Page 245 - DCOM301_INCOME_TAX_LAWS_I

Income Tax Laws – I

Notes Net annual Value 6,500
Less: 30% of Net Annual Value 1,950
4,550
Income from House Property: ‘ NIL + ` 13,300 + ` 4,550 = ` 17,850. It is presumed that House No. 4
has not been mortgaged for purposes of acquiring or repairs on the house property.

Self Assessment

State whether the following statements are true or false:
28. The basic requirement for assessment of this income is the ownership of the property.
29. In the cases where unrealized rent is subsequently realized, it is not necessary that the
assessee continues to be the owner of the property in the year of receipt also Assessment
of arrears of rent received.
30. If a house property is owned by two or more persons, then such persons are known as
co-owners.

31. If the aggregate amount of permissible deductions exceeds the annual value of the house
property, there will be a gain from that property.

Case Study Developing-a-career-path-in-retail: Whether the

compensation received for letting out the
manufacturing facilities would be income from house
property or business income?

/s. ABC Rerolling Mills P. Ltd. is carrying on business of manufacturing and
selling of rerolled metal articles. It has constructed factory premises on freehold
Mland owned by it. Its main raw material is metal scrap. Due to volatile nature of
raw material and finished goods prices, it has been incurring losses and one of the major
reasons for losses is that the manufacturing setup is larger than that sustainable by available
business.

The company has devised a re-structuring exercise whereby it intends to curtail its
manufacturing activities. It is expected that in next three years the business climate would
improve and the company would be able to restart manufacturing fully and achieve the
same production targets as earlier. This would be a temporary arrangement till the
improvement in business environment and financial capacity of the company. It would
not totally stop its current manufacturing activities but for the time being it would focus
largely on trading activities. It intends to let out its manufacturing facilities to a concern
carrying on business of rerolling and simultaneously also carry out own manufacturing
on a smaller scale.
The terms of agreement are that the premises including plant and machinery would be let
out under a composite agreement for a period of three years with a right to the company
to utilise the facilities for particular number of hours in a month. The maximum extension
of lease permissible as per the agreement is two years at the option of the lessee.

Contd...

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