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Loss of Fixed assets by theft...

Amrut (Partner) (33 Points)

10 September 2009

Hello,

Can anyone guide me on income tax implications on how to treat Loss of Fixed assets by theft?

Regards

Amrut Barad

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11 Replies

laxman suthar (Asst. Manager Taxtation ) (329 Points)
Replied 10 September 2009

Sir

There is no tax impication b'coz there is no tranfer of owenership. Loss is capitalised in capital a/c

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Ashish M (Chartered Accountant) (2731 Points)
Replied 10 September 2009

No treatment of such loss in tax as it considers only losses of capital assets which are caused by natural or other specified causes which are listed in Sec.45(1A) and that too when any insurance amt. is recieved in that regard and for no reason else......!!!!!!

Amrut (Partner) (33 Points)
Replied 10 September 2009

So can I claim that as a deduction from the income from business under the IT provisions??i.e loss on theft(Book value).

(Guest)

U cant claim deduction as it is capital loss and also loss by theft is not coverd under Sec 45(1A)

varun sharma ( CA Final , M.Com) (87 Points)
Replied 10 September 2009

amrut you can charge that loss in the books of accouts that is loss by theft. if any insurance claim is there then stand the insurnace co in ur books as dr. when claim is received then show as income to the extent the claim received. but sec 45 (1A) will not be applicable to it becose this sec is applicable only if the amont or other assets under an insurance from an insurer on accont of damage to , destruction of any capital asset as a result of :-

1. flood. typhoon, hurricane, cyclone, earthquake or other convulsion of nature or

2 riot or civil disturbance or

3 accidental fire or explosion or

4 action by an enemy ( whether or without declartaion of war)

so in ur case it is a natural phenomena not coverd under sec 45 (1A). but u can charge as loss in accounts.

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CA Kingsley (Audit Manager) (470 Points)
Replied 11 September 2009

Hey. If you get any insurance compensation, you can reduce the wdv to extent of compensation.there is no problem for u if the block consists of more than one assets. Hope u get my point

Chitrank Jain (Senior Manager - Group Internal Audit) (146 Points)
Replied 11 September 2009

Friends wont this tantamount to transfer as per Section 2(47), it defines transfer as

²⁰[transfer²¹, in relation to a capital asset, includes,

(i) the sale²¹, exchange²¹ or relinquishment²¹ of the asset ; or

(ii) the extinguishment of any rights therein²¹ ; or

(iii) the compulsory acquisition thereof under any law ; or

(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] ²²[or]

²³[(iva) the maturity or redemption of a zero coupon bond; or]

²⁴[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A ²⁵ of the Transfer of Property Act, 1882 (4 of 1882) ; or

(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.

wont theft be a extinguishment of rights??

And since in this case full value consideration is NIL, nothing will be deducted from the block and the remaining wdv of the asset will be alllowed as depreciation over the remaining life.

Max Payne (employed) (2574 Points)
Replied 11 September 2009

Agree with Kingsley.... claim depreciation if there is still any asset left in the block at the year end. No reduction in block value. Reduce the block value by any compensation received.

Or if there is no asset remaining, you will have short term capital loss...

Capital gain will arise only when the insurance company compensates you against the capital loss so dont worry about 45(1A) now.

Pammi Srivastav (Assistant Finance Officer ) (84 Points)
Replied 11 September 2009

U can claim it as business loss by writing off the whole amount under section 37 as it allows all the expenses and losses which r not covered u/s 30 to 36. As per Circular No. 35 dated November 24 1965 the same was allowed as business expenditure. Here it is given that loss through embezzlement (theft). It is not metioned whether it is available for capital or revenue. Thus it can be claimed.

virender (ACCOUNTANT) (22 Points)
Replied 02 November 2011

Dear Sir/ Madam

Our Company is a public limited company. A Car Theft in our company and no insurance claim recd on this due to insurance period is laps. Please tell me that what is the treatment of this as per Income Tax Act 1961 U/S32

Thanks

Virender