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Taxation (rent received on shop)

CA Kumar Mukesh (CA CMA FINAL and Advance Excel Trainer) (6881 Points)

05 September 2011

Dear All

let me as one query,

our one of the client has 8 shops located in diffrents areas in delhi & he get rent only from 3 shops,

others are lying vacants or given to his relative where no rent has received so far.

my question is whether rent received on shops are covered in house property defination or income from other sourses.

if it is covered under house property then deemed to be let out will arised.

if these covered in other sourses then it is possible to deduct some fake exp.

Please suggest

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10 Replies

saminathan.s (Student) (29 Points)
Replied 05 September 2011

The annual value of property, consisting of any buildings or lands appurtenant thereto of which the assessee is the ownershall be chargeable to income tax under the head "Income from House Property".

The term 'buildings' includes any building (whether occupied or intended for self-occupation), office building, godown, storehouse, warehouse, factory, halls, shops, stalls, platforms, cinema halls, auditorium etc. Income arising out of the building or a part of the building is covered under this section.

Hence The Vacant Shops are treated as deemed to be let out and the income chargeble to tax Under the head "Income from house property"

Only Income from a Vacant Land shall be taxed Under the head Income from Other Sources.

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(Guest)

Only residential house property can be treated as DLOP. Commercial house property cannot be treated as DLOP.

I am putting the actual sections for ready reference

(2) Where the property consists of a house or part of a house which—

(a) is in the occupation of the owner for the purposes of his own residence; or

(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,

the annual value of such house or part of the house shall be taken to be nil.

(3) The provisions of sub-section (2) shall not apply if—

(a) the house or part of the house is actually let during the whole or any part of the previous year; or

(b) any other benefit therefrom is derived by the owner.

(4) Where the property referred to in sub-section (2) consists of more than one house—

(a) the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf;

(b) the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.

now if commercial house property is lying vacant then it is charged under the HP. Loss can arise only in case of MT and interest on borrowed capital.

Thanks

https://taxbykk.blogspot.com/

Thanks

1 Like

RAKESH (student) (26 Points)
Replied 10 September 2011

Kaushal Sir can u pls help me in a question that if a commercial property is being given on rent then the income would be considered as from Hp or other sources

(Guest)

If objective of renting out a commercial property is to earn rent then charged under the head HP

If objective is the exploitation of commercial assets then charged under the head Business.

Objective shall depend upon circumstances of each case.

https://taxbykk.blogspot.com/

1 Like

CA Hardik Bunha (self) (2121 Points)
Replied 10 September 2011

Hi Friend,

I think It should be charged under INCOME FROM OTHER SOURCES.....

yes you can deduct fake exp. with depreciation @ 10%

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CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 11 September 2011

Originally posted by : kaushal (taxbykk)
	If objective of renting out a commercial property is to earn rent then charged under the head HP If objective is the exploitation of commercial assets then charged under the head Business. Objective shall depend upon circumstances of each case. https://taxbykk.blogspot.com/

agreed

S.R.D. (PROP.) (62 Points)
Replied 31 January 2015

Hi,

my question is if shop premises is considered as a house property, stamp duty & registration paid on the same can be claimed u/s 80c for income tax beneift

Raphael (Chartered Accountant) (214 Points)
Replied 02 February 2015

Yes. you can claim the stamp duty and registeration expense of initial purchase u/s 80C provided you are an individual/HUF.

UDAY BHASKAR AKULA (ARTICLE TRAINEE) (46 Points)
Replied 04 February 2015

When rent received in advance for 4 years is taxable

ajay nair (owner) (29 Points)
Replied 09 December 2016

Would this answer still be valid given ruling by the Supreme Court (SC), in the case of M/s Chennai Properties & Investments Limited, held that if letting out of properties was the business of the taxpayer, then its income would be chargeable to tax under the head 'profits and gains of business or profession' as opposed to 'income from house property'. Can an individual claim income from business and claim depreciation and service tax expenses.