Section 22. Chargeability - Taxation | Income Tax for assessment (Inter Level) PDF Download

Section 22. Chargeability

The Annual Value of building or land appurtenant thereto of which assessee is the owner not occupying the building for his own business or profession.
Analysis

a.  The Annual Value of the property should consist of any building or land appurtenant thereto.
Building : Construction should be completed.
Residential Building : Four walls having a roof.
Commercial Building : Having or not having a roof.
Vacant land attached to the building : House property.
Independent plot of land : Other sources.

b. The assessee should be the owner of the property.
Registered owner : Owner
Beneficial owner : Owner
Deemed owner : Owner
Income from sub letting : Other sources

c. The property should not be used by the owner for the purpose of his own business or profession.
Factory building : Business
Let out to employees : Incidental to the Business : Business.
Even if the property is held as Stock in trade the rent from such building is taxed under the head ‘House Property.’
 

Splitting of composite rent
1. Where owner lets out the building along with other facilities and receives composite rent which is separable, then rent in respect of building is taxed under the head ‘House Property’ and charges in respect of facilities shall be charged under the head ‘Income from Other Sources’
Note 1: Facilities includes amenities like furniture and fixtures, electricity supply, provision of lifts, supply of water, watchman & ward facilities.

2. Where the composite rent is not separable, the entire rental income shall be assessed either under the head “Income from Other Sources” or “Profits from Business” as the case may be.

P1 : Under which head following incomes are charged to tax.
1. House property is owned by the company and is occupied by the employee as its residence.
2. Letting out of lodging house / Hotel Room.
3. Paying guest accommodation.
4. Holding of house property as stock in trade which is let out.
5. Income from letting out of godown / commercial property.

Answers
1. Business
2. Business
3. If separable building portion u/h HP, facilities portion u/h Other Sources.
4. House property
5. House property

Section 27. Deemed Owner
For the purposes of sections 22 to 26:
1. An individual who transfers House Property to his or her spouse without adequate consideration, such individual who transfers the property is treated as deemed owner.
Note 1: Where the property is transferred in connection with an agreement to live apart then deemed owner concept is not applicable. Income from HP chargeable in the hands of transferee itself.

2. An individual who transfers House Property to a minor child, without adequate consideration such individual who transfers the property is treated as deemed owner.
Note 1: Where the minor child is a married daughter then deemed owner concept is not applicable. Income from HP chargeable in the hands of minor married daughter itself. But return of income shall be signed by Guardian.

3. Holder of an impartible estate. Such holder is deemed to be the individual owner of all the properties comprising in the estate.

4. A member of a Co-operative society, Company or other association of person provided :
- the building or part thereof is allotted or leased to such member; and
- the allotment or lease is under a house building scheme of such society, Company or AOP
Such member shall be treated as the deemed owner of that property.

5. A person who is allowed to take or retain possession of any building or part thereof in part performance of a contract referred to in Section 53A of the Transfer of Property Act, 1882.
Section 53A of the Transfer of Property Act deals with situations where though the agreement to buy a property has not been registered with the stamp valuation authority, the person who has purchased the property will be treated as the deemed owner of the property.

6. A person who acquires any right in or with respect to any building or part thereof by way of sale or exchange or lease for a term of atleast 12 years.

E.g. 1: X is the owner of Building A. He let out the building to Y for 12 years. Y further let out this building to Z for 6 years. X is the owner and Y is the deemed owner. Income earned by both X and Y shall be charged u/h ‘HP’
E .g. 2: X is the owner of Building A. He let out the building to Y for 10 years. Y further let out this building to Z for 6 years. X is the owner and Y is the tenant. Income earned by X shall be charged u/h ‘HP’ and income earned by Y shall be charged u/s ‘OS’