Manmeet Arora (CA) (111 Points)
15 March 2014Dear Experts,
One of our client has a guest house which is given on rent on daily basis ie.e for a day or two. No other service is provided i.e. no food or other service provided. Only property is let out but only for a day or two.
Should this income be considered as income from house property or income from business or profession?
Mihir
(Wealth Manager)
(5293 Points)
Replied 15 March 2014
Manmeet Arora
(CA)
(111 Points)
Replied 15 March 2014
According to me when there is no service provided it must be considered income from house property. But need opinions of experts.
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
Dear Manmeet
It will be considered as business as the period of stay is of 1 day or 2days. So it can be said as a business. In House property things goes in different manner as their is a rent agreement between tenant and lanlord.
I hope answer is clear to you.
Regards
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 15 March 2014
Yes sir it will be House property income, Since the act does not specify the distinction between the income from Residential buling and Commercial Buliding hence the income received as rent shall be regarded as IHP.
Refer case law in this regrads.
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
Dear Saroj
As there is no rent agreement in the same how you will prove it as a rental income ??
Regards
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 15 March 2014
Dear Manoj
For the purpose of determining income under IHP follwing conditions should be satisfied. These are:
• The property should consist of any building or land appurtenant thereto
• The assessee should be the owner of the property
• The property should not be used by the owner for the purpose of any business or profession carried on by him, the profits of which are chargeable to tax.
Unless all the aforesaid conditions are satisfied, the property income cannot be charged to tax under the head ‘Income from House property’. In his case this canot be presumed that renting out is his business hence it shall definately will be IHP.
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
Dear Saroj
1.Please put some light on how you will fill it in your income tax return??
Where we have to fill in the details of tenant with pan no. (in this case will you mention all be these 100 people pan no and details in income from house property)
2. If you A.O ask you for rent agreement for this house property under scrutiny then what should be provided to them in place??
Regards
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 15 March 2014
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 15 March 2014
CA Saroj Kumar
(Keen to learn something new every moments)
(2588 Points)
Replied 15 March 2014
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
Manoj Mehta
(Head Of Department (Accounts & Finance))
(1479 Points)
Replied 15 March 2014
RAHUL GOYAL
(tax consultant)
(46 Points)
Replied 18 March 2014
Dear manmeet.....The tax treatment would depend on whether the owner is managing the guest house or one is getting only the rental income. If the owner is operating the guest house, the rent will be considered as income from business or profession. If owner only receive a rental income and the tenant manages the guest house, it will be considered as income from house property.
So dear Manmeet.....check whether your client is managing & operating the guest house or not....If YES....then the income of your client will be taxed under the head PGBP....
Otherwise imcome will be taxed under house property income......
CAclubindia
