Own proprty let out to firm by partners.

Ravi (Querist) 05 March 2012 This query is : Resolved
Sir,

Partners like to let out land to firm on which the firm shall construct any building. Rent will be paid. But end of period the building or structures at wat ever cost was built shud vest with partners as landlords. Is it fine to draft any such agreement. Is it void? or legal issued from income tax angle? Can firm claim depreciation?

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ajay sethi (Expert) 05 March 2012
visit CA clubindia .comfor your imcome tax queries

Deepak Nair (Expert) 05 March 2012
Such agreement is valid, provided the parties expressly agree to the same.

Regarding the tax, it is better to visit caclubindia as advised by Mr.Sethi.

Ravi (Querist) 05 March 2012
plz provide draft agreement of let out by partners to firm

C. P. CHUGH (Expert) 05 March 2012
A Valid Partnership Firm can make construction on Lease Hold Land, provided lease is for reasonable long period and the firm shall be entitled to Depreciation on the Cost of Construction. Lease Rent paid to owner/s of the Land shall be deductible as expenditure in the Hand of Firm and vest as income in the hands of owner/s. There is nothing wrong in it. However on termination of Lease when the remains of Construction are transfered back to the owner of Land the difference between written down value of construction and consideration for transfer would be taxable as short term capital gains in the hand of firm u/s 50 of the income tax act

Raj Kumar Makkad (Expert) 06 March 2012
I completely endorse the views of chugh.

Guest (Expert) 06 March 2012
A proper lease deed would be required to be prepared.

Deepak Nair (Expert) 06 March 2012
Get services of a professional lawyer for drafting the agreement. Don't rely on readymade drafts.

C. P. CHUGH (Expert) 08 March 2012
Yes, drafting of a proper lease deed would be necessary to make various claims under income tax act and that must be done under the advise of an expert legal advisor. So called ready to use draft may lend you in trouble.

Ravi (Querist) 12 March 2012
S experts

Draft is needed to understand clauses before Final things. So it ll be better if have a draft to have a fair idea of things. So any draft avail it ll be helpful for all whose like to know clauses mandatory to be in such form of deed

V R SHROFF (Expert) 12 March 2012
Agree with Mr Chugh.

Partnership firm is separate entity, and can deal with as discussed by experts earlier.

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