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Assets under operating lease

sivaram (Asst Mgr-Taxation) (6918 Points)

17 August 2016

Dear All

We are owning certain commercial Buildings and have let them on operating lease in this connection we are getting rent from tenants each month and in our Income tax return we are showing the rentals received from Income from House property? Where in Income tax Act it is stated that we cannot claim depreciation on these owned and leased assets ? If we show Income Under House property cant we claim depreciation too under business or profession ?

Kindlly clarify ?

Thanks in Advance

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160342 Points)
Replied 17 August 2016

Can you explain why there are different heads of income in IT act, Salary, ..... income from house property, ..... Profits and Gains from Business or Profession?

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 17 August 2016

Dear sir

we claim depreciation as per companies act both for owned assets and leased assets but let me know the provisions given in the Income Tax act which denies depreciation on leased assets ?

or it is such that if we claim repairs under House property depreciation is denied in income Tax Act?

In short i want to have clarity on depreciation under Income tax Act for assets given on operating lease by a lessor ?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160342 Points)
Replied 17 August 2016

Yes, if and only if you have shown the rental income under head PGBP, OR not claimed standard deduction under income from House property.

Even though sometimes exceptions seen.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160342 Points)
Replied 17 August 2016

Kindly read more comments from:

/forum/depreciation-in-case-of-house-property-259713.asp

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160342 Points)
Replied 18 August 2016

SUPREME COURT JUDGEMENT:

https://itatonline.org/archives/rayala-corporation-pvt-ltd-vs-acit-supreme-court-s-28-income-from-letting-of-property-on-rent-by-an-assessee-engaged-in-the-business-of-letting-is-assessable-as-business-profits-us-28-and-not-a/

Brief:

S. 28: Income from letting of property on rent by an assessee engaged in the business of letting is assessable as "business profits" u/s 28 and not as "Income from house property" u/s 22

The issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income.