Insurance Claim on Depreciable Assets

yes it need to be capitalized...then only u can claim depreciation of the asset received in subsequent years...

difference between the wdv and the cost of the new asset need to be declared as stcg

@ Gauthami.....
we spent no amount for new assets..all are granted by insurance company, then why to capitalised?

In our act, it is specified that when compensation is received in form of an asset(new) for destruction of asset being used for business purpose then excess of FMV over WDV of asset should be treated as STCG. But no where the treatment of new asset n whether depreciation can be claimed on new assets is mentioned. Moreover in this case they are not receiving any income but receiving a source for generating income in subsequent years so that continuity of business by assessee shall be intact.
so in my view treatment for new asset must've in following way. For example WDV of asset destructed is 40L and compensation received in form of new asset which has FMV of 50L. Then 10L shall be assessable amount and should be reduced from cost of new asset. The balance amount of 40L should be capitalized and depreciation should be claimed for subsequent years.

because you are confusing between the funding of the costs of the assets with the accounting treatment of a capital asset.