Income from ola - income under head other sources?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 July 2017 Dear All

An indicudual has a business of trading in stationery items. His income is booked under PGBP. He had purchased a vehicle in his own name (in the name of indivdual) during last financial year, tied up with OLA, hired a driver and earned income (actually losses). I basically have 3 questions:

1. Should the losses from such activity (of running OLA vehicle) be shown under Income under the head Other Sources?

2. EMI paid for the vehicle - Is is it a revenue expenditure or part of cost of acquisition or cost of improvement? In case, it is a part of Cost of improvement/ acquisition - will the interest also be a part of the same or will interest be a part of revenue expenditure?

3. In case of sale of vehicle, will this booked under Income under the head Capital gains?

Appreciate your help. Thanks a lot!

K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)
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24 July 2017 1. The income from such activity is essentially a business income and must be reported under Profit or gains from business or profession. And, the losses can be shown too and all related expenses incurred in earning the income can also be deducted.

2. In my opinion, only the interest portion is revenue expenditure. The principal portion goes towards creating a capital asset and is in capital nature.

3. Yes, profit from sale of business asset will be taxed under capital gains

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Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2017 Dear Sir

What are the conditions to qualify any activity as a business income?

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K Srinivas, CMA CS

K Srinivas, CMA CS (Expert)
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25 July 2017 Simply put, whatever income that one generates from business activity is.

In this case, the person earns income by letting his vehicle for Taxi services which is seemingly a business activity.