Deemed owners, Composite rent

Deemed owner is an owner by implication, he may not be the person under whose name property is registered. Some instances in which a person who is not the owner of the property is considered to be the owner for the purpose of tax levy are

1) An individual who transferred his property without adequate consideration to his or her spouse (otherwise than in connection with an agreement to live apart) his minor child (not being married daughter) is deemed to be owner of that property.

If an individual transfers another asset and his spouse or minor child purchase house property from that asset, then such individual is not treated as deemed owner.

2) If property is allotted by company/co-operative society to its shareholders/members, then technically the company/cooperative society may be the owner. But the shareholder/member to whom property is allotted is deemed to be owner of property.

3) If buyer has taken the possession of the property without getting the sale deed registered is deemed to be owner of the property.

A person who is allowed to take or retain possession of any building (or part thereof) in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, is also deemed as the owner of that building (or part thereof).

4) A person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building (or part thereof) by virtue of any such transaction as is referred to in section 269UA(f) [i.e. if a person takes a house on lease for a period of 12 months or more, Persons who purchase properties on the basis of Power of Attorney]

Composite Rent

When the total amount i.e. rent of the building along with the hire charges for other assets such as furniture or service charges for certain services such as security, lift, etc. is received by the owner of the building; such amount so received is defined as Composite Rent.

Tax Treatment of Composite Rent:

The taxability of Composite Rent can be well understandable by considering Two cases mentioned below:

Case1: Where Total amount is inseparable

Where composite rent consists of rent for the building & hire charges for other assets & the two rents are inseparable, then the entire amount is chargeable under the Business Income or Other Sources, as case may be.

Case2: Where Total amount are separable

Where composite rent consists of rent for the building & hire charges for other assets & the two rents are separable, then rent of the building is taxable under the head Income from House Property whereas hire charges of other assets is charged to tax under Other Sources.

Also, if the composite rent is the mixture of rent of the building & also includes service charges for some services, then the total amount is spilt into rent & service charges. Rent gets taxable under House-Property & Service charges under Business Income.