house property partly let out and partly used for business

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karan (Querist)
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17 May 2009 hi
If a house property is partly used to let out and other part is utilised for business and profession by owner then what would be tax treatment if the whole house treated as business profession then what will be income from let out.explain briefly my another question arise after receiving the answer of this question

2)if the land is taken as lease and made a underground house then can that house trated as residential house becasue we know that in residential house roof is compulsory but the roof in this case is the upper land which is on lease

please explain briefly

thanking u in advance

:)

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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17 May 2009

Answer to question No. 1

(a) Area wise division
If Any House Was Used Partly For business purpose and partly for other purpose , then as per section 22 such area which was used for business purpose will not be taken in to consideration for the computing income from house property (hereinafter “IFHP”), its interest shall be allowed as deduction from business exp. . And the other area will be taxable u/s 22 , hence fair rent and standard rent shall be (not actual rent) shall be proportionately divided on the basis of area used .

(b) Time wise division
If Any House Was used partly for business purpose during some months ( say 3 months) and for other purpose in remaining months ( say for remaining 9 months ) in a year. As we know that the property used for own business purpose is not assessable u/s 22, hence,
Now, for calculating IFHP we will assume that for that for 3 three month (during which House Was used for business purpose) it was not available i.e. assessee was not owner of it . for example if a person used a property in April , may and June for business and in remaining 9 months for let out. It will be assumed that the assessee become owner of the property from 1st of June, and hence fair rent and standard rent shall be (not actual rent) shall be proportionately divided and taken for that 9 months on the basis of area used. Interest for the 3 month shall be business expenses and interest of 9 months shall be claimed u/s 24(b) from IFHP. However note that that three month is NOT vacancy period. (Since as per definition of vacancy period it is the period during which NO BENEFIT is derived)

Answer to question No.2

The answer of the second question is that a under ground house is not a house property as per the definition of house property a land surrounded by sufficient wall and a land appurtenant thereto. Roof is not necessary for a non-residential house property. (wall means a partition) since a house made by digging earth there is no wall, it is not a house property and nit taxable under the head income from house property . but taxable as business income ( if assessee is engaged in the business of renting such a house ) or in any other case income from other sources. There was a case law on the same in 2006, I will provide you the same as soon as possible.

karan

karan (Querist)
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17 May 2009 1 a)your answer is correct if the business and profession and let out is segriable but if it is not segriable.

2)in underground house also it is surrounded by sufficient wall and there is land also for example suppose underground metro it is surrounded by wall.can u tell me what is definition of sufficient wall when the wall is said to be sufficient? i asked frm sir he told that there is no particular definiton of sufficient wall

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