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Depreciation in case of house property

ginni (working) (26 Points)

02 August 2013

The assessee is a company.it acquires a builing and lets it out .

hence company earns rental income from that building.company has no other buisness or source of income.

now for income tax calculation purpose rental income shall be taxable u/h house property.

my query is whether the company can charge depreciation on the building ?????and if yes then can company set it off from income from house property.???

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11 Replies

CA Kunal Mishra (Consultancy Service) (172 Points)
Replied 02 August 2013

No deduction other than provided under sec 24 is allowed & taxes are allowed. I have presumed that it is not nature of your business.

ginni (working) (26 Points)
Replied 02 August 2013

Originally posted by : Kunal Mishra
	No deduction other than provided under sec 24 is allowed & taxes are allowed. I have presumed that it is not nature of your business.

but the company has no other business. if we assume that renting out the building is the business of the company what would be the treatment then???

kailash soni (Student CA Final ) (29 Points)
Replied 02 August 2013

The Income Will be Treated as a HP Income only under the head IFHP not under Bussiness & profession as these kind of income is specifically specified under the head income from house property not covered under the Bussiness & Profession.

Read Section 32 to 36 of Bussiness & Profession.

And, then compare with the Section of House property i.e. Section 22 General Chargeability of Income from House property.

And Deduction will be allowed only of section 24 under HP.

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 02 August 2013

If ur company acquired asset and it let out its property for temporary purpose,then income from such property will be taxable under the head Income from other sources and if if for permenant purpose then income from it shall be taxable under the head "Income from PGBP' and but if such asset is house property if ur company does not use it for ur company principal business purpose and let out it then income from it shall be taxable under the head income from house property.

so if u come under the last case i.e Income from house property,u can not claim depreciation in ur company profit and loss account

but as u told company has only that source of income,obviously such income shall be taxable as business income and u can claim depreciation as well

correct me if i am wrong and i would be very greatful for ur suggestion in case of my wrong assertions

Thank you

sirisha (articles student) (109 Points)
Replied 02 August 2013

the company's core busines is not letting out so it cannot be taken under PGBP. but incase letting out is the business it can claim depreciation.

Ashwini. K (Partner in KGR&CO) (96 Points)
Replied 02 August 2013

Friends,

Reference to the Case Law "Chennai Properties and Investments Ltd (2004) 266ITR 85, read with section 22 of income tax act 1961, makes it clear that it is chargeable as income from house property and hence no other deduction except the deduction under section 24 (a) and (b) would be available.

Any income from Building or a Land appurtenant thereto is chargeable to tax under the head income from house property. It doesnot matter for what purpose or intention the building was let out.

I hope this source of information has given some sort answer.

Do correct, if its wrong.

Ashwini. K (Partner in KGR&CO) (96 Points)
Replied 02 August 2013

But, where the letting or sub-letting is part of a trading operations, it cannot be considered as income from house property . In this case it would be a trading receipt. Where a company is formed with the specific object of acquiring properties not with the view to leasing them as property but to selling them or turning them to account even by way of leasing them out as an integral part of its business, cannot be treated as landowner but has to be treated as trader. In deciding whether a company dealt with its properties as owner, one must see not to the form which it gave to the transaction but to the substance of the matter - Karanpura Development Co. Ltd. v. CIT [1962] 44 ITR 362 (SC).

This caselaw also has great significance in deciding your answer.

Bhav Bhuti Sharma (Towards Professionalism ) (823 Points)
Replied 04 August 2013

If an assets is not for the business than no deprication will charge on the assets . In case of HP you charge deduction under sec 24 . If company's core business is to let out then profit /revenue will be charged under head PGBP

rahul (owner) (34 Points)
Replied 06 July 2015

The assessee is a company.it owns a commercial builing and lets out some of its parts (small ienticial units) to a number of tanent and earns rental income paid service tax. company has no other buisness head income it just have income under the capital gain head from sale of property & sale of investments (shares).

Now the running expenses of the company like salary & administrative exp. repair & maintenance other filing fess exp can be allowable under profit & gain from business head?????

please give valuable suggestion, it is a big issue for investment companies, give details of any case or notification if any for this matter.

rahul (owner) (34 Points)
Replied 06 July 2015

The assessee is a company.it owns a builing and lets it out . hence company earns rental income from that building. company has no other buisness head income it just have income under the capital gain head.

Now the running expenses of the company like salary & administrative exp. repair & maintenance other filing fess exp can be allowable under profit & gain from business head?????

please give valuable suggestion, it is a big issue for investment companies, give details of any case or notification if any for this matter.