Hostel business

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 July 2014 Sir/madam,

i want to know income from hostel business is taxable under which head income from house property or business for a pvt. company or for a LLP.?

Thanks & Regards.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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21 July 2014 under income from house property.................

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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21 July 2014 income from hotel business will be taxable under "business only". renting out the whole building for someone else to run a hotel in it can be covered under house property

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Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2014 Nikhil Sir,

It is a Hostel Like Boys Hostel & not a hotel business.
here we charge a fixed amt from boys for rent,electricity, waterbill, security charges etc.. as we are taking amt in composite form so can i show this as a business income or i have to bifurcate it on ad-hoc basis between house-property & business ?

thanks & Regards..

Nikhil Kaushik

Nikhil Kaushik (Expert)
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24 July 2014 well, I just mistyped. Irrespective of hotel or hostel, the treatment should remain same. Ideally, you should be able to claim that it is business income. But income-tax authorities are a confused lot. where the assessee claims expenses more than 30% of the revenue, the start arguing that it is house property income only!

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Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2014 thank you sir,
for your valuable suggestion..

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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25 July 2014 if u want to invite troubles from it dept in assessment then pls take it as income from business.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 July 2014 Dear Tushar,

you may refer Cochin Tribunal judgment in the case of kenton Leisure Services Private Limited (ITA Nos. 171/Coch/2009 & 291/Coch/2010, dated 30 December 2011)

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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25 July 2014 this is not a co the judgement which u give this is hostel where u are renting only to the memebers or students

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 July 2014 how does it matter if it is a Co or an individual or a partnership? The querist anyways is asking for a Co/LLP only!!!

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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25 July 2014 but then there is a sort of landlord tenant relationship.....wat abt that?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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25 July 2014 the logic is simple: you need to see the substantial intent in the transaction. Once the Direct tax code comes into play, all such incomes will be taxed as house property only (except for SEZ properties). So as and when it happens all judgments like Cochin tribunal ones will become redundant and your view will be applicable carte blanche..

however, till then you need to see the transaction structure. if the hostel is providing food, electricity, laundry etc alongwith room, you should be able to cover it in business income.

Bare room rent will be covered under house property.

Further, if you go through cases of charitable institute, the department has always argued that hostel income is a separate business activity.

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