India: Unrealized foreign exchange gain arising from borrowings used to acquire property in India not taxable under section 43A, but may be taxable under section 43AA (tribunal decision)
Section 43A of the Income-tax Act, 1961 applies only to assets acquired from outside India.
The Mumbai Bench of the Income-tax Appellate Tribunal held that an unrealized foreign exchange gain arising from foreign currency borrowings used to acquire assets in India was not taxable under section 43A of the Income-tax Act, 1961 because section 43A applies only to assets acquired from outside India.
However, the tribunal held that the unrealized foreign exchange gain may be subject to tax under section 43AA of the Income-tax Act, 1961, which governs foreign exchange fluctuations not covered by section 43A.
The case is: Umicore Autocat India Private Limited v. DCIT (ITA 419/Mum/2026)
Read a September 2026 report prepared by the KPMG member firm in India