xien (db) (135 Points)
13 December 2010I am propreitor (compulsory auditing).
I am planning to purchase property (office space). Should i take the property on my individual name or name of my propreitor firm?
If i take on my individual name can i claim depreciation, maintenance, interest paid benefits?
Is there any negative side of taking it on my individual name versus taking on my firm name.
Please excuse me if my accounting terminology is weak as I dont belong to this field.
Thanks and regards,
xien
Pankaj Gulati
(Tax Advisor)
(81 Points)
Replied 14 December 2010
in case of individual, their is no difference between u and the name of ur prop concern.
even if u take property in ur own name, u can claim dep etc on this property. If u purchase the same from the funds in ur saving bank account and that account is not reflected in ur Balance sheet, then u can simply add the same to capital account with value of prop and show the property on the asset side under fixed asset. If u purchase the out of the funds from ur prop business, then simply show the same on the asset side of ur balance sheet.
Don't be afraid of scrutiny u/s 143(2) if u have purchased the property out of the funds which u can explain. If u fear of this section u will not be able to do anything. The best principle is always to keep ur explanations ready with documentary evidence.
xien
(db)
(135 Points)
Replied 14 December 2010
Pankaj, thanks a lot for a convincing reply.
To convince my investor this, is there any circular, notice, section, evidence etc which state that a propreitor can purchase commercial premise (or asset) on his individual name rather than firm's name but still can claim all the benefits
I would pay from propreitorship account + some loans from investors to propreitorship account + bank loan.
Thanks again.
regards,
xien
Pankaj Gulati
(Tax Advisor)
(81 Points)
Replied 14 December 2010
Income Tax law permits u to claim depreciation on the assets even if they are purchased in ur name if u r running the business in proprietorship provided the assets r shown in your balance sheet under the head 'fixed assets'. I don't have any circular etc to help u in this regard but u can legally pass the entry in your books. In order to convince your investors u can mention in the purchase deed of the property that u'll be using this property in ur business which is in XYZ name. unlike company, under proprietorship business their is no diff between ur name and the name of ur business, ur liability is unlimited & u r personally liable. The best example is when u file ur ITR, u file it in ur name and not in the name of ur business with the PAN allotted in ur name. The assessment is also done in ur name and not in the name of ur proprietary business.
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