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)

Concept Images Pvt. Ltd., Kolkata vs. DCIT, Cir-7(1), Kolata., Kolkata

In the result, the appeal of the assessee stands allowed

ITA 1201/KOL/2023[2012-13]Status: DisposedITAT Kolkata22 Mar 2024AY 2012-13

Bench: Shri Sanjay Garg & Rajesh Kumari.T.A No.1201/Kol/2023 Assessment Year: 2012-13 Concept Images Pvt. Ltd…………………………… ........................……Appellant 4Th Floor, Azimganj House, 7, Camac Street, Circus Avenue, S.O., Kolkata – 700017. [Pan: Aabcc1959L] Vs. Dcit, Circle-7(1), Kolkata...................…................…........……...…..…..Respondent Appearances By: Shri Anil Kochar, Advocate, Appeared On Behalf Of The Appellant. Shri Ankur Goyal, Jcit-Sr. Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : January 10, 2024 Date Of Pronouncing The Order : March 22, 2024 आदेश / Order संजय गग", "या"यक सद"य "वारा / Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Order Dated 19.10.2023 Of The National Faceless Appeal Centre [Hereinafter Referred To As ‘Cit(A)’] Passed U/S 250 Of The Income Tax Act (Hereinafter Referred To As The ‘Act’). 2. The Sole Issue Raised In This Appeal Is As To Marked To Market Loss Incurred By The Assessee On Hedging Of The Transaction Is To Be Treated As Speculative Loss Or Normal Business Loss. 3. The Brief Facts Of The Case Are That The Assessee Is In Business Of Purchase & Sale Of Bullions & Also Manufacturers Of Gold Ornaments. Since The Price Of Gold Constantly Fluctuates, To Safeguard Itself From Loss, If Any, Due To Fluctuation The Appellant Had Entered Into Future Contracts With The Suppliers Of Gold To Safeguard Against Loss

Section 250Section 37Section 43(5)

Mahendra Ravindra Salunkhe, Panvel City vs. Income Tax Officer, Mumbai

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 3204/MUM/2023[2012-2013]Status: DisposedITAT Mumbai01 Jan 2024AY 2012-2013

Bench: Shri Amarjit Singh & Shri Rahul Chaudharymahendra Ravindra Vs. Income Tax Officer Salunkhe, A-202, 35(2)(3) Swarganaga Chs Ltd, Plot Kautilya Bhavan No.62, Sector 18, Bkc, 400050 Kamothe, Panvel City, Mumbai Raigarh- 410209 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No:Bkfps6678L Appellant .. Respondent Appellant By : None Respondent By : Lieder Panicker Date Of Hearing 27.12.2023 Date Of Pronouncement 01.01.2024 आदेश / O R D E R Per Amarjit Singh (Am): This Appeal Filed By The Assessee Is Directed Against The Order Passed By The Ld. Cit(A) Nfac, Dated 11.07.2023 For A.Y. 2012-13. The Assessee Has Raised The Following Grounds Before Us: “1. In The Appeal The Assessee Had Stated That He Had The Total Income Of Rs.2,26,652. The Commissioner Of Income Tax (Appeals) Had Given The Assessee An Opportunity To Hear, Firstly In The Year Of 2021 However Due To Second Wave Of Covid 19 He Was Not Able To Attend The Same As During The Concerned Period Survival Was The Only Challenge. Later, The Concerned Assessee In The Year 2023 Was Diagnosed With Medical Illness Which Impaired His Physical Inability & Mental Stability To Attend The Hearings. The Order Was Dismissed By The Commissioner Of Income Tax Appeals By Passing An Order Under Section 250 Of The Income Tax Act, 1961 Dated 11/07/2023. The Notices Received From The Cit Appeals Did Not Contain Any Specific Information To Be Submitted Due To Which The Assessee Was Under The Presumption That They Will Ask Additional Questions In The Next Notice. The Appellant Craves Leave To Add, Amend, Alter Or Delete The Said Ground Of Appeal.”

For Appellant: NoneFor Respondent: Lieder Panicker
Section 148Section 194HSection 250Section 250(6)Section 43(5)

ACIT, Circle - 6(2), Kolkata vs. M/S. Nagreeka Synthetics Pvt. Ltd., Kolkata

In the result, the appeal of the revenue is allowed for statistical purposes and the cross-objection by the assessee are dismissed

ITA 427/KOL/2019[2009-10]Status: DisposedITAT Kolkata09 Nov 2023AY 2009-10

Bench: Shri Sanjay Garg, Hon’Ble & Dr. Manish Borad, Hon’Blei.T.A. No. 427/Kol/2019 Assessment Year: 2009-10 Asst. Commissioner Of Income Tax, M/S. Nagreeka Synthetics Pvt. Ltd. Circle-6(2), Kolkata Vs 6Th Floor, Jain Chamber 18, R.N. Mukherjee Road Kolkata - 700001 [Pan : Aaacn8691D] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) C.O. No. 19/Kol/2021 Assessment Year: 2009-10 M/S. Nagreeka Synthetics Pvt. Ltd. Asst. Commissioner Of Income 6Th Floor, Jain Chamber Vs Tax, Circle-6(2), Kolkata 18, R.N. Mukherjee Road Kolkata - 700001 [Pan : Aaacn8691D] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri S.D. Verma, Advocate Revenue By : Shri Abhijit Kundu, Cit D/R सुनवाई क" तारीख/Date Of Hearing : 05/09/2023 घोषणा क" तारीख /Date Of Pronouncement: 09/11/2023 आदेश/O R D E R Per Dr. Manish Borad: The Present Appeal Is Directed At The Instance Of The Revenue Against The Order Of The Learned Commissioner Of Income Tax (Appeals)- 4, Kolkata (Hereinafter The “Ld. Cit(A)”) Dt. 21/06/2018, Passed U/S 250 Of The Income Tax Act, 1961 (“The Act”) For The Assessment Year 2009- 10. The Assessee Has Filed A Cross-Objection Being C.O. No. 19/Kol/2021. 2. The Registry Has Pointed Out That There Is A Delay Of 965 Days In Filing The Cross-Objection By The Assessee. The Assessee Has Filed A 2

For Appellant: Shri S.D. Verma, AdvocateFor Respondent: Shri Abhijit Kundu, CIT D/R
Section 143(1)Section 143(3)Section 148Section 2(22)(e)Section 250Section 73

Ashish Niranjan Shah, Pune vs. Pr. Commissioner of Income-Tax -4, Pune

In the result, appeal of the assessee is dismissed

ITA 697/PUN/2019[2014-15]Status: DisposedITAT Pune13 Oct 2023AY 2014-15

Bench: Shri S.S.Godara & Dr. Dipak P. Ripoteआयकर अपील सं. / Ita No.697/Pun/2019 िनधा"रण वष" / Assessment Year : 2014-15 Ashish Niranjan Shah, The Pr.Cit-4, Pune. 39, Mantri Court, Dr.Ambedkar V Road, Next To Rto, Sangam, S Pune – 411001. Pan: Aidps 7682 K Appellant/ Assessee Respondent /Revenue Assessee By Shri Kishor B Phadke – Ar Revenue By Shri Keyur Patel, Irs – Cit-Dr Date Of Hearing 28/07/2023 Date Of Pronouncement 13/10/2023 आदेश/ Order Per Dr. Dipak P. Ripote, Am: This Appeal Filed By The Assessee Is Directed Against The Order Of Ld.Pr.Commissioner Of Income Tax-4, Pune Dated26.03.2019 Under Section 263 Of The Income Tax Act, 1961. The Assessee Has Raised The Following Grounds Of Appeal : “1. Learned Pr. Cit- 4, Pune Erred In Law & On Facts In Treating The Assessment Order U/S 143(3) Being Erroneous & Thereby Prejudicial To The Revenue U/S 263 Without Appreciating That, The Learned Ao Has Allowed Appellant'S Claim Of Business Loss Amounting To Rs.10,20,14,068/- Incurred On Account Of Default In Payment By Nsel, With Due Application Of Mind & Verification. The Learned Pr. Cit Erred In Holding That, Ao Has Not Carried Out Any Enquiry With Respect To Business Loss Claimed By The Appellant & Not Applied His Ashish Niranjan Shah [A]

Section 143(3)Section 263Section 43(5)