Whether rental income or business income

Rajesh Poddar (Chartered Accountant) (321 Points)

12 September 2009  

Dear Friends

A Partnership firm has let out commercial property. there are two agreements made of 50% each one as rental income and other as business centre income. TDS is deducted at 20% on rental income and at 2 % on business centre income.

My query is that in reality it seems that it is Rental income only and as an auditor i should take the entire 100 % income as Rental income only. Client is opinion that since two agreements are made and two rates of TDS are deducted i should take the balance 50 % as business income.

Also what is important to note is that there has been no actual business activity been carried out by the lesse during the last 12 months as therir project failed. And the components of business centre are mostly of the types of payment made to salary staff, telephone , gardener, watchman. etc. (approx 10% of 50% of total income)

Please reply with case laws your expert views

Rajesh Poddar