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allowance of brakerage from leave license in income tax

(Querist) 25 March 2010 This query is : Resolved 
I am having a property for over 30 years on lease with all the rights for sub-lease, rent and construction etc.

Now I have given the same on leave license agreement through a broker and the brokerage paid to the broker has been deducted from the license fees.

Please clarify that the same is deductable or not at the AO is not allowing the deduction.

I have calimed deduction of 30% as per the I. T. act
A V Vishal (Expert) 25 March 2010
No the brokerage is not allowable since you claim the deduction of 30% u/s.24 irrespective whether the expenses were incurred or not. The amount restricted as deduction for expenses is restricted to 30% of Net Annual Value.
A V Vishal (Expert) 25 March 2010
Clarify whether the income is reflected under House Property, business or other income.
A V Vishal (Expert) 25 March 2010
The income in respect of a portion of the building, which has been taken on lease by the assessee from the owner of the land and thereafter subleased, cannot be taxed under the head `income from house property’ but is to be taxed under the head `income from business’. In view of the same you can claim the expenses incurred on brokerage from your income.
Vineet (Expert) 26 March 2010
As you have acquired property for a 30 year lease (not a monthly tenancy), hence by virtue of provisions of section 27(iiib) of the Act, you are deemed to be owner of the said property for the purposes of computation of income from house property.

The deductions allowable against leave and license rental income are limited to those allowable u/s 24. Henece you are eligible for deduction of 30% of rental income and interest paid on borrowed capital utilised for any enhancement on the leased premise.

Therefore the brokerage paid to broker and even lease rental paid to the original owner is not allowable as deduction.

In my opinion it is better proposition as you avail straight 30% of rental income as deduction which must be higher than brokerage and other expenses.
Kumar Thadhani (Expert) 27 March 2010
AO is right in allowing brokerage from Income from House Property but the same amount could be claimed as expenses if you are having Income from from Business/Profession.


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