Service charges from tenants are not house property income when paid for services, not for occupation.

Service charges received from tenants are not part of the annual value taxable as income from house property where the payments are separately intended as consideration for services and not for occupation of the premises. Section 22 taxes annual value of property, and section 23 determines that value by reference to expected or actual rent, leaving no scope to add amounts outside rent. On that footing, receipts characterised as service charges fall outside house property income and are assessable as income from other sources.

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Issues: Whether service charges received from tenants are to be assessed as income from house property or as income from other sources.

Analysis: Section 22 of the Income-tax Act, 1961 taxes the annual value of property as income from house property, and section 23 fixes that annual value by reference to the sum for which the property may reasonably be expected to let or the actual rent received or receivable. Explanation 1 to section 23 defines annual rent by reference to actual rent, and the statutory scheme leaves no scope for adding amounts which are not part of rent. Where the parties intended service charges to represent payment for services and not consideration for occupation of the premises, such receipts do not form part of the annual value of the property.

Conclusion: Service charges were not assessable as income from house property and were liable to be assessed as income from other sources.

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