Taxability of renting of factory premises
This query is : Resolved
31 August 2013
Dear, Experts
My client is Pvt Ltd Co and let out its part of factory premises to other pvt ltd whether the rent received is considered as income from house property or taxable as income from business.
can anyone sort off the querry ? its urgent
My client is Pvt Ltd Co and let out its part of factory premises to other pvt ltd whether the rent received is considered as income from house property or taxable as income from business.
can anyone sort off the querry ? its urgent
31 August 2013
It will be income from other sources.
31 August 2013
since renting is not part of main business of company and the business premises is partly given on rent.
03 September 2013
Thank u very much Tushar
can u please do me a favour, just let me know any decided case law on matter disclosed.
can u please do me a favour, just let me know any decided case law on matter disclosed.
26 July 2025
Sure! Here's a clear explanation to resolve the confusion:
---
### Taxability of Rent Received from Factory Premises by Pvt Ltd Company
**Is the rent income classified as Income from House Property or Income from Business?**
1. **Income from House Property**
* Income from house property arises when an individual or entity owns a **residential or commercial property** and lets it out for rent.
* This income is taxable under **"Income from House Property"** if the property is a **building or land appurtenant to building**.
2. **Income from Business or Profession**
* Income from business includes income earned from any trade, commerce, manufacture, or any activity carried out with a profit motive.
* When a company rents out **factory premises** (which are part of its business assets used for manufacturing or industrial purposes), and the premises are used for business purposes, this income is generally considered **income from business**.
---
### What applies to your case?
* Your client is a **Private Limited Company**, and the rented premises are part of a **factory** (industrial property), not a residential/commercial property in the usual sense.
* Factory premises are generally **business assets** of the company.
* Renting out part of the factory to another company is an **incidental business activity** or commercial exploitation of business assets.
Hence, **rent received from factory premises by a Pvt Ltd company is generally treated as income from business or profession (not income from house property).**
---
### Why not Income from Other Sources (IFOS)?
* Income from Other Sources is a residual head for incomes not covered under other heads.
* Rental income from property usually falls under Income from House Property if it is a property like building or land (not used for business), or Business Income if it’s related to business assets.
* Since the company is engaged in business, renting factory premises is more closely linked with business income.
---
### Summary Table:
| Situation | Tax Head | Explanation |
| --------------------------------------- | -------------------------- | ---------------------------------- |
| Rent on residential/commercial building | Income from House Property | Standard rental income on property |
| Rent on factory premises by company | Income from Business | Factory is a business asset |
| Rental income from machinery or plant | Income from Business | Related to business assets |
---
If your client’s main business is manufacturing, the rent from factory premises should be shown as **business income** in P\&L account and taxed accordingly.
---
**Would you like me to help draft accounting treatment or tax return disclosures for this?**
---
### Taxability of Rent Received from Factory Premises by Pvt Ltd Company
**Is the rent income classified as Income from House Property or Income from Business?**
1. **Income from House Property**
* Income from house property arises when an individual or entity owns a **residential or commercial property** and lets it out for rent.
* This income is taxable under **"Income from House Property"** if the property is a **building or land appurtenant to building**.
2. **Income from Business or Profession**
* Income from business includes income earned from any trade, commerce, manufacture, or any activity carried out with a profit motive.
* When a company rents out **factory premises** (which are part of its business assets used for manufacturing or industrial purposes), and the premises are used for business purposes, this income is generally considered **income from business**.
---
### What applies to your case?
* Your client is a **Private Limited Company**, and the rented premises are part of a **factory** (industrial property), not a residential/commercial property in the usual sense.
* Factory premises are generally **business assets** of the company.
* Renting out part of the factory to another company is an **incidental business activity** or commercial exploitation of business assets.
Hence, **rent received from factory premises by a Pvt Ltd company is generally treated as income from business or profession (not income from house property).**
---
### Why not Income from Other Sources (IFOS)?
* Income from Other Sources is a residual head for incomes not covered under other heads.
* Rental income from property usually falls under Income from House Property if it is a property like building or land (not used for business), or Business Income if it’s related to business assets.
* Since the company is engaged in business, renting factory premises is more closely linked with business income.
---
### Summary Table:
| Situation | Tax Head | Explanation |
| --------------------------------------- | -------------------------- | ---------------------------------- |
| Rent on residential/commercial building | Income from House Property | Standard rental income on property |
| Rent on factory premises by company | Income from Business | Factory is a business asset |
| Rental income from machinery or plant | Income from Business | Related to business assets |
---
If your client’s main business is manufacturing, the rent from factory premises should be shown as **business income** in P\&L account and taxed accordingly.
---
**Would you like me to help draft accounting treatment or tax return disclosures for this?**
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