act, 2025: ss.39, 41

Section 43(5) falls under section 43 of the Income-tax Act, 1961, which corresponds to section 39 (Computation of actual cost) and section 41 (Written down value of depreciable asset) of the Income-tax Act, 2025.

Read section 39 of the 2025 ActRead section 41 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 43(5) is CIT v. Woodward Governor India Pvt. Ltd. (312 ITR 254), cited in 968 of the 524 judgments on BharatTax that turn on this section.

Leading authorities on Section 43(5)

CIT v. Woodward Governor India Pvt. Ltd.
312 ITR 254 · 2009 · Supreme Court
968
citing judgments

Foreign exchange fluctuations, whether gains or losses, are inextricably linked to the underlying business transaction and must be accounted for under the mercantile system. The Supreme Court also affirmed the standard accounting principle of valuing stock at cost or net realisable value, whichever is lower.

Brooke Bond India Ltd. v. CIT
225 ITR 798 · 1997 · Supreme Court
228
citing judgments

Expenditure incurred for increasing a company's share capital or expanding its capital base, such as expenses related to the issue of shares, constitutes capital expenditure. Such expenses are not deductible as revenue expenditure under Section 37(1) of the Income-tax Act, 1961, even if they incidentally benefit the business.

Punjab State Industrial Development Corporation Ltd. v. CIT
225 ITR 792 · 1997 · Supreme Court
158
citing judgments

Expenditure incurred for increasing a company's share capital, such as expenses related to issuing shares or an initial public offering (IPO), is capital expenditure. Such expenses are not allowable as a revenue deduction under Section 37, even if they incidentally benefit the business, because they result in an increase in capital.

CIT v. Rittal India (P) Limited
380 ITR 423 · 2016 · High Court
121
citing judgments

Additional depreciation is allowable under section 32(1)(iia) for new machinery or plant even when put to use for less than 180 days, with the unabsorbed balance available for claim in the subsequent year.

CIT v. Badridas Gauridu (P) Ltd.
261 ITR 256 · 2003 · High Court
114
citing judgments

Losses incurred from foreign exchange forward contracts or derivatives, entered into to hedge currency fluctuations in the course of regular business like exports, are treated as business losses and not as speculative transactions under Section 43(5). Such contracts, when incidental to business and cover exchange rate risks, constitute a business activity.

CIT v. Oswal Agro Mills Ltd.
341 ITR 467 · 2012 · High Court
108
citing judgments

The Legislature abolished terminal depreciation under section 32(1)(iii) and the taxing of balancing charge under section 41(2), replacing these provisions with the requirement to reduce sale proceeds of depreciable assets from the block of assets.

CIT v. Southern Roadways Ltd.
288 ITR 15 · 2007 · High Court
76
citing judgments

Expenditure on software useful for a short period or requiring regular updates, for which subscription fees are paid, constitutes revenue expenditure, distinguishable from capitalized software purchased on a perpetual license model, based on the test of enduring benefit.

Solid Containers Ltd. v. DCIT
308 ITR 417 · 2009 · High Court
74
citing judgments

The write-back or waiver of a loan obtained for business purposes constitutes taxable business income under Section 28. This applies even if no prior deduction was claimed, thereby not attracting Section 41(1).

CIT v. Soorajmull Nagarmull
129 ITR 169 · 1981 · High Court
55
citing judgments

Losses from foreign exchange forward contracts, when incidental to an assessee's regular business and undertaken to safeguard business interests, are treated as business losses and not speculative losses under section 43(5).

CIT v. DLF Commercial Developers Ltd.
35 Taxmann.com 280 · 2013 · High Court
51
citing judgments

Loss incurred by certain types of companies in trading derivatives is considered speculative loss under the Explanation to Section 73, as the value of stock derivatives depends on shares. Such speculative losses are ineligible for set-off or carry forward against business income.

Judgments on Section 43(5)

White Waves Capital LLP, Mumbai vs. Pr. CIT - 21, Mumbai

In the result, the appeal of the assessee is hereby ordered to be allowed

ITA 2370/MUM/2019[2014-15]Status: DisposedITAT Mumbai02 Mar 2020AY 2014-15

Bench: Shri Rajesh Kumar, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.2370/Mum/2019 (ननधधारण वर्ा / Assessment Years: 2014-15) बनधम/ White Waves Capital Llp Pr. Cit-21 A-305, Phoneix House, Piramal Chambers, Vs. 462, Senapati Bapat Marg, Lalbaug, Parel, Mumbai- Worli, Mumbai-400013. 400012. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aabfw2593F (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. Assessee By: Ms. Vasanti B. Patel Revenue By: Shri Awungshi Gimson (Dr) सुनवाई की तारीख / Date Of Hearing: 09/12/2019 घोषणा की तारीख /Date Of Pronouncement: 02/03/2020 आदेश / O R D E R Per Amarjit Singh, Jm: The Assessee Has Filed The Present Appeal Against The Order Dated 05.03.2019 Passed By The Principal Commissioner Of Income Tax-21, Mumbai [Hereinafter Referred To As The “Pcit”] Relevant To The A.Y.2014-15 In Which The Principal Commissioner Of Income Tax-21 Has Invoked The Provisions U/S 263 Of The I.T. Act, 1961. 2. The Assessee Has Raised The Following Grounds Of Appeal: - “1. The Pr. Comm. Of Income Tax-21, Mumbai Cit Erred In Invoking & Passing An Order Under Section 263 Of The Act For The Said Year. 2. The Cit Erred In Stating In The Said Order That Reply Filed By The Appellant Is Not Acceptable As There Is No Merits Therein Without Passing A Speaking Order. 3. The Cit Erred In Failing To Appreciate That The Issue Of Claim For Bad Debts Of Rs.65,68,044/- On Account Of Default In Payment Of Settlement Dues By Nsel Were Duly Examined By The Ao In Scrutiny Assessment Proceedings By Calling For Relevant Details & Allowed The Same After Due Application Of Mind.”

For Appellant: Ms. Vasanti B. PatelFor Respondent: Shri Awungshi Gimson (DR)
Section 143(3)Section 263Section 27Section 43(5)

Shri Sunil Manakchand Kotecha, Jalgaon vs. Pr. Commissioner of Income-Tax, Central-Nagpur, Nagpur

Appeals of the assessee are disposed of as 14

ITA 1684/PUN/2018[2011-12]Status: DisposedITAT Pune13 Feb 2020AY 2011-12

Bench: Shri D. Karunakara Rao, Am & Shri Laliet Kumar, Jm आयकर अपील सं. / Ita Nos.1675 To 1679/Pun/2018 िनधा"रण वष" / Assessment Years : 2007-08 To 2011-12 Sunil Manakchand Kotecha, 4, Vardhaman Nagar, Near Sagar Park, Jalgaon-425001. .......अपीलाथ" / Appellant Pan : Abppk2141Q बनाम / V/S. Acit, Circle-1, ……""यथ" / Respondent Nashik. आयकर अपील सं. / Ita Nos.1680 To 1684/Pun/2018 िनधा"रण वष" / Assessment Years : 2007-08 To 2011-12 Sunil Manakchand Kotecha, 4, Vardhaman Nagar, Near Sagar Park, Jalgaon-425001. .......अपीलाथ" / Appellant Pan : Abppk2141Q बनाम / V/S. Pr.Cit, Central-Nagpur Nagpur. Assessee By : Shri Hari Krishan & Smt. Arrchena Shetty Revenue By : Shri Deepak Garg सुनवाई क" तारीख / Date Of Hearing : 12.02.2020 घोषणा क" तारीख / Date Of Pronouncement : 13.02.2020 आदेश / Order Per Bench : There Are 10 Appeals Under Consideration Involving The Assessment Years 2007-08 To 2011-12 (I.E. Five Assessment Years). Out Of 10 Appeals Of The Assessee, 5 Appeals Pertain To The Revision Order Passed By The Pr.Cit (Central), Nagpur U/S 263 Of The Act Dated 11.03.2016 For The Assessment Years 2007-08 To 2010-11 & 18.03.2016 For The Assessment Year 2011-12. The Rest Of 5 Appeals Pertain To The Fresh Assessment Order Made U/S 263 R.W.S. 143(3) Of The Act. 2. The Pr.Cit Passed The Revision Order Dated 11.03.2016 For The Assessment Years 2007-08 To 2010-11 & 18.03.2016 For The Assessment Year 2011-12 Whereas The Cit(A) Passed A Combined Appellate Order Commonly Dated 30.07.2018 Involving The Common Issues For All The Five Assessment Years. Otherwise, The Error Of Making A Revision Order By The Pr.Cit Is More Or Less Similar To All The 10 Appeals Under Consideration.

For Appellant: Shri Hari Krishan &For Respondent: Shri Deepak Garg
Section 263Section 43(5)(d)

Shri Sunil Manakchand Kotecha, Jalgaon vs. Pr. Commissioner of Income-Tax, Central-Nagpur, Nagpur

Appeals of the assessee are disposed of as 14

ITA 1683/PUN/2018[2010-11]Status: DisposedITAT Pune13 Feb 2020AY 2010-11

Bench: Shri D. Karunakara Rao, Am & Shri Laliet Kumar, Jm आयकर अपील सं. / Ita Nos.1675 To 1679/Pun/2018 िनधा"रण वष" / Assessment Years : 2007-08 To 2011-12 Sunil Manakchand Kotecha, 4, Vardhaman Nagar, Near Sagar Park, Jalgaon-425001. .......अपीलाथ" / Appellant Pan : Abppk2141Q बनाम / V/S. Acit, Circle-1, ……""यथ" / Respondent Nashik. आयकर अपील सं. / Ita Nos.1680 To 1684/Pun/2018 िनधा"रण वष" / Assessment Years : 2007-08 To 2011-12 Sunil Manakchand Kotecha, 4, Vardhaman Nagar, Near Sagar Park, Jalgaon-425001. .......अपीलाथ" / Appellant Pan : Abppk2141Q बनाम / V/S. Pr.Cit, Central-Nagpur Nagpur. Assessee By : Shri Hari Krishan & Smt. Arrchena Shetty Revenue By : Shri Deepak Garg सुनवाई क" तारीख / Date Of Hearing : 12.02.2020 घोषणा क" तारीख / Date Of Pronouncement : 13.02.2020 आदेश / Order Per Bench : There Are 10 Appeals Under Consideration Involving The Assessment Years 2007-08 To 2011-12 (I.E. Five Assessment Years). Out Of 10 Appeals Of The Assessee, 5 Appeals Pertain To The Revision Order Passed By The Pr.Cit (Central), Nagpur U/S 263 Of The Act Dated 11.03.2016 For The Assessment Years 2007-08 To 2010-11 & 18.03.2016 For The Assessment Year 2011-12. The Rest Of 5 Appeals Pertain To The Fresh Assessment Order Made U/S 263 R.W.S. 143(3) Of The Act. 2. The Pr.Cit Passed The Revision Order Dated 11.03.2016 For The Assessment Years 2007-08 To 2010-11 & 18.03.2016 For The Assessment Year 2011-12 Whereas The Cit(A) Passed A Combined Appellate Order Commonly Dated 30.07.2018 Involving The Common Issues For All The Five Assessment Years. Otherwise, The Error Of Making A Revision Order By The Pr.Cit Is More Or Less Similar To All The 10 Appeals Under Consideration.

For Appellant: Shri Hari Krishan &For Respondent: Shri Deepak Garg
Section 263Section 43(5)(d)