Which head of income

This query is : Resolved

NIRAV SAVLA (Querist)
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30 September 2011 CASE :
ONE OF OUR CLIENT IS A PARTNERSHIP FIRM WHICH HAS DISCONTINUED ITS BUSINESS BEFORE 3 YEARS BUT STILL HAS NOT DISOLVED THE FIRM.
NOW THE FIRM IS HAVING ONE HOUSE PROPERTY WHICH IT HAS GIVEN ON RENT AND IT GENERATES RENT INCOME.

MY QUESTION IS WHERE THIS INCOME SHOULD BE SHOWN
1) IN HOUSE PROPERTY
OR
2) BUSINESS INCOME
OR
3) OTHER SOURCES?

Preety Parik

Preety Parik (Expert)
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30 September 2011
Business Income

NIRAV SAVLA

NIRAV SAVLA (Querist)
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30 September 2011 CAN YOU PROVIDE ANY REFERENCE.

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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06 October 2011 it is income from house property.pls refer section.22 of income tax act.

Section 22 provides for taxation of ‘annual value’ of a
property consisting of any buildings or lands appurtenant
thereto, of which the assessee is owner, under the head
“income from House Property”. Tax imposed under section
22 is a tax on ‘annual value’ of house property and is not a tax
on “House Property”. However, if a house property
is occupied by a taxpayer for the purpose of business
or profession carried on by him (the profits of which
are chargeable to income tax), annual value of such property
is not chargeable to tax under the head ‘Income from
House Property’.
In the earlier discussion, the phrase ‘lands appurtenant
thereto’ has also been used. It needs to be clarified in this
context that income from letting of vacant plots of land when
there is no adjoining building will not be taxed under this
head (but will be taxed as income from other sources). The
existence of a building is, therefore, an essential prerequisite.
Building will, of course, include residential house (whether let
out or self occupied), office building, factory building, godowns flats, etc. as long as they are not used for business or profession
by owner. And the purpose for which the building is used by the
tenant is also immaterial. Thus, income from letting out godowns
will be taken as income from house property. It does not make
any difference at all if the property is owned by a limited
company or a firm.
CONDITIONS NECESSARY FOR TAXING INCOME
FROM HOUSE PROPERTY
These are:
• The property should consist of any building or land
appurtenant thereto
• The assessee should be the owner of the property
• The property should not be used by the owner for the
purpose of any business or profession carried on by him,
the profits of which are chargeable to tax.
Unless all the aforesaid conditions are satisfied, the
property income cannot be charged to tax under the head
‘Income from House property’.