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Urgent : query regarding renting of immovable property

CA Neeta (CA) (28 Points)

29 November 2012

Dear All,

We have rented an immovable property by registering a Leave and License Agreement with the tenant. We receive rent in two parts as we have registered two agreements, one mentioned as above, i.e Leave & License (L&L)Agreement & the other as Services Agreement for providing services such as electricty, water, parking,etc. The ITO has disallowed the services part saying that the same cannot be claimed as income from House Property & only the L&L Agreemant can be claimed as Income Income from House Poperty. Is there any way with the support of any case law, or in any other way, i can prove my stand correct. Please provide your valuable suggestions.

Thanks.

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6 Replies

(Guest)

hello neeta .

objective of letting out: if form agreement between two parties,it is clear that primary object was to let out portion of a property with the additional right of using furniture,fixtures and other common facilities,then rent charged from month to month is income derived from said property,and is assessable as income from house property.(SHAMBHU INVESTMENT P LTD).

SEPARATELY IDENTIFIABLE: WHERE BUILDING IS LET-OUT ALONG WITH PLANT & MACHINERY AND AMENITIES,AND THE INCOME TOWARDS BUILDING AND OTHER ASSETS ARE SEPERATELY IDENTIFIABLE,THEN INCOME FROM BUILDING SHALL BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND OTHER INCOME SHALL BE TAXED UNDER THE HEAD EITHER ''PROFITS AND GAINS OF BUSINESS OR PROFESSION'' OR ''INCOME FROM OTHER SOURCES''.

CONCLUSION: IF YOURS PRIMARY OBJECT WAS TO LET OUT PORTION OF A PROPERTY AND OTER COMMON FACILITIES, THEN RENT CHARGED FROM MONTH TO MONTH IS INCOME DERIVED FROM SAID PROPERTY,ASSESSABLE AS ''INCOME FROM HOUSE PROPERTY''. CASE: SHAMBU INVESTMENT P.LTD.(SC)

CA Neeta (CA) (28 Points)
Replied 29 November 2012

Originally posted by : gvgr123
	hello neeta . objective of letting out: if form agreement between two parties,it is clear that primary object was to let out portion of a property with the additional right of using furniture,fixtures and other common facilities,then rent charged from month to month is income derived from said property,and is assessable as income from house property.(SHAMBHU INVESTMENT P LTD). SEPARATELY IDENTIFIABLE: WHERE BUILDING IS LET-OUT ALONG WITH PLANT & MACHINERY AND AMENITIES,AND THE INCOME TOWARDS BUILDING AND OTHER ASSETS ARE SEPERATELY IDENTIFIABLE,THEN INCOME FROM BUILDING SHALL BE TAXED UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND OTHER INCOME SHALL BE TAXED UNDER THE HEAD EITHER ''PROFITS AND GAINS OF BUSINESS OR PROFESSION'' OR ''INCOME FROM OTHER SOURCES''. CONCLUSION: IF YOURS PRIMARY OBJECT WAS TO LET OUT PORTION OF A PROPERTY AND OTER COMMON FACILITIES, THEN RENT CHARGED FROM MONTH TO MONTH IS INCOME DERIVED FROM SAID PROPERTY,ASSESSABLE AS ''INCOME FROM HOUSE PROPERTY''. CASE: SHAMBU INVESTMENT P.LTD.(SC)

Thanks for the above reply. But, i have got the above case too...its jus that the same is not fully satisfying the above query. Is there any other case law on the concept of service agreement ?

Thanks once again.

Manoj chopra (article) (128 Points)
Replied 29 November 2012

/articles/renting-of-immovable-property-service-developments-and-issues-14095.asp#.ULcZDORfEl8

(Guest)

hello,

if building is let out along with other assets,but the two lettings are seperable,i.e letting out of one is acceptable to other party without letting out of the other,then income from letting out of building is taxable under the head ''income from house property''.

income from letting out of other assets is taxable as business income or income from other sources.