4. Dispute about Ownership of House Property :
OWNERSHIP- If title of ownership of a house property is under dispute in a court of law, the decision about who is owner rests with the Income-tax Department. Thus, mere existence of dispute as to title cannot hold up an assessment even if a suit has been filed. Generally, the person who is in receipt of income or the person who enjoys the possession of a house property as owner, though his claim is disputed, is assessable to tax under section 22.
5. House Property situated in a Foreign Country.
In case an assessee who is resident of India owns a house in a foreign country, income from such a house is taxable in India under the head house property. So income from house property in case of 'Not Ordinary Resident' and a 'Non Resident' shall be exempted but again it will be taxable in India if it is received or it is payable in India.
6. 'Composite Rent' under House Property Income :
Apart from recovering rent of the building, in some cases, the owner gets rent of other assets (like furniture) or he charges for different services provided in the building (for instance, charges for lift, security, air conditioning, etc.). The amount so recovered is known as “composite rent”. The tax treatment of the composite rent is as follows—
WHERE COMPOSITE RENT INCLUDES RENT OF BUILDING AND CHARGES FOR DIFFERENT SERVICES (LIKE LIFT, AIR CONDITIONING) -
If the owner of a house property gets a composite rent for the property as well as for services rendered to the tenants, composite rent is to be split up and the sum which is attributable to the use of property is to be assessed in the form of annual value under section 22. The amount which relates to rendition of the services (such as electricity supply, provision of lifts, supply of water, arrangement for scavenging, watch and ward facilities, etc.) is charged to tax under the head “Profits and gains of business or profession” or under the head “Income from other sources”.
X owns a property. It is given on rent to Y. Y annually pays Rs. 1,00,000 as rent of the property and Rs. 20,000 for different services like lift, security, air-conditioning, etc. In this case, Rs. 20,000 is not taxable in the hands of X as income from house property. Rs. 20,000 would be taxed in the hands of X after deducting his actual expenditure for providing different services (lift, security, air-conditioning, etc.) as income from other sources or as business income.
WHERE COMPOSITE RENT IS RENT OF LETTING OUT OF BUILDING AND LETTING OUT OF OTHER ASSETS (LIKE FURNITURE) AND THE TWO LETTINGS ARE NOT SEPARABLE -
If there is letting of machinery, plant and furniture and also letting of the building and the two lettings are inseparable (in the sense that letting of one is not acceptable to the other party without letting of the other), then such income is taxable either as business income or income from other sources. This rule is applicable even if sum receivable for the two lettings is fixed separately.
X owns an air-conditioned furnished lecture hall. It is let out, annual rent being Rs. 5,00,000 (it includes rent of building and rent of air-conditioner and furniture). In this case, letting of lecture hall is not separable from the letting of airconditioner/furniture. This income (after excluding expenditure) is taxable as business income or as income from other sources.
WHERE COMPOSITE RENT IS RENT OF LETTING OUT OF BUILDING AND LETTING OUT OF OTHER ASSETS AND THE TWO LETTINGS ARE SEPARABLE -
If there is letting out of building and letting of other assets and the two lettings are separable (in the sense that letting of one is generally acceptable without letting out of the other; for instance letting out of building along with car), then income from letting out of building is taxable under the head “Income from house property” and income from letting out of other assets is taxable either as business income or income from other sources. This rule is applicable even if the assessee receives composite rent from his tenant for two lettings.
X gets Rs. 20,000 per month as rent from Y for letting out of a building and a car [the two lettings are separable in the sense that Y was given an option to take on rent either the building (at Rs. 16,000) or the car (at Rs. 4,000) or both]. The rent of the building is taxable under the head “Income from house property” and the rent of car is taxable either as business income or income from other sources.
7. House Property is Owned by Co-Owners (Section 26) :
If a house property is owned by two or more persons, then such persons are known as co-owners. If respective shares of co-owners are definite and ascertainable, the share of each such person (in the computed income of property) shall be included in his total income. It may be noted that co-owners are not taxable as an association of persons