My client is renting out a part of his bungalow for film shooting. They earned the hire charges for the location about Rs. 28 lacs for the F.Y. 2009-10. Under section 24 of IT Act, there is a 30% deduction from the income earned on house property which is about Rs. 8 lacs.
I would like to know if its okay to file returns using section 24 of IT Act and availing a reduction of income of Rs. 8 lacs.
Thanks in advance.
S, Rs.8.4 lakhs can b claimed by the assesse as standard deduction on the rental income
Dear Mihir,
"Income From House Property" is a specific head and rental income from property shall be assessed in this head only if following conditions are satisfied -
1) Assesee should be the owner otherwise Rental income will be assesssed as "PGBP" or "Other Sources"
2) Rent should be in respect of property only and not in respect of any other thing like furniture, etc.
3) "Letting out" should be with the intention to let out from year to year basis. i:e If House is given to "Film makers" or for other Events ONLY then it will be assessed as "Business Income". But if this case is only one of its kind then it will be assessed as House Property.
Where the building constructed by the assessee out of donations was let out for limited periods for functions such as marriages, and chairs/mikes, etc., were also made available by the assessee for which separate charges were collected, this activity of earning an income from making the building available to others for a charge for limited periods is not to be equated with the letting out of a building on lease from month to month or year to year, wherein it could be said that the building was being exploited by the owner to earn a rental income. Here the expression ‘letting out’ is used only for a limited purpose. The building remains under the control of the owner. What is granted by the owner is only a licence for a prescribed fee for a specified period. This activity of the assessee can be described as a business carried on by the assessee with the intention of earning income from the building, and the resultant income is assessable as income from business and not as income from house property - CIT v. Halai Nemon Association [2000] 243 ITR 439 (Mad.).
Thanks Srinivasa
Thanks Amir, great explanation
If this case does not qualify to be income from house property, how does one reduce the income from business with the expenses incurred? My client is the permanent resident of the bungalow. How much expenses can he avail to reduce the income from business?
if this income is assessed as PGBP/Other sources then ALL legitimate expenses incurred to earn this income can be deducted and there is no limit as such.
s, i agree with Mr. Amir any legitiamte expenditure incurred for earning the income are eligible for deduction there is no limit u/s 28.
Yup....agreed here also...
Yes, the income to chrged under PGBP, and all allowed legitimate expenses to be deducted from it.
Thanks everyone,
What all "legitimate" expenses can be availed in computing the taxable income in case of income from business & profession?
mihir legitimate expenses means expesnes which u has incurred wholly n exclusively for earning the rent for such a house. all such expenditure are available as deduction from income of such a house
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