A factory building was destroyed by accidental fire in March 2025 and the insurer settled the claim by paying money in June 2025. Under section 45(1A) the capital gains are chargeable in:
AYear of destruction, on the value insured under the policy
BNeither year, because destruction is not itself a transfer
CYear of receipt, with the money received as the consideration
DYear of receipt, with market value on the destruction date
Answer & Solution
Correct answer: C. Year of receipt, with the money received as the consideration
1. Section 45(1A) applies when money or assets are received from an insurer on damage or destruction of a capital asset by specified causes including accidental fire.
2. The capital gains are charged in the previous year in which the money or asset is RECEIVED — here P.Y. 2025-26.
3. Full value of consideration is the money received (or FMV of the asset received) on the date of receipt.
4. Option D wrongly values consideration on the destruction date; the section fixes value as of receipt. Without 45(1A), option B would have been the position since destruction alone is no transfer — the deeming cures exactly that.
_Source: ICAI CA Inter P3(A) Income-tax SM (May 2026), Ch 3 Unit 4 Capital Gains, PDF p. 17_
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