Section 38 – Building, etc., partly used for business, etc., or not used exclusively

Section 38 of the Income Tax Act deals with the deductions related to buildings, etc., partly used for business, etc., or not exclusively so used. The provisions contained in this section provides in summarized in two parts:

1. Deductions with respect to premises used for the purpose of business or profession which is also partly used by the assessee for his own accommodation.

2. Where the assessee uses his building, plant or furniture, or machinery not exclusively for the purposes of his business or profession.

Deductions with respect to premises used for the purpose of business or profession  

Where the assessee uses part of the premises for his own accommodation:

i. The deduction for the rent paid as a tenant including the cost of repairs to the premises under Section 30 (a) (i), would be determined by the Assessing Officer with respect to the proportional annual value of such part of the premises which is used by the assessee for the purpose of his business or profession, and if any repairs, the deduction would also be proportional to such part of the premises which is used by the assessee for the purpose of his business or profession;

ii. The deduction for the amount paid on account of land revenue i.e. local rates or municipal taxes under Section 30 (b) shall be the sum as determined by the Assessing Officer with respect to the proportional to such part of the premises which is used by the assessee for the purpose of his business or profession;

Where the building, plant or furniture, or machinery is not used exclusively

Where any building, plant or furniture, or machinery isn’t used by the assessee exclusively for the purposes of his business or profession, the deductions for:

i. The amount paid by the assessee on account of repairs to the premises otherwise than as a tenant under Section 30 (a) (ii)

ii. The amount paid by the assessee as premium with respect to insurance against the risk of damage or destruction of his premises under Section 30 (c)

iii. The amount paid by the tenant on account of repairs of machinery, plant, or furniture used for his business or profession under Section 31 (i)

iv. The amount paid by the assessee as insurance premium with respect to risk of damage or destruction of his machinery, plant, or furniture used for his business or profession under Section 30 (ii)

v. Depreciation for the block of assets under Section 32 (1) (ii)

The deduction for the aforesaid items will be restricted to a fair proportion as determined by the Assessing Officer with respect to the user of the building, plant or furniture, or machinery for the purposes of the business or profession.

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