Income tax rental income + AS 9,10

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Revathi (Querist)
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29 September 2010 I feel its a complicated case. The facts of the question are as follows
- Its a manufacturing private limited co.,(all the directors are the family members)in the rented premises (rent Rs 2 lakhs p.m.
- The company is in the arrangement of purchasing the rented property for business use,but would be in the names of family person otherthan the Directors of the company.(wife of MD)
- They have entered into an agreement to sell with the landlord & the payment mode is like an EMI say Rs 10 lakhs for 1 year (may include interest also)
- The agreed amount of Rs l0 lakhs is paid by Wife of MD to the landlord every month.(This amount is recovered / received from the company to wife of the MD as the rent payable for business use.

- Can this arrangement be legally possible?
- Land & Building would be in whose name from the date of Agreement to sell till the sale deed?
- Can Wife of the MD offer the income as rental income in her individual return? Though the property is not transfered in her name, But used by the company for business pupose?
- till the date of saledeed, what is the status of the original landlord?
- Can wife of the MD show the advance paid to original landlord as advance or show as fixed assets in her Balance sheet?
Can anybody help in this complicated case?

CA Shiv

CA Shiv (Expert)
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29 September 2010 1.Yes definately this arrangement is possible.
2. Proeprty will be in name of MDs Wife.
3. Yes she can do it and show it in her income.
4. Can show it as asset as risk seems to already been transferred and after the approval of new owner the asset is used by third party..

This was the answer to your question..

Now.....
WHy you want to do like that... Its better to show in books of company.... and not wifr..
company can claim loan interest and depreciation both on the property..

Even in your case the wife cant claim depreciation and have to pay tax on it...