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Application of sec. 11(1a)

GAUTAM SHARMA (Audit Assistant) (353 Points)

04 June 2013

Dear friends. I am facing a problem regarding application of sec. 11(1A)

Assesse is Registered under sec 12 of IT Act & it is claiming depreciation as per books of accounts as regards to application of income. The Assesse has a depreciable asset which was was destroyed in A.Y. 12-13 and received a insurance compensation in A.Y. 13-14 . Now my Questions are:

1.How sec 11(1A) should be applied & what should be the cost of transfered asset for computation of capital gains?

2. If Sale consideration received ( Claim Received) is used for acquiring new capital asset , then what should be cost of new capital asset and how depreciation should be charged on new asset.

It is very urgent

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4 Replies

Amber Jain (Article Assistant) (206 Points)
Replied 07 June 2013

Hello Gautam,

As per Sec 45(1A) capital gains on insurance claims for damage or destruction of capital assets shall be computed as follows:-

A) The Capital gains will be taxable in the year of receipt of insurance compensation.

B) While calculating cost of acquisition the indexation for the year of transfer is to be taken as the date on which the asset is destroyed & indexation of the year the asset is acquired shall be taken as the original date of the cost of acquisition.