Wdv for purpose of depreciation

Mr A has Rs.1 crore worth block of assets in his business. 50 lakhs worth of assets got destroyed in fire accident. 10 lakhs is received as insurance claim. Now what is the WDV of the block- on what amount depreciation is to be calculated?? How to treat insurance claim of Rs.10 lakhs and loss of 40 lakhs?? Please help me
 

Replies (9)
If there are still some assets in the block then reduce the insurance claim of rs. 10 lakh only and wdv shall be rs. 40 lakh.

however if there is no asset in block and block is ceased to exist then wdv shall be nil and rs. 40 lakh shall be short term capital loss.

Sir WDV will be 40 lakhs or 90lakhs??

Oh.. my mistake... it will be 90 lakhs

Sir then how to treat loss of 40 lakhs?? We lost 50 lakhs worth of asset, can we claim dep on the lost asset? 

And can i show 10lakhs as income in p&l a/c. Please help me

ACCOUNTIGN TREATMENT

Bank A/c........................ Dr. 10,00,000

Loss on Machinery............Dr. 40,00,000

          To Machinery A/c                              50,00,000

Transfer the 'Loss in Machine' account in Profit and loss A/c. 

 

Tax Treatment

-> Add back  the 'Loss on Machine' account for computation of taxable income.

-> Provide Depreciation for Income Tax purpose on 90,00,000/- 

 

This way you will continue to get depreciation on 40 Lakhs in income tax ....

secendly you are getting the net loss of 40 lakh no profit is to be shown in profit and loss

 

 

 

For ex: the dep rate for the block is 10%. I actually lost 40 lakhs. But now i am able to claim as expenditure or depreciation of 4lakhs (40lakhs* 10%) only and remaining 36 lakhs will be included in taxable income. Am i thinking correct sir??

This issue has become so confusing that can not be explained like this...

Still...the 36 lacs also will be allowed as dep in future years.

Yes, entire 40 lakhs shall be allowed as depreciation over the years... no profit or loss on account of destruction of asset shall be included in taxable income...

Thank u so much:)

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