Splitting of rent from leasing of building

This query is : Resolved

BIKAS DAS (Querist)
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08 May 2012 Dear Sirs,

I am to lease my whole 21000 sft building to a hospitality group, which will use it as a guesthouse for Corporates at an annual rent of Rs 33 lac.

My queries are :

a. Is Service Tax chargeable on this renting under 65_105_zzzz or exempted as it will be used for the purposes of accommodation, including boarding houses and holiday accommodation.

b. Can I split the rent into parts (by separate agreements with the lessee) - one towards the building rent @ Rs 24 lac/annum and the second @ Rs 9 Lac/annum towards the rent of plants & equipments like Lift, Power Sub-station, 100% Power backup system, Aircons/Geysers (no furniture considered). Investment on these P/E is around 50 Lac and the Lessee agrees to this 9L/year.

c. Can I avail depreciation on these P/E at prescribed rates?

d. Is Service Tax applicable on this P/E rent (if rent splitting is legally permissible)? As it is below the threshold limit of 10 Lac/annum, should I register for ST?

e. Can I claim depreciation on this building. It has been approved by the local authority as a residential multi-storeyed building, but always be used for renting. I have separate residential property for my own use in the same city.

Thanks in advance,

Regards,

Bikas Das

Guest

Guest (Expert)

08 May 2012 1. Service tax is chargeable on renting of property.

2. You can have a separate amenities agreement for PE apart from the lease agreement.

3. Service tax is chargeable for PE also. 4. You can claim depreciation on PE provided you show rent from PE as business income.

Rent from building to be shown as income frm house property.

BIKAS DAS

BIKAS DAS (Querist)
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08 May 2012 1. If ST is chargeable, then what is about the exclusion [(d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities.] under Sec.65(105)(zzzz)? I am to reaffirm that this is a residential building.

2. If a separate amenities agreement for PE is made, does this not contradict with Sec.65(105)(zzzz) (....by renting of immovable property or any other service in relation to such renting for use in the course of or .....)

Guest

Guest (Expert)

08 May 2012 Wud get back, need to check it in detail.