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Service Tax deduction under House Property

Amir (Learner) (4016 Points)

05 March 2010

Dear Members,

I m aware that Renting of Immovable Property is a taxable service under Service Tax,

Now I have following queries under Income Tax relating to above -

1) While computing "Annual Value", Actual rent shall be taken as inclusive of Service Tax or not......

2) If answer to above is "YES", then whether the amount of "Service Tax" paid can be claimed as deduction u/s 23...

Thanks in advance.............!

Regds

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15 Replies

Max Payne (employed) (2574 Points)
Replied 05 March 2010

Hi Amir,

For this i have the departments answer from circular no 4 of 2008 (TDS & 194-I)

1. No.....

2. NA

WHY?? (U ONTO SOMETHING??)

1 Like

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Amir (Learner) (4016 Points)
Replied 05 March 2010

Thanks Bhai......

R u sure.....!

I have seen that Circular......But nothing is coming out in clear terms..........

Further I think the principal laid down by that circular is only for the purposes of TDS........

May be I m referring to only an extract of that circular.........If u have complete text, can u just attach it.....

Thanks again...........

Max Payne (employed) (2574 Points)
Replied 05 March 2010

Deduction of Tax at source on Service Tax - The payments made under section 194-I differ significantly from payment made under section 194J in the way that in the case of 194-I TDS has to be deducted on any income paid as rent. However, in the case of section 194J TDS has to be deducted on any sum paid as professional and technical fees. The Board had decided to exclude TDS on service tax component on rental payment because it was construed that service tax payment cannot be regarded as income of the landlord. Since section 194J covers any sum paid, therefore the board has decided not to extend the cope of Circu lar No. 4/2008, dated April 28, 2008 to such payment under section 194J - Letter F.No. 275/73/2007-IT(B), dated 30-6-2008.

Source:

https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/cirsec194J.htm

Note: Its the Board's own construction of law..... They might admit that they are wrong someday! :P

1 Like

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 March 2010

OMG.... never ever thought that AMIR will have a doubt even..., man u r the genius, how can u have any doubt??

Nywz, whatever resident evil has said is correct, still u want further clarification, can visit :

https://www.simpletaxindia.org/2009/01/service-tax-on-rentimmovable-property.html

1 Like

Amir (Learner) (4016 Points)
Replied 05 March 2010

HA HA HA...........

Briliant -

"Note: Its the Board's own construction of law..... They might admit that they are wrong someday! :P"

Come on Bhai, Plz conclude it......Wots ur final call.........Same as first post..........

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Max Payne (employed) (2574 Points)
Replied 05 March 2010

OK.... OK... It's still "NO" to me...

This is your final warning bro... tell me ur pulling my legs or something!!

I dont see y u asked a doubt like this...

What are u onto??

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Amir (Learner) (4016 Points)
Replied 05 March 2010

Hey Dhiraj,

Come yaar dont pull my leg..........:)

One thing Bhai, the above link talks about Service Tax & not its treatment under Income Tax...

Plz can u paste the specific lines or para which taks abut Income Tax ................

Amir (Learner) (4016 Points)
Replied 05 March 2010

G.K. Bhai,

Relax ...!

Its not that I m trying to be fishy..........

Its just that I had a genuine doubt & from ur reply I thought there r two opinions.....

Just seeking a clarification...........

By d way that "ha ha " in d above post was an appreciation to ur sense of humor/comment...:))

Max Payne (employed) (2574 Points)
Replied 05 March 2010

Whew... :o

cos i was kinda sure u were playing along to pull ma leg in the end with something....

But its not part of annual value in sec 23, which speaks only of rent right....?

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 05 March 2010

Ok then...

Amir, general understanding states that ACTUAL RENT shall be taken net of SERVICE TAX...

I mean, the tax charged is not an income for an assessee... Moreover, there seems no reason for including such tax also in the calculation of actual rent...

I tried to find reliable source or any case study, but could not get..

So, as per my understanding, or rather normal logical understanding, such service tax should be excluded from the actual rent and for ur 2nd Q solves itself