Changes in ITR- Part -3

Things change, and not always for better. Sometimes they are pointless. Like the option to declare house property as self-occupied for company assesses. This is the latest change in ITR-6 form for the Assessment year 2020-21.

This raises a lot of questions in mind like,

How can a Company have income under the head House Property? Can a Company even declare it as Self-Occupied? Are there any rules for declaring Self occupied house property? These were some my reservations. I’ll share with you now what I learnt and understood

Company can have its income under the head House Property as well as Business Income. This is concluded in the landmark judgement by honorable Supreme Court in M/s Chennai Properties & Investments Limited, where it was held that , held that if letting out of properties was the business of the taxpayer, then its income would be chargeable to tax under the head ‘profits and gains of business or profession’ and in all other cases under the head House Property. The SC observed that according to the taxpayer’s memorandum of association, it held the stated properties and letting them out was the main objective. The entire income earned by the taxpayer was from the letting out of the said properties. No other income was earned by the taxpayer. This decision is relevant in determining the characterization of a particular income; the SC has emphasized that for income to be characterized as ‘business income’, the activities actually carried out by the taxpayer need to be in line with its main object according to its constitution documents.

So Yes a company can derive both Income from House Property & Income form Business from rental income varying on case to case basis. But how can it claim its property as self-occupied.

Section 23(2) has laid down condition for declaring property as self-occupied, these are:

a). Where the property is in the occupation of the owner for the purposes of his own residence; or

b). cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,

Going by the above conditions it is puzzling to think how can a company have its own residence. Even when the company owns the property in which it is registered it shall be shown in its balance sheet and depreciation charged on it. Another use possible is accommodation for employees, guest house of company, then also it shall be shown as a capital asset and depreciation should be charged on it while calculating business income.

And if a company has even purchased a property is not using it itself like the above cases, it will bear rent, how can it be claimed as self-occupied going against Section 23(2).

After all the deliberation this change in ITR-6 form seems to be useless.

Please share your views on the same.