Tax on rented commertial property

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

10 December 2012 i have rented out commertial property,
income generated is more than 10 lakhs per year ,i am paying service tax also,i am investing 1 lakhs in ppf and 20000 in bonds,apart from 70% deduction(mantainence) and deduction of propertyb tax how can i save income tax

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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10 December 2012 Income from Residential Property Only Have 30% Flat Deduction, Not Commercial Property.

It Taxed Under PFBP.

You Can Take Deduction of Expenses as Much as You Have Bills.

Next is, Investment in Long Tem Infra Bonds No More Deduction Available from 2012-13.

CA ASHISH GUPTA

CA ASHISH GUPTA (Expert)
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10 December 2012 30% deduction is available irrespective of use of property...either residential or commercial...experts should be sure about their opinion...

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CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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10 December 2012 Dear Ashish,

This is Common Practice Generally Adopted By Us.

Please Go Through the Case law:-
Bigg Investment & Finance Pvt Ltd.
ITAT Delhi Bench.

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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10 December 2012 SUMMARY OF CASE LAW
Merely because income is attached to immovable property, it cannot be the sole factor for assessment of such income as “income from house property.
CASE LAW DETAILS
Decided by: ITAT, DELHI BENCHES `F’: NEW DELHI, In The case of: Bigg Investments & Finance Pvt. Ltd. v.DCIT, Appeal No.: ITA Nos. 5367 & 5368/Del/04, Decided on: April 30, 2009.
RELEVENT PARAGRAPH
5.8 The question whether income from property should invariably be taxed under the head “income from house property” is to be decided after taking into consideration the cumulative effect of all factors prevailing in a given case. The Courts have formulated different tests to determine the head under which such income can be taxed. Merely because income is attached to immovable property, it cannot be the sole factor for assessment of such income as “income from house property”. The primary object of the assessee while exploiting the property has to be seen. If it is found that the main intention is for let out of property or any portion thereof, the same must be considered as rental income or income assessable under the head “income from’ house property”. In case, it is found that the main intention is to exploit the .immovable property by way of commercial activities^, in that event it must be held as “business income”. It is, therefore, clearly born out that the main test to determine the head under which the income from immovable property be taxed is the purpose for which the property was exploited. If it is exploited commercially in the course of carrying on in business activity, then the income arising therefrom would be assessable under the head “business income”. No abstract or straight jacket formula can be devised to determine conclusively as to under which head “income from property” would fall. All the relevant facts and circumstances are necessarily to be looked into to decide the character of income. If the facts of a given case are that the assessee was doing a complex commercial activity by exploiting the immovable property, then the income would be assessable under the head “business”. If, on the other hand, the property or space is simply let out by the assessee and the rental income is earned, it would be assessed under the head “income from house property”. Thus, the decisive test is. the true nature of activity carried out: by the assessee while letting out the property.
5.14 The property in question was designed as business centre in the period relevant to the assessment year 1996-97. However, no evidences or materials have been brought on record that the assessee was engaged in the business of exploiting the property commercially by indulging into complex: commercial activity in the year in question. The present agreement to let out the property to l£)BI for their business purposes has been made for a period of 3 years from 1998 with an option to review the same for a total period of 9 years with an escalation of 15% of the monthly charges at the end of each 3 years’ period. The assessee has thus simply let out the property. In the present case, the assessee has not been able to prove that the assessee has let out the property for a temporary period to exploit the same commercially. In the light of the agreement with IDBI, it is clear to us that the assessee has decided to let out the property to others to earn rental income and not to do any activity of complex commercial exploitation of property.
5.15 In view of the reasons given above, we, therefore hold that the authorities below are justified in assessing the receipt of so called service charges received from IDBI as income assessable under the head “income from house property”.

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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10 December 2012 This is the Link

http://taxguru.in/income-tax-case-laws/income-cannot-be-assessed-as-income-from-house-property-just-because-income-is-attached-to-immovable-property.html