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Tax Publishers 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.

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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.