In Insurance compensation asset is received

Dear Niki,

Accounting Treatment

I think New Asset will be recognized at the FMV, & difference of WDV of old asset & FMV will be recognized as Profit/Loss on Disposal of Old Asset.

Income Tax

WDV =

                                       Opn.  WDV                      =       X

Add :- Assets acquired                                        =      Nil (Since cost is met by insurance co.)

Less :- Full value of money's payable            =         Nil (Since insurance Co. has replaced the asset & has not paid any money)                                 

Depreciation will be allowed on amount "X"

Now in this casecapital gain will be computed with reference to Sec 45(1A) read with Sec 50

Sales = FMV Of the new asset

Less =  X