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HUF Queries

Shefali Bajpai (Article Assitant & CA Final Student) (1148 Points)

16 May 2008

1. Whether Karta ( Senior Citizen) can deposit in PO Scheme on behalf of the HUF?

2. Is Interest on Housing Loan from Private Lender allowed as deduction u/s 24 of Income Tax Act?

3. Whether expense on account of Commercialization of residential property amounting to approx 5-6 lakh allowed as deferred revenue expenditure?

4. Of late has there been any restriction for a HUF to have a PPF account? If yes, then whether or not the HUF account already running has to be dissolved?

I’ll be glad if someone can enlighten me on the above mentioned queries.

With Regards,

Shefali.

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5 Replies

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HUF

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 16 May 2008

1. Yes

2.. Yes, but onus that the borrowing was for house property lies with the claimant

3. What is the nature of expenditure?

4. I do not think a running account will be closed prematurely.

SANDEEP AGARWAL (CA) (20 Points)
Replied 16 May 2008

Ans. for No.3

As it appears from your query expense is in the nature of capital exp. beacause use of property is changed permanently and benefits will arise for whole of life i.e. it will be capitalized.

Shefali Bajpai (Article Assitant & CA Final Student) (1148 Points)
Replied 17 May 2008

@ Mr. S. Srinivasaraghavan

This expense pertains to commercialization tax. And after paying this tax the property shall be converted from Residential to commercial nature permanently.

@ ALL. Thanks for the suggestions.

S.Srinivasaraghavan (Chief Financial Officer and Co) (11318 Points)
Replied 17 May 2008

Ms.Bajpai,

From the question I am not able to make out whether you want to treat that expenditure as Deferred Revenue (DR) expenditure or you are asking whether the IT people would treat it as DR expenditure.

However, the Income Tax Act (IT Act) primafacie does not recognise a DR expenditure. It only recognises an expenditure as capex or revenue. If an expenditure is recognised as capex by IT Act provisions, only depreciation is allowed. To treat an expenditure as capex, there has to be a recognisable capital asset comoing into existance on account of that expenditure. If not, but, the expenditure is incurred wholly for the business, then the expenditure could be classified as revenue only, no matter how you treat the expenditure in your books purely due to your accounting perception.