The assessee claimed deduction of an amount representing gain on cancellation of forward contracts relating to capital assets lying in capital work in progress. The Assessing Officer disallowed the unrealised foreign exchange gain. The Tribunal held that the assessee had reduced an amount of at the computation stage. The gains on the cancellation of forward contracts are a capital receipt and not a revenue receipt. The High Court while affirming the finding set aside the observation in the order of the Tribunal  and held that the foreign exchange fluctuation related to the interest portion was to be treated as revenue receipt and brought to tax. The amendment of section 43A of the Income-tax Act, 1961 by the Finance Act, 2002 with effect from April 1, 2003 is not clarificatory and would  apply prospectively. Under the unamended section 43A, adjustment to the actual cost takes place on the happening of a change in the rate of exchange, whereas under the amended section 43A, the adjustment in the actual cost is made on cash basis. In other words, under the unamended section 43A, actual payment was not a condition precedent for making necessary adjustment in the carrying cost of the fixed asset acquired in foreign currency but under the amended section 43A, with effect from April 1, 2003, such payment of the decreased or enhanced liability on account of fluctuation in foreign exchange rate has been made a condition precedent for making adjustment in the carrying amount of the fixed asset. (AY. 2009-10)