Wdv for purpose of depreciation

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lavanya (Querist)
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02 May 2016 Mr A has Rs.1 crore worth block of assets in his business. 50 lakhs worth of assets got destroyed in fire accident. 10 lakhs is received as insurance claim. Now what is the WDV of the block- on what amount depreciation is to be calculated?? How to treat insurance claim of Rs.10 lakhs??
Please help me

Sandeep Garg

Sandeep Garg (Expert)
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03 May 2016 Since the block of asset still exist, 10 lacs insurance claim received will be reduced from total block wdv of 1 crore and dep will be allowed on 90 lack wdv. As u mentioned wdv of stock destroyed is 50 lacs, so no capital gain / loss will arise in this case. Loss of 40 lacs will be allowed in tax by way of dep.
Thanks

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lavanya

lavanya (Querist)
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03 May 2016 Sir we should not reduce 50lakhs from the block?? On what amt depreciation is to be calculated?? Please help me

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lavanya

lavanya (Querist)
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03 May 2016 And sir why cap gain issue arise in this case?? I am using these assets in my business and not as investment

Sandeep Garg

Sandeep Garg (Expert)
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03 May 2016 Dep will be charged on 90 lacs. If u would have received 110 lacs in case the whole block gets destroyed, implications of capital gain will be there. Other scenerios also there.

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lavanya

lavanya (Querist)
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03 May 2016 Thank you sir. So loss of 40 lakhs is allowed as depreciation. Then can i show 10lakhs insurance claim as income in my P&L a/c??

Sandeep Garg

Sandeep Garg (Expert)
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03 May 2016 10 lacs will be reduced from 1 crore wdv to arrive at 90 lacs wdv for the purpose of tax. It will not be income for taxation purpose.

Accounting treatment will be done as usual.

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