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Conditions for taxability under Income from House Property

Property should be any building or land appurtenant thereto

  • Building includes residential building, shop, godown and other commercial premises.
  • Land appurtenant means land connected with the building like compounds, courtyards, playgrounds, kitchen gardens, motor garages, stables, cattle sheds, or any parking space.
  • Income from letting out of vacant land is chargeable to tax under “Income from other sources" or "Profits and gains from business or profession", as thecase may be.
  • The existence of a root is not always necessary for a structure to be regarded as a building. A large stadium or an open-air swimming pool constructed at a considerable expense would be a building as it is a permanent structure and designed for a useful purpose - Ghanshiam Das vs Devi Prasad & Anotherseful.

Property must be owned by the assessee

(a) Ownership includes both freehold and leasehold rights.

(b) Deemed ownership (cases when the person is deemed to be the owner of a property even though he is not a legal owner).

(c) Owner of building need not be the owner of the land.

(d) If the entire investment in the property was made by the husband but the property is registered in the name of his wife, the income is taxable in the hands of the husband - CIT v. Ajit Kumar Roy

Use of property

(a) Property should not be used by the owner for the purpose of any business or profession carried on by him of which profit is chargeable to tax.

(b) If the houses are given to its employees or directors, section 22 will never apply as the house will be regarded as having been given for the purpose of business - CIT v. Modi Industries Ltd.

(c) If the partnership business is carried on in the premises of one of the partners, the said partner, as an individual, would be entitled to the exemption under section 22 - CIT v. Rabindranath Bhol

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CA Rupali Gupta

CA Rupali Gupta