ASSETS LOST BY FIRE NOT COVERED BY INSURANCE

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This discussion clarifies the tax treatment of assets lost due to fire, particularly when insurance cover is absent. While it's a capital loss under the Income Tax Act 1961, the practical approach for IT returns involves presenting it as a disposal in the depreciation chart. The full written-down value (WDV) should be charged to the Profit & Loss account as revenue expenditure, effectively treating it as a revenue loss rather than a capital loss.

Venkat Venkataraghavan

Venkat Venkataraghavan (Querist)

01 November 2020 While I know that it is a capital loss under Income Tax Act 1961, how do we present it in the depreciation chart for IT returns? This is a practical query for filling in the data for returns.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 November 2020 Show it under disposal column of depreciation chart. Being depreciable asset chrge it fully to P&L as revenue expenditure. It's not a capital loss being depreciable asset it's only revenue loss.

Venkat Venkataraghavan

Venkat Venkataraghavan (Querist)

06 November 2020 Thank you, Sir. I stated capital Loss presuming that the remaining value after deletion would be negative. So we need to show the WDV of the lost assets as deletions in the schedule, am I right?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

06 November 2020 In the books of accounts show the assets under disposal book the loss to p&l. Under income tax under block of assets concept continue to depreciate it.

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