Composite rent can be split between property income and service income when tenancy covers both building and amenities.

Composite rent received from tenants may be split between the property element and the amenity or service element where the letting covers both the building and separate facilities. The High Court treated the reference as limited to that allocation issue and held that the portion attributable to the property was taxable under section 9(1) of the Indian Income-tax Act, 1922, while the amount referable to amenities fell under section 12. On that basis, the question was answered in the affirmative in favour of the assessee.

---

---

Issues: Whether composite rent received by the assessee from tenants had to be split up, so that the amount attributable only to the property was assessed under section 9(1) of the Indian Income-tax Act, 1922 and the amount attributable to amenities was assessed under section 12 of that Act.

Analysis: The reference was confined to the propriety of splitting composite receipts between the property head and the residual head. The Tribunal had found that the rent covered both the letting of the building and the amenities supplied to tenants, and on those findings the question referred was whether the property component alone could be taxed under section 9(1) while the service component fell under section 12. In the absence of findings necessary to reframe the controversy on a different footing, the answer had to be based on the limited question referred.

Conclusion: The question was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: Where composite rent includes distinct elements referable to the property and to amenities or services, and the reference is confined to that question, the receipts may be split and taxed under the appropriate heads according to their respective character.

---