18 March 2015
A person has hired a stationary shop on rent amounting Rs: 35000/- per month. Neither he has any rent agreement nor his landlord issue any kind of monthly rent slip at the time of Rent payment. My client has income from his stationary shop during FY 13-14 as net income Rs: 3.50(Gross receipt 9.50-expenses made for running shop during the year Rs: 6 Lac). In this case can he claim Rent amount Rs: 35000/- as expense for deduction his gross receipt or not, where he doesn't any kind of supporting documents?
18 March 2015
if u dont have any rent receipt or agreement. at the year end u can get a slip signed by him i.e. u had paid so and so amount for so and so months....
18 March 2015
Ankit ji, Landlord is alive but he doesn't want to issue any kind of slip either month or yearly. That's why he refused for rent agreement. Plenty of time my client asked him to sigh over voucher on which stationary name is printed but he refuses. At the time of payment he comes to shop takes out his own register on which my client sign & pays him rent amount,but my client doesn't have supporting.Even if landlord says, he doesn't receive rent money, my client can prove. Ankit ji in this case what to do? Can my client avail Rs: 35000/- as expense & reduce rent amount from his total gross receipt of Rs 9.50 of financial Year to minimize the tax liability or not??
19 March 2015
Your client can definitely take a deduction of such rent expenses. He can prove this showing the bank passbook. However, the authorities may ask for rent agreement and rent receipts and can also go ahead and disallow the claim. However, this can be challenged at a Commissioner (appeals) or higher level.
But there are two fundamental points to be clarified:- 1. Has the rent been paid by an account payee cheque? 2. Has the client deducted TDS on such rent paid since it has exceeded Rs. 180000?
19 March 2015
Tapas ji, Landlord takes rent amount in cash & no Tds deduction is made by my client because he isn't aware. When Landlord saves himself to sign over register at the time of rent payment, then how he can allow for tds deduction. it is very hardly for him. However tds is deductible when turnover is more than 1 crore & client comes u/s 44AB. But his gross receipt during FY 10 lac. then in that case tds deduction is not applicable?
19 March 2015
If TDS has not been deducted, then the expense shall anyways be disallowed. So no point in claiming the deduction. Further, since cash payment of more than Rs. 20000 has been made, penalty shall also be leviable.
19 March 2015
Tapas ji. TDS is deductible when Turnover exceeds Rs 1 crore u/s 44AB. But here turnover is 10 lac. I think in this case tds is not deductible.
19 March 2015
Interest and Penalty. And your client shall have to pay everything, tax, interest and penalty from his pocket since the way you have described the landlord, I don't think he will reimburse even the TDS even if he receives credit of such TDS
19 March 2015
in my opinion no rent agreement is needed. verbal agreement is a recognised system of law. Since your turnover is less than 1.00 Cr. you should take shelter under section 44AD of the Act where no books of accounts needed to be maintained. You should offer 8% profit on your gross turnover or any hire amount. In that case no question of disallowance shall arise.
Just for my knowledge, can an assessee take shelter of 44AD for default made on cash payment of more than 20000 and TDS?
Further, as per my understanding section 44AD provides that an assessee can declare minimum 8%. In this case, if rent expense is not considered, the actual income is 3.5 lacs which is much higher than 8% (72000). Technically speaking should this income not be offered under 44AD?
Further, if rent expenses are considered, the assessee shall actually have a loss.
Request you to provide your valuable inputs on the above.
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