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Standard deduction on hp income

Amrit Dalmia (Indirect Tax Consultant) (912 Points)

20 November 2013

A factory is equally owned by two proprietors. One proprietor has given on lease the share of his factory to another proprietor for business use. Whether the lease income for the lessor would be taxed under HP, PGBP or IFOS. If taxed under HP, whether Std Ded'n can be claimed on it or not? Please justify the replies with relevant supportings from the Act.

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6 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 20 November 2013

I think it will be income from house property, and standard deduction shall be available.

Wait for other replies.

CA Kedar Sakhardande (Proprietor) (942 Points)
Replied 20 November 2013

If the factory is a depreciable asset then the income is income from Business Profession on which no standard deduction is availible

CA Chandra Kishore Bajpai (Tax Consultant) (3088 Points)
Replied 20 November 2013

Section 26 talks about the co-ownership. According to this section, where property consisting of building or buildings and land appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable such persons shall not, (in respect of such property,) be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income. In such an eventuality, the relief admissible under section 23(2) shall also be separately allowable to each such person [Explanation to Section 26]. thus it is clear that if their share is defined and is certain that income shall be taxable separately.

I understand that his income shall be taxable under the head "income from house property" because this is not used by the owner (other co-owner) for his own business or professional purpose.

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Amrit Dalmia (Indirect Tax Consultant) (912 Points)
Replied 20 November 2013

Sir,

Actually I'm doing a tax planning for a real life situation. Here, the the lessee i.e. the other co-owner is using the leased factory for his business. How to ensure that the lessor gets 30% Standard Deduction u/s 24(b) on the lease rent received. Should the lessor lease only the factory or the entire property which they share equally?

Regards

*RENU SINGH * (✩ §m!ℓ!ñġ €ม€§ fℓม!ñġ ђ♪gђ✩ ) (21627 Points)
Replied 20 November 2013

In my opinion ,

If the person who has given the property on lease and he is the regular business of leasing , then it will be treated as PGBP otherwise it comes under the purview of HP .

and standard deduction would be allowed as well.

and in the second case, for the leasee , as he is using the property for his business... he would do the simplification as per PGBP and general deductions would be allowed under section 37.

correct me , If I'm wrong.

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