Replacement of machinary

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2010 I was given machinary to contractor but because of flood machinary was destroyed.
Details are given
Machinary cost 1.5cr in my books
contractor pay me 3 cr for new machinary.

How should I account these 3 crs.

Thanks in advance

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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04 June 2010 Profit on destroyed asset will be arise and shown as misll. income.

In Income tax schedule, Plant & Machinery Block will be redcued by 3 Cr.

At the time of calculating of tax liablity, Profit on destroyed asset will be deduct form total profit.

i.e treatment of such entry will be as it profit of sale of asset.

other expert's views are solicited.

Querist : Anonymous

Querist : Anonymous (Querist)

04 June 2010 But we are purchasing the machinary from that ammount so this is replacement of machinary. What entries should be made in my books?

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CA Shiv

CA Shiv (Expert)
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04 June 2010 No it wont be counted as replacement... Its like profit on sale of old machinery and purchase of new one....
Dont show as machinery destroyed.
But SHow as machinery purchase by ur client at 3 cr. and show profit of 1.5 crore...

Pls ask ur CA also...