You cannot claim depreciation for AY 2010-11. The car is assumed to be sold.

Dear Mayank

You can not claim the Dep on car Becuase block is not exist on 31.03.2010. but you can claim short term capital loss on this car.

Dear Mayank

The Prerequsite condition to claim depreciation is as follow

(1) the "block " must be exist

(2) value of such block not be ceased i,e block have some value

so , the car was stolen in previous year the block is not in existance , hence you can not claim depereciation .If above two condition is not satisfied then it will be go to  capital gain , you can claim short term capital loss .

Sec 45(1A), which covers deemed transfer, does not cover theft of asset and hence the insurance amount so received wud be capital receipts not subjected to capital gains, since there will be no transfer. There will be no tax on the Rs. 1 Lacs of claim money..

Depreciation however cannot be claimed if there is no other car in the block.. write that off as STCG.. You are in a win win position as far as the taxtion is concerned.

Dear Amit KK

And for capital gain, my opinion is also that it not cover the "theft" incident and hence the whole compensation received is not chageable to tax.

Why depreciation can not claimed and under which section it can reduce the WDV of the said block of assets???

Dear Friends,

I also want to know under which section, we are treating the compensation recieved, as realisation from block..... we do it, but on what basis?

Depreciation cannot be claimed because there is no asset in the block.. The balacne is STCL...

See this article and comments... very suitable for the situation...

/articles/section-43-6-v-section-45-1a--4402.asp

Dear Mayank,

The amount of Rs. 100000 will be treated as capital receipt. Section 45(1A) specifies that Where any person receives any money or assets under insurance from insurer on account of damage or destruction of any capital asset, as a result of.................. However the car is stolen and hence not covered by this section. Hence 100000 will not be taxable.

The money received from insurance company will not be deducted from block for arriving at WDV since the same doesnot fall within the terms - "sold, discarded, demolished or destroyed" mentioned in Section 43(6) defining WDV. Hence entire amount of Rs. 200000 being the balance of empty block will be available as STCL.

Dear Chintan Shah

Why the entire block of assets is treated as STCL becuase Sec 50 says block ceased to exist for the reason of transferred of assets and in case of theft there is no transfer and hence no transfer and no section 50.

Awaiting for the reply.

Dear Mayank,

You are quite right...Since there is no transfer no capital loss can arise u/s 50. The WDV cannot be carried forward in next A.y since the block has already ceased to exist. Hence the balance of WDV in the block will lapse and will not be allowable under any sections of the Act.

Regards,

Chintan

Just an interesting thought, but what does the word "extinguishment of rights" occurring in Section 2(47) mean ?  Does it cover cases where the rights are extinguished without the consent of the  owner like stolen assets ?  In that case will the compensation become taxable?  Of course 45(1A) gives specific circumstances under which it is taxable and theft is not covered.  But then, if it is already covered by 45(1), this will not matter.  This is a long shot, thought I could put it down here.