Income Tax Act 1961 has express provision of charging income from rental of building or house under the head Income from House Property . Thus , most of the court decision are unanimous about the treatment of the rental income usually under Income from House Property .
This is so , even in a case where a person who is in business of hotel or lodging , gives the house or building or space on rent to tenant on a longer term . Recently Kerala High Court in case of Joseph George and Co. vs ITO and Anr. 328 ITR 161 grappled with the issue and in a very brief order held as under
Only two issues arise from the three questions raised in the connected appeals filed by the assessee. The first issue is whether the income received from building under the name “Konny Building” is business income or not. Counsel contended that the assessee is engaged in letting out rooms in the lodging house and the Konny Building is one rented o
ut to the bank on long-term lease. It is conceded that the income from the lodging building is treated as business income and the appellant has no grievance against the same. However, we are unable to accept the appellant’s contention that rental income from the Konny Building also should be treated as business income because letting out building on long-term lease is not a business activity at all. While lodging is business, letting out building to the bank cannot be treated as business. It is to be assessed as income from property. We, therefore, uphold the finding of the Tribunal with regard to the confirmation of assessment on the income from the Konny Building.
Thus , it must be kept in view that even if someone is in the business of giving space on rent , if the rental is not on day to day basis, chances of falling income from such property under the head “Income from House Property “ is very high because out of five heads of income , one head is very specific to rental income of buildings or houses .
