Assets loss by fire

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2016 Dear sir,
on 1/4/2015 in our block the wdv is 6628625/-
but in fire tragedy we have lost one assets this assets wdv was 816244 as on 1/4/2015
however only RS. 250000 received from insurance company, query...1) on which amount dep. will be calculated....2) weather the loss of assets is allowable in profit & loss account,

regard
mukesh rajan

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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03 May 2016 In case of an assessee engaged other than in generation or generation and distribution power, has to follow block of assets concept as per section 32(ii) and WDV of the block shall considered for computing depreciation allowance. There is no requirement to know WDV of individual asset in each block as you written in the query.

As per section 32(iii) the amount received from insurance company towards the asset destroyed shall be deducted from opening WDV of the block as 'moneys payable' and depreciation allowance shall be calculated on the balance amount.

CA Prateek Garg

CA Prateek Garg (Expert)
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03 May 2016 show loss of 566244 for accounting purpose... however for income tax pupose reduce 250000 from 6628625 and provide dep on 6378625.

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Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2016 Sir pls let me know weather loss of 566244/-
Is deductable in profit & loss account or not

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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03 May 2016 I disagree the view of CA Prateek with all due respect. In case of accountancy, the assets are to be depreciated as per the Schedule II to the Companies Act, 2013. In case of non-companies on some other basis. However, following block of assets method for accountancy purposes is not right.

Hence, the figures would differ between books of account and tax depreciation.

Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2016 So sir what should be correct treatment
Of this said asset destroyed, however this
Case is pertains to company,
Pls revert...

CA Prateek Garg

CA Prateek Garg (Expert)
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03 May 2016 Dear Pavan Ji

I also suggested different treatment for Accounting and for tax purpose.. May be my language was ambiguous...

since asset gets destroyed in 1st day of FY hence no depreciation would be charged for accounting purpose and difference between opening WDV (of specific asset) and insurance claim shall be the loss from asset. it shall be 566244 (816244/- minus 250000/-). Depreciation on other assets are to be charged normally as per companies act (for corporate) and otherwise (for non corporate)

further for income tax purpose actual recovery in cash i.e rs. 250000/- are to be reduced from opening wdv (of entire block) and depreciation is to be provided on balance for income tax purpose. hence depreciation for income tax purpose is to be provided on 6378625 (6628625 minus 250000)

CA Prateek Garg

CA Prateek Garg (Expert)
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03 May 2016 Loss of 566244 is deductible in profit and loss account... but for accounting purpose and not for tax purpose.

it means that deduct the loss in profit and loss but at the time of computing taxable income it is to be added back in profit.

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Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2016 sir if at the time of computing taxable income it will be added back in profit... that means loss will be shown in profit & loss account only for accounting purpose but this loss is not allowable as deduction in profit & loss account as per income tax..... right.....

CA Prateek Garg

CA Prateek Garg (Expert)
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03 May 2016 yes... absolutely...