Depreciation & rental income
Querist : Anonymous
DEP MAY BE CALIMED EVEN IF INCOME IS TAXED AS OTHER SOURCES INCOME IF THE PLANT, MACHINRERY AND BUILDING ALL ARE LET OUT
CA MANOJ GUPTA
JODHPUR\
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CIT v. Modi Industries Ltd[1994]73 Taxmann 691/210 ITR 1 Delhi
CIT V. Delhi Cloth & General Mills Co. Ltd[1966]59 ITR 152 Punj
Further, you can claim the depreciation even if the production activity is stopped and you have rented out but the stoppage of production should be for temporary purpose other it would defeat the basic object of the company as per AOA.
The first case law is very much relevant for the present case. The ratio can be applied here also, except here the property is not givn on rent to the employees and that also doesnt matter.
There is nothing to do with the closure on production activity. what is the real/main object of the activities carried out by the assessee has to be seen from the articles of the company.
If the company is in the business of production of goods then it can no way be called as house property income.
it is either business income or house property income.
Income from other sources comes into picture only if it does not fit into any of the earlier heads.
Thanks
I am very well aware that the cases quoted by me are not fully applicable to the given facts, however ratio of the case can be applied herealso and it doesnot alter the answer of the question if the building was rented out to outsiders.
It will be considered as house property income only if the assets are held in stock in trade or renting of house property is main business of the assessee.
Since it is a HP, the assessee cannot claim depreciation on it.
Even DTC clarified the same. Irrespective of the fact, it will be income from HP.
I was referring DTC, that inorder to clear this confustion DTC has clearly said that such rental income will be taxed under HP only.
Also, as per Sec 56(2) only income from machinery, plant or furniture only be taxed under other sources and not rental income on building (unless it is not separable). Since here rent of buildings is separable (assumed), it has to be taxed under HP only.
Querist : Anonymous
My company is still running business at any other place. and old business building is letout. now pls clear it. and after some time they will close the company.
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