10 February 2021
Sir, my client is into the business of perishable goods, further, my client was sanctioned insurance of Rs.8,00,000 by the insurance company on account goods damaged due to rain water entering the godown. Furthermore, the sanctioned amount was given on quality deterioration of goods (i.e quality of goods reduce from Rs.100 to Rs.80) and not on account of destruction of goods. My question is whether I have to reverse the ITC availed on the Rs.8,00,000/
10 February 2021
Yes you are required to reverse such ITC in terms of clause i of section 17(5). Calculation plays an important part here because of partial damage. If the damage is of 8lakhs or less then you can reverse ITC availed on Rs. 8 lakhs(a conservative and simple approach) but if your loss is more than Rs. 8 lakhs then you need to reverse the ITC on such loss amount.
CAclubindia
