Conditions for Taxability under House Property – Section 22
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”.
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”. Chennai Properties & Investment Ltd vs CIT (Chennai 2015)