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Treatment of rent received for factory along with machinary

nilesh (PROPRIETOR) (208 Points)

08 August 2013

If a factory is rented out alongwith machinary & instruments, furniture etc., can we treat it as business income and claim depreciation on machinary given on rent?(manufacturing business is fully discontinued ) contract not seperate for building and machinary, furniture.

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6 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 08 August 2013

Memorandum of association should permit such a source of income.

I think depreciation can be claimed because the machine is in use and is fetching rental income.

TDS deduction for building shall be at 10% and for plant & machinery at 2%.

Wait for others to reply.

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Nayagam (Chartered Accountant) (134 Points)
Replied 08 August 2013

Correct TDS @ 10% for rent from building and 2% for rent from machineries. But depreciation cannot be claimed as there is no manufacturing operation carried on by the owner.

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CA Pallav Singhania (IT System Auditor) (33052 Points)
Replied 08 August 2013

Payment by way of “rent”

Here ‘Rent’ means any payment, by whatever name called, under any lease, sub lease, tenancy or any other agreement or agreement for the use of (either separately or together) any –

· Land, or

· Building (including factory building), or

· Machinery, or

· Plant, or

· Equipment, or

· Furniture, or

· Fittings

Whether or not any or all of the above are owned by the payee.

TDS RATES

Nature of payment

Basic rate of TDS

Payment for use of machinery / plant / equipment

Payment for use of land / building / furniture / fitting

10%

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Ishan kewlani (Article) (172 Points)
Replied 09 August 2013

Here income would not be taxed as business income but wld be taxed as income from other sources, as there is no seperate contract for items given on rent. Depreciation, repairs etc would be available.

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nilesh (PROPRIETOR) (208 Points)
Replied 09 August 2013

Is there any perticular section or case law applicable to decide whether to treat this as other source or business income and what expenses can be charged against the revenue generated in the form of rent ?