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depreciation

FATEMA (CHARTERED ACCOUNTANT) (719 Points)

27 January 2010

A house property is being used for business (25% of house property),residential purpose (25%) and the remaining 50% is let out.Now can an assessee claim full depreciation on house property or will he claim depreciaiton to extent of 25% (used for business purpose)?

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14 Replies

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Fatema,

U may find different opinions on this query.

My view is there is Sec 38 which says that if Building, etc is not used wholly for business purposes then only proportionate expenditure ill be allowed as deduction.

Hence only 25% will be allowed.

But the way it is computed is as follws:-

Suppose Building is of Rs. 1,00,000, Dep rate is 10%,

Hence, Dep will be Rs. 10,000 out of which only Rs. 2,500/- will be allowed as per sec 38, but for calculating Opening WDV of next year Rs. 2,500/- will be deducted & not Rs. 10,000/-

This means that the enytire depreciation(i;e Rs. 1,00,000) will be allowed but by deferring it to later years...

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CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 27 January 2010

Ofcoarse, an assessee can claim upto 25% only (the business area part)....

For let out property, he can't claim any deduction except @ 30% of Standard Deduction..

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 27 January 2010

And what about depreciation on the let out part.Can the asessee claim that depreciation also?

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Fatema,

Under House Property there is a notional deduction of 30% & hence actual expenditure on account of repairs, renewals, depreciation, etc are not relevant.

Max Payne (employed) (2574 Points)
Replied 27 January 2010

Dear Fatema, depreciation will be only on the portion which is used for business or profession... so 25% will be eligible for depreciation.

Please see explanation 5 to section 43(1) which says notional depreciation has to provided where a building is brought in to the business by the assessee, so we have arrive the gross block after providing notional depreciation.. only the amount after adjusting the notional deprecation will be treated as the gross block for providing depreciation.

However, this provision is clearly not applicable in case of a new building....

Remaining 75% will be income from house property so no depreciation will be allowed

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FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 27 January 2010

Thanks.It means i have solved the problem correctly.

FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 27 January 2010

How do i solve this?

WDV of building (residential) as on 1.04.09 is Rs.3,75,000.Part of the residential buildings whose WDV as on 1.4.09 was Rs. 2,20,000 was completely destroyed by fire on 5.6.09 and Rs. 1,80,000 was received from insurance company.What will be the depreciation admissible during the year ending 31.03.10?

Amir (Learner) (4016 Points)
Replied 27 January 2010

Dear Fatema,

Depreciation will be computed on Rs. 3,75,000 - Rs, 1,80,000 = Rs. 1,95,000/-

Pragya Jha (Learner) (40 Points)
Replied 27 January 2010

Originally posted by : G.K..
	Dear Fatema, depreciation will be only on the portion which is used for business or profession... so 25% will be eligible for depreciation. Please see explanation 5 to section 43(1) which says notional depreciation has to provided where a building is brought in to the business by the assessee, so we have arrive the gross block after providing notional depreciation.. only the amount after adjusting the notional deprecation will be treated as the gross block for providing depreciation. However, this provision is clearly not applicable in case of a new building.... Remaining 75% will be income from house property so no depreciation will be allowed

Perfect...

RADHIKA JALAN (agarwal) (1521 Points)
Replied 27 January 2010

i agree with amit..................

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parth shah (article) (89 Points)
Replied 27 January 2010

depri. can be claimed only to the extent of 25%. No depri. can be claimed for the house property not used for the business .only stand. ded. @ 30 % is allowed u/s. 24.