Business building

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 May 2012 Dear expert,
One of my client is a lpg gas dealer and started business in fy 2011-12. In sales tax registration he is sole proprietor of the firm. He constructed office and godown at his ancestral agriculture farm and for the construction of building his father invested money out of his gratuity fund.
Here I want to know that, he should clamim depreciation on building in his P&L A/c and balance sheet or he should claim expences of rent for business building.
Please advise me.

Manjunath KS

Manjunath KS (Expert)
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30 May 2012 Facts are:
1. Office & godown built on ancestral property.
2.Construction cost met by his father's gratuity money.
Two alternatives:
1.Bring in his father as a lender or investor to the firm. Pay interest if taken as lender or share profit if taken as investor simultaneously claiming depreciation.
2.Enter into a lease agreement with him and charge the rent to P& L.

In the above case 2nd option is better.

VNS Sarma, Advocate

VNS Sarma, Advocate (Expert)
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30 May 2012 Status of the assessee not mentioned. 1).If he is carrying on business in his Individual Status, and the property belongs to HUF, he can pay rent and claim the same in p&l a/c as expenditure.
2). If the property belong to father only, he can pay and claim rent.
3). If the business is in HUF status, and building also of HUF, he can claim depreciation.
4).If the business is HUF and building belongs to father's Individual status, he can claim rent.

CA Harish Suwalka

CA Harish Suwalka (Expert)
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30 May 2012 Dep. can not be claimed, because the property is owned by HUF and not by the individual assesee, so he shoukld enter into a lease agreement with HUF and pay rent, such rent will be deductible as a expense

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