Deduction of lease rent from rent income

Originally posted by : Hemraj Charan
	Hello Friends, I Have taken a land on lease for 30 Years on a rent of Rs.25000/- p.m. & I have Construct a bulding on this land with 2 floor in which 1 floor is lent to a bank for rent of Rs.65000/- p.m. Whether this income will be Taxable Under income from house property or income from other sources? whether I can take deduction of above lease rent & under which head? Please Resolve this problem & Guide Me?

1) When a person obtains a piece of land on lease and constructs a building on it, the income from such building will be taxed in his hands as “Income from House Property”

[Lessee as owner - To deem the lessee as the owner of the property, the lessee should not only have the right to raise new construction on the leasehold property but should also, in exercise of such right, have actually raised the new construction and should also be deriving income from such new construction - CIT v. Supreme Credit Corporation Ltd. [1998] 230 ITR 700 (Cal.).]
.
2) Firstly, you will be deducting TDS on lease rent paid by you as it exceeds the threshold limit of deduction.

[For purposes of section 194-I Rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,—(a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;]
.
Further, you can claim the amount of lease rent expenses as revenue expenditure.

[In case of CIT v. Perot Systems TSI India Ltd. [2012] 349 ITR 563 (Delhi) (High Court) Tribunal allowed it as revenue expenditure holding that the amount paid was not for acquiring any leasehold right by way of annual lease rent. Thus, the payment was for continuing to enjoy the leasehold rights. In such situation, the assessee would not acquire any new capital asset but merely maintain capital asset already acquired. Thus, the expenditure assumed the character of revenue in nature and not capital expenditure.]