Section 22

Section 22 — the law in short

What the courts have decided on section 22, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• PCIT v M P Entertainment and Developers P Ltd Supreme CourtHelps taxpayerValidity unconfirmed
  We run a shopping mall. Is the income business income or income from house property?
  Business income, on these facts. Applying Sultan Brothers, the Supreme Court dismissed the revenue's SLP: the company's objects covered constructing, owning, developing, managing, running, hiring, letting out and leasing malls and multiplexes, and its actual activity matched them, so the letting was the doing of business under s.28.
• Raj Dadarkar & Associates v ACIT Supreme CourtHelps department
  Our deed says sub-letting is our business. Does that make the licence fees business income?
  No. The Supreme Court held the objects clause in a partnership deed is not the conclusive factor in deciding the head of income; with no material showing organised commercial exploitation, the compensation and licence fees from the sub-licensed shops and stalls were assessable as income from house property.
• Rayala Corporation Pvt Ltd v ACIT Supreme CourtHelps taxpayer
  My company's only activity is letting out its properties. Is the rent taxable as house property income or as business income?
  As business income, on these facts. The Supreme Court held that where a company's business is to lease its property and earn rent, the income so earned is business income, and set aside the Madras High Court's contrary view. It applied Chennai Properties and Investments Ltd, in which it had held that if an assessee has house property and by way of business gives it on rent, the receipt, though in the nature of rent, is business income. It rejected the Revenue's argument that the memorandum of association must make letting the main object, noting that on the admitted facts the company had stopped its other activities and had only this one business.
• Chennai Properties and Investments Ltd v CIT Supreme CourtHelps taxpayer
  My company's whole business is acquiring properties and letting them. Is the rent business income or house property income?
  Business income, on these facts. Where the company's main object is to acquire and hold properties and let them out, and that is the activity it actually carries on, the rent is assessable under s.28 and not under s.22. The Court warned that the object clause is not by itself determinative - what matters is what the company in fact does.
• Chelmsford Club v CIT Supreme CourtHelps taxpayer
  My members-only club owns its own club house and uses it for members. Can the Department tax the annual letting value of that building as income from house property?
  No. The Supreme Court held that the principle of mutuality covers the annual value of a club house used only for members and their guests. Two steps get there. Section 22 taxes income, not property: the levy is traceable to entry 82 of List I and the Act cannot tax anything but income, so what is charged is deemed income from the property. And section 2(24) recognises mutuality by excluding businesses governed by it, other than those in clause (vii). Since the club satisfied the three tests of mutuality, the deemed income from its property was outside the charge too.
• CIT v Bokaro Steel Ltd Supreme CourtHelps taxpayer
  While my plant is still being built I recover rent, hire charges and interest from my own contractors. Is that taxable income before the business starts?
  No, where the receipts are inextricably linked with setting up the plant. The Supreme Court held that rent charged to contractors for housing their workers, hire charges for plant and machinery lent to them, interest on advances made to keep their work moving, and royalty for stone excavated from the company's own land are all capital receipts that go to reduce the cost of construction. They arise from arrangements intrinsically connected with building the plant, not from any independent source. Tuticorin Alkali was distinguished: interest on surplus borrowed funds parked in short-term deposits is an independent source and remains taxable.
• CIT v Podar Cement (P) Ltd Supreme CourtCuts both ways
  I have paid for the flat and I am in possession, but the conveyance was never registered. Am I the owner for s.22?
  Yes. For s.22 the Supreme Court read 'owner' as the person entitled to receive the income from the property in his own right, not the person holding a registered title. A buyer who has paid the whole consideration and is in possession is therefore assessable on the rent under the house property head even though no conveyance has been registered — which is why the assessee here, who had returned the rent under s.56 and argued it was not the owner, lost. The Court also held the deemed-ownership clauses inserted in s.27 by the Finance Act 1987 to be declaratory and retrospective.
• CIT v Bijoy Kumar Almal Supreme CourtHelps taxpayer
  My client owns a one-third share in the house he lives in with his brothers. The officer has computed the relief on the whole property and then split the balance three ways. Is that right?
  No. Where a house is owned by two or more persons whose respective shares are definite and ascertainable, section 26 requires the share of each person in the income computed under sections 22 to 25 to be included in his own total income, and the relief under section 23(2) is available to each co-owner separately out of his own share — not once over the whole property. The Supreme Court held the language of section 26 is clear enough even without the Explanation added to it in 1976, which puts the same result beyond doubt.
• CIT v Dalhousie Properties Ltd Supreme CourtHelps taxpayerSuperseded by amendment
  The municipal taxes on my client's let-out property have been levied and are under dispute before the Corporation, and only part has been paid. Can I still deduct the whole amount, relying on Dalhousie Properties?
  Not any more. The Supreme Court did hold, on the proviso to s.23(1) as it stood for assessment year 1966-67, that the words 'borne by the owner' referred to the liability the owner had to discharge and not to the sum actually paid, so that neither non-payment nor a dispute before the local authority defeated the deduction. That proviso has since been replaced: the proviso now in force allows the deduction only in the previous year in which the taxes are actually paid by the owner, and the Court in this very judgment noted that the proviso as it then stood had not been happily worded and had since been suitably modified.
• Sheila Kaushish v CIT Supreme CourtHelps taxpayer
  My client's shop is under rent control. The Assessing Officer has taken a notional market rent far above the standard rent as the annual value. Can he?
  No — not under the s.23(1)(a) limb. Where the property is governed by rent control legislation, the sum for which it might reasonably be expected to let cannot exceed the standard rent determinable under that legislation, and this is so even where the standard rent has never actually been fixed by the Rent Controller and even where the tenant's right to apply for fixation has become time-barred. But read the caveat: this was decided on s.23(1) before clause (b) existed, and today a higher actual rent received or receivable is taxed under s.23(1)(b) regardless of the standard rent.
• Bhagwan Dass Jain v Union of India Supreme CourtHelps department
  I live in my own house and earn nothing from it. Can Parliament tax me on a notional annual value as income from house property?
  Yes. The Supreme Court refused leave and dismissed the petition, holding that including an amount computed under section 23(2) for a self-occupied house is within Parliament's power to tax income under Entry 82 of List I. Income in Entry 82 is not confined to money actually received. Even in its ordinary economic sense it includes not merely what comes in by exploiting property but what one saves by using it oneself, and what can be converted into income may reasonably be regarded as giving rise to income. The tax is on income from house property, computed in an artificial way, and not on the building.
• S.G. Mercantile Corporation (P) Ltd v CIT Supreme CourtHelps taxpayer
  My company took a market on a long lease, spent money rebuilding it and sublets the shops and stalls. Is that rent business income or income from other sources?
  Business income. The Supreme Court held that the company's income from subletting stalls in Taltolla Bazar was assessable under section 10 of the 1922 Act, not under the residuary head. The company was not the owner, so the property head could not apply. Its memorandum authorised taking property on lease and dealing with it commercially; within a fortnight of incorporation it took the market on a fifty-year lease, undertook to spend Rs 5 lakhs remodelling it, and for three years did nothing but develop the premises and let out shops, stalls and ground space. Taking the lease and subletting was its trading activity.
• R.B. Jodha Mal Kuthiala v CIT Supreme CourtHelps department
  The title to a property is still in my name but somebody else has taken over all the rights and the rent — am I still the owner for income from house property?
  No. The Supreme Court held that the 'owner' for house property purposes is the person who can exercise the rights of an owner in his own right, not on behalf of another. A firm whose Lahore hotel had vested in the Pakistan Custodian of Evacuee Property was not the owner: the Custodian had every power of an owner except appropriating the proceeds, so he was the owner in the eye of the law, and the assessee's residual interest was not ownership for the charging section. The firm could not therefore claim the interest as a house property loss.
• CIT v National Storage Pvt Ltd Supreme CourtHelps taxpayerValidity unconfirmed
  My client lets specially built units with security, services and staff. The officer says it is still just letting, so it is house property. Is there authority the other way?
  Yes. Where what is hired out is a complex subject — a purpose-built structure together with services the ordinary landlord does not supply — the return is not income derived from the exercise of property rights but income from an adventure or concern in the nature of trade. The Supreme Court also held that the Act does not allow the receipt to be split, taxing the rental element as property income and the extra as business income, where the assessee is in occupation of the premises for the purposes of its business.
• Sultan Brothers P Ltd v CIT Supreme CourtHelps taxpayer
  I let a building together with its furniture and fittings under one agreement. Is that rent house property income?
  It depends, and the Supreme Court refused to lay down a formula. Whether a particular letting is a business is decided on the circumstances of each case, and whether the building and the plant, machinery or furniture are inseparably let turns on the intention of the parties - whether the two were meant to be enjoyed together and whether one would have been let without the other.
• Karanpura Development Co Ltd v CIT Supreme CourtHelps department
  My company acquired mining leases, developed the land and sub-let it for a premium. Is the premium a capital receipt or business profit?
  Business profit, on these facts. The Supreme Court held that the company, formed to acquire coal-mining rights and to turn them to account, was carrying on business when it took head leases at a salami of Rs 40 a bigha, developed the fields and granted sub-leases at Rs 400 a bigha. The excess was profit of that business, not appreciation of capital. The Court said ownership and letting may be done as part of a business or as a landowner, and which it is depends on the object with which the act is done. Assessable under the business head.
• East India Housing and Land Development Trust Ltd v CIT Supreme CourtHelps department
  My client is a company whose memorandum says it exists to develop and let property. Does that alone make its rent business income?
  No. The heads of income are mutually exclusive and are fixed by the source from which the income is derived, so rent from shops and stalls is income from property whatever the company's objects say. The Supreme Court held that the character of the income is not altered because it is received by a company formed with the object of developing and setting up markets, and that if income falls within a specific head the fact that it may indirectly be covered by another head does not make it taxable under the latter.
• Tivoli Investment & Trading Co v ACIT High CourtHelps departmentValidity unconfirmed
  The officer says my declared rent is too low and has fixed a much higher annual value. Is he bound by the municipal rateable value?
  No. The Bombay High Court held that the municipal rateable value does not bind the Assessing Officer when he determines annual value under s.23(1)(a), and upheld an annual letting value of Rs 22,00,000 against a declared licence income of Rs 1,17,900 where the premises had been let to a bank for a nominal monthly fee alongside an interest-free security deposit of Rs 1.54 crore.
• Shivani Madan v PCIT High CourtHelps taxpayerValidity unconfirmed
  My husband and I are both on the sale deed. Must half the annual value be taxed on me?
  No. The Delhi High Court held that merely signing the instrument of conveyance raises no presumption that the income is to be assessed in that person's hands; taxability must reflect who actually obtained the benefit of the property, so an equal share cannot be assumed where the deed is silent.
• Navin Jolly v ITO High CourtHelps taxpayer
  The officer says I already owned more than one residential house on the date of transfer, so s.54F is out. Some of those flats are let out for commercial use. Does that count?
  Usage decides it, not the sanction plan. The Karnataka High Court held that in applying the condition in the proviso to s.54F(1) the use to which a property is actually put has to be considered in deciding whether it is residential or commercial. The assessee owned nine flats; the Revenue conceded that seven were sanctioned for commercial purposes, and the remaining two, though sanctioned as residential, were being run as serviced apartments. Those two could not be treated as residential apartments. The Court also held, as an alternative ground, that two apartments of 500 square feet in the same building have to be treated as one residential unit.
• CIT v Gundecha Builders High CourtHelps taxpayerValidity unconfirmed
  I let out the unsold part of my project. Is that rent business income or house property?
  Income from house property. The developer's business was constructing and selling, not letting, so letting the unsold portion pending sale was incidental to the business and the rent was the fruit of ownership, assessable under s.22 rather than s.28(i).
• Ansal Housing & Construction Ltd v ACIT High CourtHelps departmentUnder appeal
  My unsold flats are stock in trade and were never let. Can the AO still tax notional rent?
  On this Delhi High Court view, yes. Vacancy allowance under s.23(1)(c) presupposes an actual letting, so where flats have never been let in any previous year the assessee cannot enter that clause at all and is taxed under s.23(1)(a) on the sum for which the property might reasonably be expected to let.
• Commissioner of Income Tax v M/s. Sane & Doshi Enterprises High CourtHelps taxpayer
  I am a builder and I let out the flats I could not sell, which sit in my books as closing stock. Is that rent business income, and can I claim the section 24 deductions including interest on the money that built them?
  It is house property income, and yes. The Bombay High Court dismissed the Revenue's appeals and upheld the finding that rent from unsold units of a commercial complex was assessable under the head income from house property with the section 24(a) deduction. It held that the character and nature of the income is decisive, not the treatment the assessee gives it in its books, so a consolidated profit and loss account did not convert the receipt into business income. It also upheld the provision of Rs 45 lakhs for incomplete work under the project completion method, and the deduction under section 24(b) of interest paid on partners' capital, where that capital had gone into constructing the premises that were let.
• Commissioner of Income Tax-12 v Tip Top Typography High CourtHelps taxpayer
  The officer says my rent is too low, has collected instances of higher rents in the locality and has also added notional interest on my interest-free deposit. When can he displace the rent I actually receive?
  Only on cogent material, and never by adding notional interest. The Bombay High Court held that the municipal rateable value is a safe guide and cannot be discarded in every case; to depart from it the officer needs cogent and reliable material. Market rate in the locality is an approved method for fixing fair rental value, but he may resort to it only where he is satisfied the case is suspicious and the parties' determination doubtful, and that satisfaction, that the bargain is inflated or deflated by fraud, emergency, relationship or the like, must come first. He must disclose the material to the assessee before using it. Notional interest on a refundable interest-free deposit cannot be treated as part of rent under section 23(1)(a).
• CIT v J.K. Investors (Bom.) Ltd. High CourtHelps taxpayerValidity unconfirmed
  I charge rent under one agreement and service charges for air-conditioning and building facilities under another. Which head do the service charges fall under?
  It depends on whether the service agreement can stand on its own feet. The Bombay High Court held the test to be whether the service agreement could stand independently of the rent agreement. On these facts it could not. The amenities charged for - the staircase, the lift, the common entrance, the main road through the compound, drainage, the open space in and around the building and air-conditioning - were not separately provided but went along with the occupation of the property. Rs 1.23 crores of service charges was therefore part of the rent, taxable under section 22 as income from house property and not as income from other sources.
• CIT v Sardar Exhibitors P Ltd High CourtHelps departmentValidity unconfirmed
  My client lets its shop to a group company at a low rent, and that company sub-lets to an outsider at many times the figure. Can the Assessing Officer assess my client on the sub-letting rent?
  The Delhi High Court refused to let that structure pass unexamined. It found the Tribunal had proceeded on the factually wrong footing that the tenant was not a sister concern, when the assessee had admitted the connection before the Assessing Officer, and it remitted the appeals to the Tribunal for fresh consideration, answering the question of law partly in favour of the Revenue. It expressly did not decide whether the sub-letting rent can be taxed in the owner's hands, and left that question open.
• CIT v Moni Kumar Subba (Full Bench) High CourtHelps taxpayer
  The property is not under rent control. My tenant paid a huge interest-free deposit and a small rent, and the Assessing Officer has added notional interest on the deposit to the annual letting value. Is that permissible, and what should the annual value be instead?
  Notional interest on an interest-free security deposit cannot be added to arrive at the annual letting value under s.23(1)(a) — the Full Bench held that view to be the consistent one across the High Courts and adopted it. What the Assessing Officer must do instead is determine the fair rent, for which the rateable value fixed under the municipal laws is a rational yardstick, though it is not binding on him and he may depart from it on material.
• Vivek Jain v ACIT High CourtHelps department
  My flat was never let during the year. Can I take the annual value as nil under the vacancy clause?
  No, on this High Court view. Section 23(1)(c) presupposes an actual letting - the clause covers a property that is let and is vacant for the whole or part of the year, and where the property has not been let out at all during the previous year there is no question of any vacancy allowance. The annual value then falls to be computed under s.23(1)(a).
• CIT v Neha Builders (P) Ltd High CourtHelps departmentValidity unconfirmed
  I am a builder and I let out an unsold floor of a building that sits in my closing stock. Is the rent house property income or business income?
  Business income. The Gujarat High Court answered the reference in favour of the Revenue and held that the Tribunal was wrong to allow the assessee's claim. Income derived from property is ordinarily income from property, but where the property is used as stock-in-trade it partakes the character of stock, and income derived from stock is income from business. The company was incorporated to purchase, lease, acquire, sell or let out the buildings it constructed; it had shown the building in closing stock and debited maintenance expenses to the profit and loss account; and every part of the building except the let-out ground floor had been sold. It was stock-in-trade from the beginning.
• Commissioner of Income-Tax v Shambhu Investment Pvt Ltd High CourtHelps department
  I let furnished table space with security, electricity, water and common amenities for a single monthly charge. Is that business income or income from house property?
  Income from house property, on these facts. The Calcutta High Court held that the mere attachment of income to immovable property is not by itself decisive; what must be seen is the assessee's primary object in exploiting the property. If the main intention is to let the property or a portion of it, the receipt is rental income; if it is to exploit the property by way of complex commercial activities, it is business income. Here there was no separate charge or agreement for furniture, fixtures or services, the monthly rent was comprehensive, and interest-free security advances of Rs 4,25,000 had already recovered the whole cost of the let portion. Applying the Sultan Brothers tests, the letting was inseparable and the object was letting.
• Ravi K Sheth v DCIT ITATHelps taxpayerValidity unconfirmed
  I own two flats. One is treated as self-occupied and the other is deemed let out under s.23(4). The Assessing Officer has taken market rent plus ten per cent as the deemed rent. Can I insist on the municipal rateable value?
  The Mumbai Tribunal held that you can, where the flat was never actually let out. It deleted the Assessing Officer's computation of market rent increased notionally by ten per cent and restricted the annual value of the deemed let out flat to the municipal rateable value, following the Bombay High Court in Pr.CIT v. Smt Laxmi Jain that in the case of a vacant property the tax on rental income under s.23 can be computed only on the basis of the rateable value assessed by the Municipal Corporation.
• Ramesh Dungarshi Shah v DCIT ITATCuts both waysValidity unconfirmed
  I'm a builder taxed on notional rent for unsold flats. From which year can that apply?
  From AY 2018-19. The Tribunal followed the Delhi High Court in holding that notional rent must be determined on vacant unsold flats held as stock in trade under the head income from house property, but held that no such addition can be made for assessment years before AY 2018-19, when s.23(5) began to operate.
• Sunil Ramnarayan Mantri v DCIT ITATHelps taxpayerValidity unconfirmed
  My property was let for only a few days in the year and lay vacant for the rest. The officer has taxed the full twelve-month notional value. Can section 23(1)(c) substitute the small rent I actually received?
  Yes, on this order. The Pune Bench held that section 23(1)(c) applies once three conditions are met: the property or part of it was let, it was vacant for the whole or any part of the previous year, and the rent actually received or receivable is, because of that vacancy, less than the sum computed under clause (a). The assessee's Ahmedabad mall was let for fifteen days in each year for Rs 30,000. The Assessing Officer had adopted an annual letting value of Rs 75,48,492 under clause (a) and added Rs 52,83,945 after the standard deduction. The Tribunal deleted the addition and directed the officer to allow section 23(1)(c).
• Syeda Bibi Sadiqa v DCIT ITATHelps taxpayerValidity unconfirmed
  Is there a ceiling on the interest I can deduct on a house that is let out?
  No. The Tribunal held that the property was let out during the year — rent of Rs 4,74,69,381 having been received — and that there is accordingly no maximum limit on the deduction for interest on borrowed capital. The proof accepted was a certificate from the lending bank, supported by the same deduction having been claimed and allowed in earlier years, and by a finding that the loan had not been taken afresh for any renovation of the property.
• Shamdarshan Properties Pvt Ltd v DCIT ITATHelps taxpayerHigh Courts differ
  The officer has added notional annual letting value on my builder-client's unsold flats for AY 2012-13. Section 23(5) did not exist then. Can he do that?
  No, on the Mumbai Tribunal's view. Section 23(5) was inserted by the Finance Act 2017 with effect from AY 2018-19; for earlier years there was no provision bringing the notional annual value of unsold flats held as stock-in-trade to tax under section 22, and flats carried as stock generate business income when they are sold, not house property income while they lie unsold.
• ACIT v Rcube Projects Pvt Ltd ITATHelps taxpayerValidity unconfirmed
  My client holds commercial space at a metro station under a build-operate-transfer concession and sub-lets it. The officer says it is a deemed owner under section 27 and must offer the receipts as house property. Is that right?
  Not on this decision. The Tribunal held that section 53A of the Transfer of Property Act, on which the deeming provision draws, operates in relation to a transfer of immovable property by way of a registered document where possession has been taken in part performance of the contract, and that a build-operate-transfer concession has none of those characteristics — the building always belongs to the grantor and the concessionaire holds only a licence. There being no basis to treat the concessionaire as a deemed owner, the receipts were business income and not income from house property.
• Abeezar Faizullabhoy v CIT(A)-28 ITATHelps taxpayerValidity unconfirmed
  I booked a flat years ago and have been paying the home loan, but the builder and the society are in litigation and I still have no possession. The officer has disallowed my s.24(b) interest because I do not occupy the flat. Can he do that?
  No. Section 24(b) prescribes no condition that the assessee must have taken possession of the property. The Tribunal set aside the disallowance and directed the officer to allow the Rs 2,00,000 deduction, holding that entitlement under ss.22 to 24 turns on ownership and not on possession.
• Osho Developers v ACIT ITATHelps taxpayerSuperseded by amendment
  I'm a builder holding unsold flats as stock. Can notional rent be taxed as house property?
  For the years before AY 2018-19, no. The Tribunal held the annual value of flats held as part of the stock in trade of a builder's business could not be determined and brought to tax under the head income from house property, and that no addition can be made under s.22 on a notional basis.
• Dynacon Equipments Pvt Ltd v ACIT ITATHelps taxpayerValidity unconfirmed
  My client's factory has been shut for years and the land, building and two generators are let out on one rent. The officer has taxed the whole of it as income from other sources. Can it be house property?
  Yes, on this decision. The Tribunal held that where the lease deed shows that the predominant objective is to let out the land and building along with the plant installed in it in order to earn rental income, and there is no visible intention to carry on organised and systematic business activity, the income is assessable under the head income from house property. It relied on the structure of section 14: income is to be assessed under the correct specific head, and only income that cannot be brought under any of the prescribed heads because of its nature falls to the residuary head of income from other sources.
• Swayam Prabha Jain v ACIT ITATHelps taxpayerSuperseded by amendment
  My tenant deposited the disputed rent in court and the TDS was deducted then, but the money only reached me two years later when the suit was settled. The officer has taxed it in the earlier year. Which year is it taxable in, and what happens to the TDS credit?
  The rent is taxable in the year it is actually received, not the year it was deposited in court, and the addition made in the earlier year was deleted. The TDS, however, does not simply follow the money: under Rule 37BA(3)(ii) the credit is allowed across the years in the same proportion in which the income is assessable, so the officer was directed to give proportionate credit in both years.
• Sonu Realtors P Ltd v DCIT ITATHelps taxpayer
  The flat was let for three years, then lay empty for the whole of this year. Is the annual value nil?
  Yes, on this Tribunal view. Where a property was let in an earlier year and is found vacant for the whole of the year under consideration, s.23(1)(c) applies and the annual value is nil - provided the vacancy was not because the owner took the property back for his own occupation. The Tribunal read 'property is let' in clause (c) as deliberately different from 'house is actually let' used elsewhere in s.23.
• Saif Ali Khan Pataudi v ACIT ITATCuts both waysValidity unconfirmed
  The flat could not be let at all because it did not match the sanctioned plan and needed alteration. Am I still taxable on a notional annual value?
  The Tribunal held he was entitled to vacancy allowance under s.23(1)(c), on the footing that a flat which departs from the sanctioned plan and needs alteration is not in a position to be let until the defects are removed. The flat was found vacant for the whole of the assessment year. No proportionate computation was made: having decided entitlement, the Tribunal took the figure the assessee had himself offered in his grounds of appeal, Rs 11,83,723, and modified the order below to that extent.
• Sachin R Tendulkar v DCIT ITATHelps taxpayer
  My flat stayed vacant although I tried to let it. Can I still claim vacancy allowance?
  Yes, on this Tribunal view. The words 'property is let' in s.23(1)(c) do not mean 'property actually let out' - holding the property for letting during the year with genuine, documented efforts to find a tenant is enough, and infallible proof of those efforts cannot be demanded.
• Kavita Marketing Pvt Ltd v Income Tax Officer ITATHelps taxpayer
  My leave and licence agreement splits the receipt into rent and separate facility charges for housekeeping and security. Can the officer tax the facility charges as house property income too?
  No, not where the services are actually rendered. The Mumbai Tribunal held that facility service charges of Rs 9,60,000 received for housekeeping, caretaker and security were business income, not income from house property. Applying CIT v Sarabhai (P) Ltd, where an owner carries on activities on the property that yield profits not from ownership but from the use of the property, those profits are business income. The Revenue's argument that the services were routine and of the kind a landlord would provide was held to be of no consequence, since it was not disputed that the services were in fact rendered and that the assessee had incurred Rs 10,11,900 on them. The rent itself remained assessable as house property income.
• Jagtar Singh Purewal v CIT Advance RulingHelps taxpayerSuperseded by amendment
  My tenant has paid me a lump sum of back rent after a long-delayed rent revision. Is that taxable as house property income in the year I receive it?
  No - on the law as it stood in 1994, and only then. The Authority ruled that Jagtar Singh Purewal, a non-resident with a one-sixth share in a Jalandhar building let to Madras Rubber Factory Ltd, was not liable to tax on his Rs. 1,05,083 share of arrears of rent for periods up to 31 March 1992, received on 6 July 1992. Income from house property computed under s.23 cannot exceed the actual rent for the previous year in question, and the Act as it then stood made no provision for taxing the excess referable to earlier years. Nor could the sum be taxed as income from other sources, on the principle in Nalinikant Ambalal Mody. Parliament has since reversed the outcome by enacting a specific charge on arrears of rent.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.