Please tell me whether I am Correct or not with the understanding of the below concepts.
Rental Income earned through letting out of Buildings as cinema halls is not taxable U/H "Income from House property" as the rental income is composite and inseperable in nature ie letting out of building is inseparable to letting out of furniture in the cinema hall. Therefore entire rental income will be taxed U/H "Profits and Gains from business or profession" or "Income from other Sources"
But whereas letting out of buildings to shopping malls like Big Bazaar, Spencers is taxable U/H "Income from House property" as though the income is composite in nature it is just letting out of building and provision of services like escalators, lift etc. So the composite income is now bifurcated into two parts as rental income from house property and income earned from provision of services. Therefore rental income earned from letting out of building is taxable under "Income from House property" and income earned from provision of services (like lift facilities provided) is taxable under "Income from other Sources".
One more query - can Rental income earned by the apartment owner is also to be treated in the same manner as rental income earned from shopping malls above.
04 August 2011
Great Query i am appreciate. IF the income received by the owner for giving their building for cinema it cover under U/h House property instead of PGBP. Generally PGBP cover income earn frm business or any profession. bt above case their is no any circumstances or Composite rent is Income from other sources
04 August 2011
Composite rent concept need to be view in 2 ways
1. Where the Composite rent can be inseparable , which is letting of building and other assets cannot be done separately ex. A having building along with furniture, machinery, lift etc. when the building cannot take for rent only for building, tenant need to take together and need to pay rent so such as case Income need to be treated either Income from business or Income from other sources
2. where the building & other assets like lift, furniture can be let out separately then the income from building need to treated as Income from HP & Income from other assets need to be considered as Income from othersources
Thanks for the brief description of the concept "composite rent".
Please tell us whether the concept of composite rent being separable (ie letting of building can be done without letting out the furniture in the building)can be applied to a cinema hall.
Can we say that rental income from cinema hall is chargeable U/H "Income from Business or Profession" or "Income from other Sources" or do we need to go through the tenancy agreement to find out whether it is inseperable or not.
I am asking this query only out of academic interest.
05 August 2011
Academically the answer has been given by the expert CMA Ramesh.
However,practically if you desire to separate the rent of building -as say Rs 1.00 lac per month and rent of furniture and facilities is say Rs .50 lac, then you can take the rent of building U/H IFHP and further rent of Furniture, Projector etc can be taken under income from other sources or IFBP. . Two separate agreements can be entered into. . As such We need to go through the tenancy agreement to find out whether it is inseperable or not.
Composite rent being inseparable means letting out of one asset cannot be done without letting out the other asset. In such cases the entire income is taxable U/H "Income from Business or Profession" or "Income from other Sources".
Obviously letting out of building is inseparable to letting out of furniture in the cinema hall.
But as you said, practically, we can make the agreement separable by entering into two separate agreements and charge rent from building U/H "Income from House property" and rent on furniture U/H "Income from Business or Profession" or "Income from other Sources".
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