Hotel given on rent- ifhp or business income ?
This query is : Open
03 August 2013
Hello everyone,
one of my client has purchased a hotel for rs.20 lacs and incurred rs.300000 for lincese and rs.10 lacs on interior decoration.He has given the same on rent for monthly rent of Rs.50000/-
i am confused as to the taxability of this monthly income ie. it will be taxable under which head and treatment of lincese fees and cost incurred on interior decoration?
waiting for the views of the experts ?
one of my client has purchased a hotel for rs.20 lacs and incurred rs.300000 for lincese and rs.10 lacs on interior decoration.He has given the same on rent for monthly rent of Rs.50000/-
i am confused as to the taxability of this monthly income ie. it will be taxable under which head and treatment of lincese fees and cost incurred on interior decoration?
waiting for the views of the experts ?
03 August 2013
if full hotel is giving on rent for staying of visitors then it will be income from house property only.
only int on loan and std deduction as you know can be deducted.
you can capitalised the amount as it was incured for earning income.
only int on loan and std deduction as you know can be deducted.
you can capitalised the amount as it was incured for earning income.
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03 August 2013
I beg to deffer Mr. Tushar,
1. If the owner has given the Hotel on rent and he does not have an intention to operate the hotel, then it is treated income from other source.
2. If the owner has given the Hotel on rent to mitigate the loss/or due to some reason and he has intention to return on business, then the income is treated as from business
3. if it the business of the person to purchase and selling of hotel/ purchase and renting, then income from business
1. If the owner has given the Hotel on rent and he does not have an intention to operate the hotel, then it is treated income from other source.
2. If the owner has given the Hotel on rent to mitigate the loss/or due to some reason and he has intention to return on business, then the income is treated as from business
3. if it the business of the person to purchase and selling of hotel/ purchase and renting, then income from business
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03 August 2013
Mr umesh pls refer the original query by uathor which says that he has given on rent to some1 for Rs.50,000 which may be sub let.
here there is a landlord tenant rel between the author and the person to whom it was given on rent.
here there is a landlord tenant rel between the author and the person to whom it was given on rent.
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03 August 2013
Tushar Jee
As far as question is concern, owner has given hotel on rent after converting it to hotel (as per question, he has got licence for operating a hotel. so from question it can be assumed that the building was not hotel)
The established rule is
"Where an assessee let machinery, plant or furniture and also buildings, and the letting out of buildings is inseparable from the letting of the machinery, plant or furniture, the income from such letting, if it is not chargeable to tax under the head "Income from business or profession" would be taxable under the head "Income from other sources"."
In case of Hotel, all plant & Machinery, furniture, TV are to be given on rent, without it will not called as hotel.
As far as question is concern, owner has given hotel on rent after converting it to hotel (as per question, he has got licence for operating a hotel. so from question it can be assumed that the building was not hotel)
The established rule is
"Where an assessee let machinery, plant or furniture and also buildings, and the letting out of buildings is inseparable from the letting of the machinery, plant or furniture, the income from such letting, if it is not chargeable to tax under the head "Income from business or profession" would be taxable under the head "Income from other sources"."
In case of Hotel, all plant & Machinery, furniture, TV are to be given on rent, without it will not called as hotel.
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03 August 2013
Umesh jee refer the first line of query it menations that he purchased hotel-already running and just paid operating licence and also have done interiors decoration....
i assumed the hotel given on rent is furnished else how it can be rented???
i assumed the hotel given on rent is furnished else how it can be rented???
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03 August 2013
If he has purchased the hotel, then giving it on rent is letting out, not sub-letting.
Let Abhishek Jee, clearify whether he has purchase unlicensed hotel and converted it on licensed hotel
or he purchase building and converted it into hotel
Let Abhishek Jee, clearify whether he has purchase unlicensed hotel and converted it on licensed hotel
or he purchase building and converted it into hotel
03 August 2013
Mr abhishek has already clearly mentioned that " my client has purchased a hotel"
and not first purchased a building and converted it to hotel.
and not first purchased a building and converted it to hotel.
05 August 2013
My client has purchased a running vegetarian hotel which does not had license for beer and liquor. after acquring the hotel he incurred rs.300000 on lincese for serving liquor/wine/beer etc and 10 lacs on interior decoration. shop and establishment license is also in the name of my clinet. He is the owner of the hotel.
my client has taken Rs.16 lacs refundable deposit fromthe tenant. tenant has also incurred rs.20 lacs on interionr decoration.
tenant is paying to my client rs.60000 pm as rent for the same.
my client has taken Rs.16 lacs refundable deposit fromthe tenant. tenant has also incurred rs.20 lacs on interionr decoration.
tenant is paying to my client rs.60000 pm as rent for the same.
05 August 2013
thanks everyone for your valuable reply. my cleint has taken rs.25 lacs loan from bank for buying hotel and interior decoartion and linceses.
if the icnome will fall under house property then there will be loss to my client since he cannot claim the interest.
waiting for the views of the experts ?
if the icnome will fall under house property then there will be loss to my client since he cannot claim the interest.
waiting for the views of the experts ?
05 August 2013
since there is landlord tenant relationship and your assessee himself is the owner which he has given on rent the amount spent on license acquiring and interior decoration as per AS-10 fixed assets should be capitalise and rental income under income tac act should be taxable under the head income from house property.
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05 August 2013
Thanks a lot.
in that case can my client claim deduction u/s. 24b of interest paid on loan taken for purchase of hotel, cost for obtaining license and interior decoration ?
in that case can my client claim deduction u/s. 24b of interest paid on loan taken for purchase of hotel, cost for obtaining license and interior decoration ?
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