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T. Banusekar

I HAD let out a building along with fixtures, UPS and other facilities on rent but received rent only for a period of four months. The sum payable by the tenant was split as follows: Rs 25,000 per month towards rent and Rs 20,000 per month towards hire charges. The tenant deducted tax at source at 16.5 per cent on the entire rental of Rs 45,000 and issued Form 16A. The tenant thereafter vacated the property and I am, at present, using the building along with the infrastructural facility for my consulting business.

Can I claim depreciation on the building and fixtures against my consulting income earned for the eight-month period?

Is the rental income chargeable under the head `income from house property' or under `income from other sources'?

If the rental income from the building is chargeable under the head `income from house property' can I claim 30 per cent thereof as a deduction?

If the hire charges for fixtures and equipment are chargeable under `income from other sources', can I claim depreciation on these assets?

K. Pani

Depreciation is allowable under Section 32 provided the asset is put to use for the purpose of business or profession of the assessee and if the assessee is the owner or part owner of the asset. In the instant case, as the querist is using the assets, namely the building, UPS, and so on, for the purpose of his own business, depreciation can be claimed on these assets at the rates prescribed in the Income-Tax Rules.

It may be noted that depreciation is allowable only at half the rate prescribed in the Rules if the asset is put to use for less than 180 days. In the instant case, however, since the questioner has been using the asset for his business for eight months, that is, a period exceeding 180 days, depreciation can be claimed at the full rate, that is, as prescribed in the Rules.

If an assessee lets out on hire machinery, plant or furniture along with building where the letting of the other assets is inseparable from the letting of the building, the income therefrom shall be chargeable under the head income from other sources. The inseparability is based on the intention of the parties. The intention may be ascertained by framing the following questions:

Was it in the intention in making the lease that the two should be enjoyed together?

Was it the intention of letting the two practically one letting?

Would one have been let alone and a lease of it accepted with the other?

If the answers to the first two questions are in the affirmative and the third negative, it could be taken that it was intended that the letting would be inseparable (Sultan Bros Pvt Ltd vs CIT — 1964 51 ITR 353 SC). In the instant case it does not appear that the letting was inseparable. Therefore the rent in respect of the house property will be charged under the head income from house property and the rent attributable to the letting of the fixtures, and so on, will be chargeable under the head income from other sources.

In respect of the rental income from the building, a deduction can be claimed to the extent of 30 per cent of the annual value under Section 24.

In respect of the rental income which is derived from the letting of fixtures, and so on, all expenses incurred for making or earning the income and also depreciation on these assets from which the income is derived can be claimed as a deduction (Section 57).

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