Prolific Consultancy Services (Mumbai) (P) Ltd. v.
ITO [I.T.A. Nos. 3489 & 3490/Mum/2019, dt. 16-12-2020] : 2020 TaxPub(DT)
5489 (Mum-Trib)
Depreciation on sub-lease arising out of property leasing
business -- Whether allowable as inter head set-off?
Facts:
Assessee was in the business of leasing and sub-leasing of
properties as a business. Arising out of sub-lease of a property they earned
rental income which was offered to tax as house property income. As against
this income the assessee had a business loss primarily on account of
depreciation and certain expenses which were incurred to maintain the corporate
identity. This business loss was adjusted against the house property income
which did not meet the eye of the assessing officer who disallowed the same.
FAA also upheld the views of the assessing officer. On higher appeal by the
assessee --
Held in favour of the assessee that they were entitled to
the set off of the business loss against house property income which arose out
of the sub-leasing activity.
Editorial Note: The
computation offered is the interesting piece of the judgment.
The method adopted by the assessee of forming a corporate
identity and then routing all its expenses and the depreciation in the
corporate structure and then adjusting it against house property is an
excellent planning tool.