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Tax audit u/s 44ab

Sarika M (Credit Manager) (40 Points)

23 December 2016

If a person is getting rental income of more of 2 crores from the properties owned by him. Is he responsible for tax audit ? . Under 44AB only gross receipts from business / profession covered. As per my view, its not taxable as this is not a business/ profession. Is this a loop whole in the law ?. Same person can be covered under tax audit U/s 44AB if he is doing the business of renting. But what exactly is the business of renting properties ?

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10 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177824 Points)
Replied 23 December 2016

No, its not loophole. Criteria of Income from HP or business profits can also be derived from assessee's main income of source, number of properties held etc. Its always advisable to get audit report in such cases.

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CA Amisha (Practicing ) (161 Points)
Replied 23 December 2016

As rightly said above, if it is business of properties or not depends on the movement of stock of house properties, frequency of transactions, how has the assessee booked the properties in his books, his main source of income. So, if this qualifies as business then tax audit is to be done.

gopal (student) (212 Points)
Replied 23 December 2016

govt. is smart enough. if person goes to business income then he can claim Many and also fake expenses. so he is required for tax audit after some limit. but if he is going to HP head then only 30% std. deduction and some interest only.

2 Like

Suraj (B.Com) (44 Points)
Replied 23 December 2016

If the person is earNing even ₹10 crore by renting of 100 properties then also his income will be income from house property and not business except that of hotels by renting rooms on days/hours/week/month basis

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VIKASH SINGH (ARTICLE) (92 Points)
Replied 23 December 2016

if the main object of assesee to let out the properties then taxable under PGBP otherwise it would be taxable under House Property and also if a property rented out his unsold property it will also taxable under House Property. And only income under PGBP is required for Tax Audit u/s 44AB not the income under House Property.

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Suraj (B.Com) (44 Points)
Replied 23 December 2016

In the recent case law M/s. Chennai Properties & Investments Ltd it is clear that the main objective & income from only source should be explained only then it is possible to show under HP

Suraj (B.Com) (44 Points)
Replied 23 December 2016

Small correction - only then it is possible for business income

Shivam Jain (Student CA Final ) (92 Points)
Replied 23 December 2016

As per Supreme Court ruling in the case of Chennai Properties and Investments Limited, it was held that renting of property is assessable as business income and not income from house property after considering the following:-
1. Object clause in MoA.
2. Disclosure in IT return.
3. Further, classification of income as HP income or business income will depend on facts and circumstances of each case.

So basically you've to see the facts and circumstances to determine whether the activity of renting constitutes business or not. If it's business, then tax audit needs to be done.

I hope this helps.

1 Like

Gnanashekar.R (Chartered Accoutant) (64 Points)
Replied 24 December 2016

If the income is from head income from house property then whatever the amount received tax audit is not applicable
As deduction us 24 is fixed and no other deduction allowed so there is no requirement tax audit

I think there is no loop hole as you are declaring more income in hp and you cannot play with the expenses