Rent, Repairs, Insurance, etc., of Building
Introduction
This provision allows deductions for revenue expenses incurred on premises used for business or profession, including rent, repairs, municipal taxes, and insurance. Only current repairs qualify for deduction.
Deductible Expenditures
- Rented Premises
- Rent for premises used as offices, warehouses, or residential quarters.
- Current repairs by the tenant under tenancy terms.
- Land revenue, local rates, or municipal taxes (deductible on a paid basis under Section 43B.)
- Insurance premiums for business premises.
- Owned Premises
- Current Repairs: Necessary maintenance repairs, excluding capital improvements or extensions.
- Payment of land revenue, municipal taxes, or local rates (deductible on a paid basis under Section 43B.)
- Insurance premiums for the premises.
- Shared Use of Premises
- Rented Premises (Partial Residential Use): Proportional deductions for rent, repairs, and taxes under Section 38.
- Owned Premises (Partial Business Use): Proportional deductions for repair expenses and insurance premiums under Section 38.
Repairs and Insurance of Plant and Furniture
Introduction
Provision of Section 31, allows deductions for repair and insurance expenses related to machinery, plant, or furniture used for business or profession purposes. Only current repair expenses qualify for deduction.
Key Points on Deduction
- Eligibility
- The deduction is available only to the owner of the asset if it is used for business or professional purposes.
- It applies only to expenses on current repairs; capital expenditures are not deductible.
- Premiums paid for insuring the asset are also eligible for deduction.
- Quantum of Deduction Allowability Conditions:
- Assets must be used for business, even if only part of the year.
- Assets kept ready for use are considered “used” for business, making the related expenses deductible.
- If the asset is partly used for non-business purposes, deductions are allowed proportionately under Section 38.
Deduction Timing
- Under the mercantile system, expenses are deductible in the year incurred.
- Under the cash system, expenses are deductible on a payment basis, including advance payments.
Assets Used Partly or Not Exclusively for Business or Profession
Introduction
When an asset is used partly for personal purposes and partly for business or profession, or not exclusively for business, deductions for expenses and depreciation are limited to a proportionate amount as determined by the Assessing Officer.
Key Provisions
Proportionate Deductions
- Deductions are granted based on the extent of business or professional use of the asset.
- The proportion is determined by the Assessing Officer.
Specific Scenarios
- Dwelling Houses: If part of the premises is used as a residence, deductions for rent, repairs, and related expenses are proportionate to the business use.
- Land Revenue and Taxes: Land revenue, local rates, or municipal taxes are deductible based on the proportionate use of the business.
- Building, Machinery, Plant, and Furniture: Current repairs, insurance premiums, and depreciation are allowable only for the business-use portion of the asset.