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Expressly Admissible Deductions from Gross Income from Business or Profession Section-30-31

 

Rent, Rates, Taxes, Repairs and Insurance in the case of Building Premises [Section 30]

A deduction is allowed regarding rent, rates, taxes, repairs and insurance premium paid for the building premises where the assessee is carrying on his own business or profession.

(a) Rent

(i) The full amount of rent will be an admissible deduction in case the building premises are taken on rent.

(ii) In case no rent is paid or the assessee owns the business premises, then no deduction shall be allowed because the landlord cannot be a tenant also. If it is so, the assessee will not be taxed for the building income under the head ‘House Property’.

(iii) If business premises belong to one of the partners of the firm, the rent paid to the landlord- partner shall be an admissible expense of the firm’s business or profession.

(b) Repairs

(i) In case the assessee is a tenant, and the agreement of rent provides that the tenant will bear the cost of repairs; the amount paid or spent on account of such repairs, is allowed as deduction.

(ii) Otherwise than as a tenant, e.g., the assessee is the owner of the premises, the amount which the assessee spends on repairs will again be allowed as deduction.

The word ‘repairs’ here mean such repairs which are required to keep the building in the workable condition i.e., minor changes (replacements) due to wear and tear. Repairs are simply to keep the asset working; It should not result into any increase in the value, efficiency etc. of the asset.

The words ‘current repairs’ shall not include any expenditure, which is of the nature of capital expenditure.

(c) Local Taxes, etc.

Any sums paid on account of land revenue, local rates or municipal taxes in respect of the premises used for the assessee’s business, if the assessee is the owner of the building, are allowed under this category. In case the building is on rent then such part of these expenses which the assessee is supposed to pay under the contract of rent entered between the landlord and assessee are also allowed.

(d) Insurance Premium

The amount of any premium paid in respect of insurance against risk of damage or destruction on the premises of the assessee used for his business or profession is allowed as expenditure. Insurance iiay be against fire, earthquake etc.

Where the assessee has sub-let a part of the premises, the deduction under Section 30 will be limited to the difference between the rent paid and the rent received from sub-letting. Section 38(i) deals with the cases where the part of the house is used for business purpose and the remaining part for residence of the assessee. In such cases the deduction will be limited to that part of the building which is used for the business purposes.

Repairs and Insurance of Machinery, Plant and Furniture [Section 31]

Under Section 31, the following deductions shall be allowed in respect of repairs and insurance of machinery, plant and furniture used for the purposes of the business or profession

(i) The amount paid on account of current repairs thereto;

(ii) The amount of any premium paid in respect of insurance against the risk of damage or destruction thereto.

The plant, machinery, fumiture etc. on which this deduction is to be claimed must be used for the business of the assessee. The repairs must be iii the ordinary course to replace or to compensate the wear and tear of the asset, i.e., to keep the asset in the working order only and these should not be of capital nature.
 
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