Company receives an insurance claim of Rs. 2 crores as a reinstatement value of the lost machinery. The written down value of that machinery was Rs. 1 Crore and the whole block of machinery was Rs. 4 crores.
At the yearend company was in the process to reinstate the new machinery in respect of which the insurance claim was received. The Value of the Capital work in process as on 31.03.2022 of the new machine was Rs. 2.50 crore.
My question is that
1. Whether the amount of Insurance claim of Rs. 2.00 crore will reduce from the wdv of the machinery i.e Rs.1 crore and surplus will be reduced from the Capital work in process of the machinery i.e Rs. 2.50 crore.
2. Or Whether all the amount of the Insurance claim of Rs. 2 crore will reduce from the wdv of the whole block i.e Rs. 4 crore.
Kindly guide the treatment as per company law and income tax act.
CAclubindia
