An enterprise engaged in the business of manufacturing of steel balls discontinued its activities and decided to lease out its factory building, plant and machinery and furniture from 1st April, 2020 on a consolidated le

The income derived from leased assets shall be chargeable to tax as Income from Other Sources u/s 56(2)(iii) of the Income-tax Act, 1961 but the computation thereof shall be made after allowing deductions specified under sections 30, 31 and 32 subject to section 38. This is as per the provisions of section 57(ii) and 57(iii) of the Income-tax Act, 1961. Computation of Income under the head Income from Other Sources Particulars Amount (₹) Amount (₹) (A) Lease Rent for 12 months @ ₹ 50,000 p.m. 6,00,000 Less: Expenses and deductions allowable under section 57(ii) & 57(iii): Repairs 15,000 Fire Insurance Premium 12,000 Legal expenses for drafting of lease agreement 1,500 Factory Licence fee 1,000 Depreciation for the year 1,47,500 Unabsorbed depreciation of earlier assessment years - eligible for deduction (Note 1) 2,75,000 (4,52,000) 1,48,000 (B) Interest on Deposits 1,00,000 Less: Expenses allowable u/s 57(i): Brokerage 2,000 Interest on hundi loans (note 2) 50,000 (52,000) 48,000 Total Income 1,96,000 Working Notes Unabsorbed depreciation of ₹ 2,75,000 pertains to earlier assessment years are allowed to be carried forward even if the income tax return for the relevant assessment year is filed after due date of filing of return u/s 139(1). The unabsorbed depreciation shall form part of the current year depreciation and can be set off against any other head of income. Accordingly, the amount of ₹ 2,75,000 is adjustable/allowed to be set off against income from other sources. Since deposits are made by investing amount received on hundi and other loans, the interest on hundi and other loans would be eligible for deduction from the income arising on such deposits. However, interest paid to non-resident is not eligible for deduction as the tax has not been deducted as source.