Depre on ceased Block

This query is : Resolved

Mayank Shyamsukha (Querist)
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26 February 2010 Hi,
There is only one car in the block in the firm, which has WDV on 1/04/2009 Rs. 200,000/-. Unfortunately, the car was stolen in 2009-10(FY). Now the car owner(who is the partner) get the compensation from Insurance Company Rs. 100,000/-. Then
How such compensation is taxable.Can we claim Depreciation for AY 2010-2011.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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27 February 2010 Compensation will be considered as sale value of the car and balance Rs. 100,000 will be considered as STC Loss u/s 50 since the block cease to exist.

However no depreciation allowable u/s 32 as block of asset cease to exist.

Also check that there are no assets of the company liable for deprecaition @ 15% like machinery. If the same is there then the block of asset does not cease to exist and depreciation will be allowable on balance Rs. 100,000

Mayank Shyamsukha

Mayank Shyamsukha (Querist)
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27 February 2010 Dear Aditya,

Under which section this insurance compensation will be charged because u/s45(1A) brings the insurance compensation taxable however it does not cover the THEFT incident and second thing for reducing the WDV of block under which section is it made? because u/s 43(6) doesnot include THEFT incident.
Thats why i think there will be no capital gain/loss and depre can be claimed

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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27 February 2010 Ok. I had not read the section 45(1A) in that precision. My reply was based on section 45(1A) of the Act and not on any other section. The section referred to in my reply was section 45(1A) only.

You have rightly pointed out the missing term "THEFT" Will revert to you after referring to relevant provisions of the Act.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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27 February 2010 and your query has been replied in the forum section https://www.caclubindia.com/forum/depre-on-ceased-block-70954.asp