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Depreciation

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(Querist)
16 February 2011 A company has leased out it's factory with full facilities to another company. AO disallows depreciation claimed by the lessor company on the ground that the factory is not used by the lessor. Is the stand of AO correct ? Under which head the lease rent is assessable, business income or other sources ?
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CA Punit

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CA Punit (Expert)
16 February 2011 When factory building is let out along with plant & machinery and facilities, and the rent is separable, then rent from building shall be taxed under HOUSE PROPERTY..
and no depreciation can be availed there against....

hwever if the lease rent is inseparable (consolidated for all), then will be taxed under OTHER SOURCES..
and depreciation can then be claimed u/s 57

Related Case, [Sultan Bros. Pvt. Ltd. by SC]
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