Letting Out of Machinery, Plant & Furniture

Relevant Provision: Section 92(2)(f) and (g)

Section 92(2)(f) covers income from machinery, plant or furniture belonging to the assessee and let on hire, if not taxable as business income. Section 92(2)(g) covers composite letting — machinery/plant/furniture together with a building, where the letting of the building is inseparable from the letting of such machinery/plant/furniture.

2. Taxability — Why the Distinction Matters

If letting out a building is separable from letting the machinery/plant inside it, the rent for the building is taxed under House Property and the rent for machinery/plant is taxed under Other Sources. If the two are inseparable (a fully furnished multiplex or fitted-out commercial kitchen, for instance), the entire composite rent is taxed as one unit under Income from Other Sources, not apportioned between heads.

3. Exemptions and Deductions

There is no blanket exemption for this category — deductions are the relief mechanism instead. For income under clauses (f) and (g), the taxpayer can claim current repairs to machinery/plant/furniture and building (if composite), insurance premium, depreciation on machinery, plant, furniture and building computed as per business-asset depreciation rules, and any other revenue expenditure laid out wholly and exclusively for earning such income.

4. Illustrative Example

Mr. Iyer owns a fully equipped commercial kitchen (building plus catering equipment) which he lets out as one composite unit for ₹6,00,000 a year — the tenant would not take the bare building without the equipment. The entire ₹6,00,000 is taxed under Other Sources (not split between House Property and Other Sources). Mr. Iyer can deduct repairs of ₹40,000, insurance of ₹15,000, and depreciation of ₹80,000 on the equipment/fittings, leaving ₹4,65,000 as net taxable income under this head.

5. Case Laws

Sultan Brothers (P) Ltd. v. CIT (1964) SC — the seminal ruling: whether letting is a "business" or "other sources" income depends on the intention of parties and whether the letting of building and furniture/fixtures is inseparable.

CIT v. National Storage (P) Ltd. (1967) SC — storage facilities let with specialised fittings were held taxable as business income where the dominant intention was commercial exploitation.

Universal Plast Ltd. v. CIT (1999) SC — laid down that no single test is conclusive; the totality of facts and circumstances governs classification.

6. Precautions

Draft rental/lease agreements clearly specifying whether machinery and building are let separately or as one composite unit — ambiguous agreements invite reclassification disputes.

Maintain a fixed asset register with cost, additions, and depreciation claimed year-on-year; depreciation cannot be claimed twice under different heads.

If the same equipment is let out only occasionally (not as a business), ensure it is not treated as "business income," which would attract different compliance requirements.

7. FAQs

Q1. My tenant pays rent for a furnished flat with some furniture — is this "Other Sources" income?

Generally no — if the furniture rent is incidental to a house-property letting and can reasonably be separated, it is usually still treated under House Property. If truly inseparable, the composite rule may apply.

Q2. Can I claim the standard 30% deduction (as in House Property) against machinery-letting income?

No — the flat 30% standard deduction is specific to House Property income only. Deductions here must be actual and specific (repairs, insurance, depreciation).

Q3. Is GST applicable in addition to income tax on such rentals?

Possibly yes — renting machinery/plant is generally a taxable supply under GST if turnover thresholds are crossed, entirely independent of the income-tax classification.

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.