niki_1079 (CA Practice ) (279 Points)
17 February 2010
If an asset is damged or stolen from block of assets and an asset is received in insurance compensation then what would be the tax implications and what would be the accounting entries?
Amir
(Learner)
(4016 Points)
Replied 17 February 2010
Dear Niki,
Accounting Treatment
I think New Asset will be recognized at the FMV, & difference of WDV of old asset & FMV will be recognized as Profit/Loss on Disposal of Old Asset.
Income Tax
WDV =
Opn. WDV = X
Add :- Assets acquired = Nil (Since cost is met by insurance co.)
Less :- Full value of money's payable = Nil (Since insurance Co. has replaced the asset & has not paid any money)
Depreciation will be allowed on amount "X"
Now in this casecapital gain will be computed with reference to Sec 45(1A) read with Sec 50
Sales = FMV Of the new asset
Less = X
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