House property income rules do not cover option compensation for not leasing vacant units; the receipt falls under other sources.

Compensation received under an option arrangement, where the owner agreed not to let vacant units to third parties for a specified period, was not rental income and could not be assessed as income from house property. Income from house property under sections 22 and 23 applies only where property is let out or deemed to be let out, with annual value computed on that basis. Because the units were neither actually let out nor vacant in the statutory sense, the receipt represented consideration for surrendering the right to lease the premises to others and fell under the residuary head as income from other sources. The addition under the head income from house property was deleted.

---

---

Issues: Whether the compensation received under the option agreement was taxable as income from house property by determining annual value of the vacant units, or as income from other sources.

Analysis: Income from house property is chargeable only where the property is let out or deemed to be let out, and section 23 of the Income-tax Act, 1961 governs determination of annual value on that basis. The receipt in question arose from an option arrangement under which the assessee agreed not to let the units to third parties for a specified period, in return for compensation. The property was neither actually let out nor vacant in the statutory sense so as to attract computation of annual value under section 22 read with section 23. The amount was therefore not rental income, but compensation for renouncing the right to lease the premises to others for the agreed period, which falls under the residuary head.

Conclusion: The receipt could not be assessed as income from house property and was rightly assessable as income from other sources; the addition made under the head income from house property was deleted.

---