Set off of Interest income against HP /Business loss ?

667 views 1 replies

07/06/2011

Dear Friends,

A Company has received interest income of Rs. 17 Lakhs on loans given to other companies.

Further there used to be Rental income in earlier years. Now the property is lying vacant for the whole of F.Y.

The company has paid Rs. 5 Lakhs towards property taxes, 2 Lakhs towards security charges, office expenses Rs. 7 lakhs like salaries to staff, telephone etc.

My query is that can the compuation be done like  ( Rs. 17 Lakhs - 5 Lakhs - 2 Lakhs - 7 Lakhs) = Rs.3 Lakhs Net Profit.

Is the above mode of computation right, in other words can i claim the above expenses. if yes please reply with supporting case laws etc !

Your expert views shall be highly appreciated.

Thanks

CA Rajesh Poddar

Replies (1)

No sir the above computation is not correct in my opinion

Amount paid as property tax is not allowed as deduction .

          GROSS ANNUAL VALUE = NIL

LESS: MUNICIPAL / PROP. TAX =5LAKH ( THIS DED.IS ALLOWED SUBJECT TO ANY GROSS                                                                                               INCOME)

            NET ANNUAL VALUE       =NIL  ( AS IT CAN'T BE NEGATIVE)

LESS: DED. U/S 24                    

              30% STATUARY DED.  =   NIL       ( 30% OF NAV  i.e, NET ANNUAL VALUE)

              INTEREST ON LOAN     = N/A        (   AS NO INF. GIVEN BUT WOULD BE ALLOWED IF ANY                                                                                        AMOUNT UPTO Rs.150000)

INCOME U/H HOUSE PROPERTY=  NIL

( NOTE - 30% STATUTARY DED. COVERS THE AMOUNT OF SECURITY CHARGES AND ACTUAL AMOUNT OF SUCH SECURITY CHARGES WILL NOT BE ALLOWED SEPARATELY)

 

 

income u/h Profits and Gains from business and profession = 17 lAKH- 7lAKH=10lAKH

( Note- the above amount will be charged u/h income from other sources if giving loan to others is not the main business of co.) 

 

GROSS INCOME CHARGEABLE TO TAX = 10 LAKHS

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