Whether rental income is business income or income from house property is an issue that is a fighting point between tax department and taxpayers for quite long time. Various courts and Tribunals have intervened and gave judgments. But the controversy still persists. Now add to this controversy is the new rental opportunities for many house or property owners by letting mobile operators on the roof or terrace. That gives them a new opportunity to earn some income from unused space -roof or terrace of a building. The controversy is whether the income from rental of the roof or terrace for letting mobile operators antenna tower or others to put hoarding for advertisement is income from house property or income from other sources or business income.
Courts : Rental of Terrace is House Property Income
Since various courts and Tribunals have already gave judgments on this issue, there is no need for personal opinion . So here are few High Court orders and some decisions of ITAT that clears the air .
Delhi High Court in Niagra Hotels & builders (p) ltd vs CIT  233 Taxman 180 (Delhi)
The facts involved in the case was that the assessee received rental income in form of ‘licence fee’ for the terrace floor as the ‘space’ for mounting a tower/mast and antenna on its property and declared as ‘Income from House property’. The A.O held it as business income .The Commissioner (Appeals) accepted the assessee’s claim.
However ,the Tribunal took a view that terrace does not have any appurtenant land. So, the agreement of renting and hiring terraces was for hiring space and not the building and land appurtenant thereto. Therefore, the rental income is ‘income from other sources’.
Assessee challenged the verdict of ITAT in Delhi High Court . The Hon’ble High Court held in favour of assessee stating as under ( Para 22) :
22. We do not approve of the logic employed by ITAT in rejecting the claim of it being income from house property. The terrace floor cannot exist in the air. It is part of the building which has been constructed on the land beneath the super-structure. It is, therefore, not correct to hold that the terrace does not have any appurtenant land. We, therefore, reject the conclusion of ITAT that the agreement of renting and hiring terrace is in essence for hiring space and not hiring building or land appurtenant thereto.
So, Delhi High Court settled that rental income under an agreement for mounting tower is income from house property and not business or income from other source .
Another decision in this regard is that of ITAT , Delhi in Manpreet Singh vs ITO Ward 33(3) , 67 SOT 426 (Delhi – Trib.). In that case the assessee, rented terrace space to certain companies for installation of their antennas. Assessee declared the income from rental of terrace as “income from house property ” and claimed standard deduction of 30% . The Assessing Officer, however, rejected said claim for deduction on the ground that ‘income regarding installation of antenna’ was taxable under the head ‘income from other sources’ . The Commissioner (Appeals) confirmed the order of the Assessing Officer.
When assessee appealed to ITAT, it gave relief to assessee by holding the income from rental of terrace space as “income from house property”. The relevant extract is below :
The agreement with Bharti Airtel Ltd mentions that the assessee “permits the licences to install, establish, maintain and work on the licenced premises, inter alia, including the following – (a) transmission tower/pole, with multiple antennas; (b) pre-fabricated equipment shelter; (c) D G Set upto 25 KVA: and (d) two earthing connection and laying of other cables to ground an one lightning arrestor, necessary cabling and connecting to each antenna/ equipment, and space for installation of electricity meter and power connectivity etc”. Similarly, agreement with Idea Cellular Ltd, inter alia, states that the assessee gives permission and licence “to use and occupy a portion admeasuring approx. 800 sq ft terrace and roof area for installation of prefabricated temporary assembled air conditioned shelter, tower/antenna poles and such other equipment as may be necessary”. All these installations are to be done by the related companies and the obligation of the assessee does not extend beyond permitting use of space for such installations. It is thus clear that the rent is for space to host the antennas and not for the antennas. As long as the rent is for the space, terrace and roof space in this case and which space is certainly a part of the building, the rent can only be taxed as ‘income from house property’.
9. In view of the above discussions, and as the rent received by the assessee for use of space, by Bharti Airtel Limited and Idea Cellular Limited, in a building, or part thereof, owned by the assessee, in our considered view, the rent so received must be taken into account in computation of annual value to be taxed under the head “income from house property”. Accordingly, as learned counsel for the assessee rightly contends, the deduction under section 24(a) is admissible on the facts of the present case. We, therefore, reverse the stand of the authorities below and uphold the stand of the assessee. The Assessing Officer is, accordingly, directed to delete the impugned disallowance.
Third case law to rely on is that of ITAT, Mumbai in case of Matru Ashish Co-operative Housing Society Ltd. vs ITO  144 TTJ 446 (Mumbai – Trib.) in which teh fact n brief was that he assessee had shown rent received by it by letting out terrace of its building as income from house property. The A.O assessed rental receipt as income from other sources . Hsorder was confirmed by the Commissioner (Appeals).
On assessee’s apea, ITAT however faoured assessee by holdin that the income from letting out of the terrace had to be assessed under the head income from house property subject to deduction under section 24 as against income from other sources as assessed by the Assessing Officer.
Contrary Judgment & Distinguishing Factor
Calcutta High Court judgment in case of Mukherjee Estate (P) Ltd  161 CTR 470 (Calcutta) is often applied by the tax department blindly to every case where it suits them for taxing the rental receipts. But the decision was based on particular facts . Therefore , before one applies the decision of Hon’ble Kolkata High Courts facts have to be matched. Let us see what was the fact.
The assessee’s business consisted of letting out on hire cinema hall, service charges realised from various house properties and shareholding. The assessee also realised certain sum on account of display of hoardings of various concerns on top of its building for advertisement purpose. The ITO held the hoarding receipts as it as income from other sources.
On appeal, the Commissioner (Appeals) allowed the assessee’s claim for such income being assessed as income from house property. On second appeal, the Tribunal upheld the ITO’s assessment on the ground that hoardings did not form part of the building which was separable from the cinema hall and other parts of the building.
When matter reached the High Court of Kolkata , it asked for evidence in form of an agreement that the rental was receipt form renting the roof or renting the hoarding. The assessee could not produce any agreement to support that the said receipt was for renting of roof and not teh hoarding. In that case , the Hon’ble High Court approved the decision of ITAT that the receipt should be assessed as “income from Other Source”
The learned counsel for the assessee submits that the assessee has let out the roof for hoarding and advertisement. Therefore, the income should be assessed as income from house property. A query was put to him whether there was an agreement to this effect to conclude whether the hoarding was let out or the roof is let out. He failed to produce that agreement nor is there any reference to such agreement before the authorities below. Therefore, considering the finding of the Tribunal that the assessee has let out the hoardings, these are neither part of the building nor the land appurtenant thereto. Therefore, permitting some companies to display their boards on hoardings cannot be taken as income from house property as hoardings cannot be treated as part of the building.
The agreement for rental mus clearly speak out aout renting of the trrace space or roof space . In that case , as per court and tribunals, the income from rent of those spaces (roof/terrace) is income from house property.
It must also be brought to the notice of readers that in case an assessee carries on business of renting of space or house/flats , the renting of terrace/roof may still be considered as Business Income because of two supreme court judgments – Rayala Corporation Pvt Ltd vs ACIT  72 taxmann.com 149 (SC) which relied on its own judgment in Chennai Properties and Investments Ltd. v. Commissioner of Income Tax  373 ITR 673 (SC) to hold that Where assessee company was having house property and its business was to lease out its property and to earn rent, income so earned as rent should be treated as ‘business income’, and not as ‘income from house property’
For all others , it is always Income from House Property.