Query reg. allowability of residence rent as expenditure.

This query is : Resolved

Guest

Guest (Querist)

06 January 2011 Dear Friends / Experts,

A, a salaried individual has entered into share trading activity in October 2009 and doing it at his residence.

A is paying monthly rent of Rs.6000/- for his residence.

Query 1

Whether there is any option available for A to consider the residence rent payment as 'business expenditure' for the following reason :

Share Trading Activity is done at residence only.

(A has done voluminous delivery based transactions, which shall attract S.44AB).

Is there any possibility under the provisions of Income Tax Act ?

Ans : ..................

Query 2

As A is doing Share Trading Activity at residence only, is there any option available for treating the Electricity Payment as 'business expenditure'.

Is there any possibility under the provisions of Income Tax Act ?

Ans : ..................

I may be suitably clarified on the above two queries.

Thanks.
DK.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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06 January 2011 If a person is carrying on business from his home, he can apportion a fair proportion of expenses incurred for rent & electricity towards carrying on the business. He may show assistant's salary also.

Guest

Guest (Querist)

07 January 2011 While I thank you for your advise, I may still request you to clarify me the 'fair proportion of expenses incurred for rent & electricity'.

Query

Whether this claim is allowable in the view of Income Tax Authorities.

Ans : .................

If allowable, how to determine the fair portion say for example, A has been paying Rs.6000/- as monthly rent and EB (bi-monthly) Rs.1000/-.

Ans : .................

Request : If such expenditure is allowable, I may request for any relevant case laws / provisions of income tax act.

I shall wait for your views.

Thanks.
DK.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 January 2011 Generally such claims are not sustainable in the absence of proper explanation in case demanded by authorities.

In case of salaried persons, it is very difficult for them to justify that residence has been used for the purpose of business as their normal duty hours will clash with the trading time slot of stock exchanges. It depends upon the fact that from where the business is actually transacted. If you are engaged in the online trading from your home, then only it is advisable, otherwise not.

But where, the assessee can explain that say 20% the place is fully/partly used
for the purpose of business and electric consumption is obvious in electronic mode of transactions his claim becomes sustainable.

Secondly, if assessee is in receipt of HRA from his employer, he should show the amount of rent paid towards residential portion only while calculating exempted portion of HRA.

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