When the owner of the building gets along with the rent of the building, rent or hire of other assets (like furniture) or charges for different services provided in the building (e.g. charges for security, lift, air-conditioning etc.), the total amount so received is called ‘composite rent‘. The tax treatment of composite rent is as follows :
When composite rent consists of rent for building and rent hire for other assets (like furniture, television etc.) and the two rents are inseparable i.e. the other party will not accept the letting of one without the other, then such income is taxable as business income or ‘income from other sources’ – Sultan Bros (P) Ltd. v. CIT [1954] 51 ITR 353 (SC).
When composite rent consists of rent for buidling and rent for other assets (like furniture, television, etc. and the two rents are separable i.e. the othe rparty will accept the letting of one without the other) the rent of building is taxable as ‘Income from house property’ and rent or hire of other assets is taxable as ‘Income from other sources’.
When composite rent consists of rent for building and charge for different services (like lift, A.C, security) the composite rent is split up and the portion which relates to rent of building is taxable as ‘Income from house properyt’ and the portion which relates to the services offered is taxable as ‘Profits and gains of business or profession’ or ‘Income from other sources’.
Composite rent must be split up – Where the assessee received composite rent from its tenant towards building as well as services/amenities, such rent should be split up and the portion of rent attributable to the building should be assessed as ‘income from house property’ and the other portion attributable to services/amenities should be assessed as ‘income from other sources’ – CIT v. Kanak Investments (P.) Ltd. [1974] 95 ITR 419 (Cal.).
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