Asset damaged by fire

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2016 Dear sir,
The block is consist only one asset
However this block WDV was 167670/-
As on 1/4/2015 and due to fire fire the
Said asset has been has been completely
destroyed also there was No insurance
And No other Asset is left in block.. query..1)
Can i charge dep. As per IT act. On full
Value 167670 in AY 2016-17 or not...2) will
The loss of 167670 be debited in profit
& loss account and the same will be added
back while computing income,

Pls revert...

Regard
Raj kumar

Amol S Joglekar

Amol S Joglekar (Expert)
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10 May 2016 You are repeating the query...is it? Are you not satisfied with the answers given for the said query OR you are looking for the answer which you have in your mind? What is the issue?

Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2016 Sir.. the problem is experts has
Reply differenty hence the confusion
Arise...
My query was as there is No asset left
In the block then dep. Is to be charge
Or not for AY 2016-17
Also the loss is not deductable therefore
the loss will be added back.. right,

Amol S Joglekar

Amol S Joglekar (Expert)
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11 May 2016 Please try to note that, in the initial query you started with the PHRASE.....asset damaged. Right? Then at the answer of one of the experts...you added that the same is in IRREPAIRABLE state.....and that stand went to a confusing loop. Ok?
Now try to decide.....Extinguishment of asset VERSUS Damage of asset. Please be careful in using these words.
In your case, it seems that the asset is damaged and NOT extinguished. The damaged asset is in such a state that it can NOT be repaired. One can always claim that the block has NOT ceased to exist.
Your views please

Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2016 Yes the block has not ceased to exist..
but you have not answer the query my query was
can i claim dep. On 167670/- for AY 2016-17,

Also tell me will loss be debited in profit &
Loss and the same will be added back
while computing income

Amol S Joglekar

Amol S Joglekar (Expert)
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11 May 2016 if you agree that the block has NOT ceased to exist, then why do you want to dig the unwarranted issues. Income tax Act is very clear about it.......if the block has NOT ceased to exist, you can continue charging the depreciation.
Now the next is : what form of organisation you have? Sole proprietorship OR partnership OR Company.
In either case, accountancy will tend to differ from Income tax computation.

Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2016 Sir... what do you mean by the block
Has not ceased to exist

Amol S Joglekar

Amol S Joglekar (Expert)
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12 May 2016 it means that BLOCK is still in existence. It is very much there, though in a damaged and irrepairable condition.

Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2016 Sir as i have already cleared that
No any other asset is left in block
now.. therefore the entire wdv
will be debit in profit & loss a/c
And No dep. Is allow for AY 2016-17
as per my knowledge..

Amol S Joglekar

Amol S Joglekar (Expert)
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12 May 2016 that is what i tried to tell you...... since the block exists, as per income tax depreciation can be claimed . As per accountancy, what you are saying is right.

Querist : Anonymous

Querist : Anonymous (Querist)

12 May 2016 There was only one asset in that said
Block and that said asset has been
Destroyed due to fire... if the said
asset has been destroyed then how
can be block exist..

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 That is what I have been asking you since first interaction........what do you want? You want experts to answer what you have in mind??????
Please try to note the position......asset is damaged.it is in irrepairable state. it may not be in working condition, but t the same time it is also not extinguished.
Ok, let me try to quote one rider to you.....many a companies are still having old lathe, grinders and millers. Due to technological pgradation, they have switched over to CNC machines. But they still continue to charge depreciation on the old lathe and millers and grindres, although redundant from the usability view point.
Same is the case with, telecommunication instruments like telephones, manual EPABX, pagers and so on.....
Now tell me your views

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 You mean to say dep. Is to be charged
Inspite no block is exist.... right.

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 why you want to say no block exist??????? Any specific reason?
Please try to realise that BLOCK IS IN EXISTENCE. It very much exists. Asset is very much there. It is a different thing that the same is in 'damaged' and 'NOT repairable' state.

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 Sir.. plz explain me if asset is not in working
position also the has been turn into rubble
Even in this condition will this asset be
Consider as existence.
Your view plz..

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 Yes. There are many such instances. Few of them are already quoted by me in my earlier reply.
Morally, one may not feel like calling it to be in existence, but legally, yes......it is regarded to be in existence unless scraped out or removed from the ownership.

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 Ok.. if i agree with you even then
No dep. Can be charge because as
per IT rule dep. Will be charge on running
assets Not on damaged assets which
Is not in working position..

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 The concept of WORKING asset is in company's act, not in Income Tax.
Let me give one more interesting word gimmick.....asset "put to use" VERSUS "asset actually used"....Income tax says "put to use"....it doesnt say "actually used"......

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 If scraped has been removed in Rs. 5000/-
Then No block is exist after that will dep. Be charge or not

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 you said it now.......once it is scrapped.....the BLOCK no more EXISTs.....and then no depreciation.

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 Sir.. as the scraped has been removed in
Rs. 5000/- and wdv of the block was 167670/-
As on 1/4/2015 hence the loss of 162670/-
Plz let me know the what will be treatment
Of this said loss as per IT as well as per
accounting policy.. as the entity is proprietorship,

Amol S Joglekar

Amol S Joglekar (Expert)
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13 May 2016 It is Short Term Capital Loss and not business loss

Querist : Anonymous

Querist : Anonymous (Querist)

13 May 2016 Sir i know it is STCL but i want to know
As the asset wdv is exist in books of
Accounts therefore i have to debit
The loss in profit & loss accounts......
Is it correct....

Amol S Joglekar

Amol S Joglekar (Expert)
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16 May 2016 Since it is proprietorship, you can even directly debit it to capital account. Or as rightly said by you, you can transfer the asset account to Profit and Loss account.

Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2016 Sir if i have trf balance asset wdv then
while computing income the same amout
Have to add to profit & loss account...
right...

Amol S Joglekar

Amol S Joglekar (Expert)
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16 May 2016 that is why i said you can debit it to Capital Account and then you do not have to ADD back the same. You can directly show it in computation as Short Term Capital Loss

Querist : Anonymous

Querist : Anonymous (Querist)

16 May 2016 Sir weather STCL can be set off against
business income.... example...
income from bisiness...minus....STCL

Amol S Joglekar

Amol S Joglekar (Expert)
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17 May 2016 No. That is NOT possible.

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