Meaning, Scope of charge

• Building or Land Appurtenant thereto. The scope of this head of income is limited to the income from buildings or lands appurtenant (attached or situated in the vicinity of building) to buildings only. Buildings include residential houses, bungalows, docks, warehouses, any block of bricks or stone work covered by a roof etc. Land which is not appurtenant to any buildings does not come within the scope of this section.
• Annual Value. The meaning of word ‘Annual value’ is very significant because the annual value of the building or land appurtenant thereto is to be taxed and not the rent received. The annual value is to be determined according to the provisions of section 23 of Income-tax Act. These are discussed later in this chapter.
• The Assessee should be the owner of the property. It is only the owner of the house property who can be taxed under this head of income. The tax under this section is in respect of the legal or beneficial owner and not the occupation or possession of house property’. Therefore, income from subletting, will be chargeable under the head ‘Income from other sources’ and not under house property’. So only the owner, may be legal or deemed owner, is liable to tax under this head of income, unless the house property is used by him for the purposes of his own business or profession.
• The annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purposes of any business or profession carried on by him the profits of which are chargeable to income- tax, shall be chargeable to income tax under the head” Income from house property”.

1) The property should be consisting of any building or land apparent thereto.

• Income from letting vacant land is chargeable to tax under “Income from Other source – Section 56” not under this head “Income from House Property – Section 22”.
• The purpose for which the building is used by the tenant is immaterial. Thus income from letting godown, shop, house, factory, showroom etc will be taxable under this head.

2) The assessee should be the owner of the property

• If the property is sublet by the lessee/tenant then the income from sublet received by the lessee/tenant should be chargeable to tax under “Income from Business/Profession – Section 28”, if the lessee/tenant is carrying on business of letting/subletting otherwise under “Income from Other Sources – Section 56”.
• Deemed Ownership.
• Co-ownership.
• Income from building made by tenant/lessee on leasehold land is taxable under this head.
• If there is any dispute regarding title of the property then the income shall be chargeable to tax in the hand of the recipients of income.

3) The property should not be used for Business/Profession carried on by the assessee himself of which profit is chargeable to tax.

• If the owner of the property is an individual/HUF who is a partner in a firm and such property is used by that firm for carrying of business/profession, then property is considered to be used for business purpose.
• If the property is owned by HUF and any members of the HUF is partner in his individual capacity then income shall be taxable under this head.
• If the property is let out by a person for any purpose which is incidental to business then property is considered to be used for business purpose.
  For Ex :- If an assessee gives his property to his employees, directors etc for purpose incidental to business , whether on rent or otherwise, then income from such property is taxable under “Income from     Business/Profession – Section 28”.
• If propery is given on rent for purpose like for marriage, organising fair etc then it is not taxable under this head but under “Income from Business/Profession – Section 28”
• If property is located outside India then also tax is computed under this head.

4) If the property is used by the assessee for a business of letting of properties then the income derived from such business has to be shown in the head “Income from Business/Profession”.