Question

A and B each own an undivided one-half interest in a tract of raw land. In discussing each of the following cumulative facts, determine how the opera- tion should be classified for tax purposes and the availability, if any, of elect-

Answer 1

The Income taxable Under Head House Property It must includes Building or Land appurtenant thereto. Means if there is only a piece of open plot of land i.e. on which there is no building, will not be taxable under this head.But if land is attached with a building forming part of building shall be taxable under this head. For example: If there is swimming pool in a building, playground, backyard, kitchen garden or garage, then all these shall be chargeable under this head.

1.Many of think renting of a vacant plot will chargeble under income from house property it is not correct. In the above example A& B had make a open plot and given for parking to C. For C it is Income from Business or Profession. If the A& B it will taxable under Income from House Property.

2.A&B constructed building and given for leased through and agent. A&B will receive the Rentals Therefore it is chargble under income from House Property.

3.A&B also providing the extra facilities which they are collecting the fee inclusive of Rent therefore it is also taxable under the Income from House property.

Since A&B are co Owners the Income is charged in the agreed Ratio. i.e Half to Half.