Court splits rent: Services income not property income.

The High Court affirmed the Tribunal's decision that the composite rent received by the assessee should be split, with the portion attributable to services assessed under 'Other sources'. The Court held that services provided to tenants were distinct from property income and should be treated separately. The decision was in favor of the assessee, rejecting the Revenue's argument that all income, including service charges, should be considered as 'income from house property'.

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Issues Involved:
1. Whether the composite rent received by the assessee from its tenants should be split.
2. Whether the amounts attributable to the property only should be assessed under the head 'property income'.
3. Whether the amounts attributable to amenities provided/services rendered by the assessee to the tenants should be assessed under the head 'Other sources'.

Summary:

Issue 1: Splitting of Composite Rent
The Tribunal held that the composite rent received by the assessee from its tenants should be split. The assessee, owning a multi-storeyed building, provided various services to tenants, including lift operation, maintenance of common areas, and security. Clause 35 of the lease deed specified that 15% of the rent was for services provided. The Tribunal found this separable from the rent for the premises.

Issue 2: Assessment under 'Property Income'
The Commissioner of Income Tax (Appeals) upheld the assessing authority's view that the entire rent, including service charges, should be considered as 'income from house property' u/s 22 of the Income-tax Act, 1961. The Commissioner argued that services like lifts, security, and maintenance were integral to the property and could not be availed independently by the tenant.

Issue 3: Assessment under 'Other Sources'
The Tribunal disagreed with the Revenue's contention, holding that services such as lift operation, maintenance, and security were separable from the property rent and should be assessed under 'Other sources'. The Tribunal's view was supported by precedents, including decisions from the Calcutta High Court and the Supreme Court, which emphasized that income derived from services distinct from property ownership should be treated separately.

Conclusion:
The High Court affirmed the Tribunal's decision, stating that the composite rent could be split, with the portion attributable to services being assessed under 'Other sources'. The question referred was answered in the affirmative and against the Revenue.

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