Composite Rent :

(i) Meaning of composite rent: The owner of a property may sometimes receive rent in respect of building as well as –

(1) other assets like say, furniture, plant and machinery.

(2) for different services provided in the building, for eg. –

(a) Lifts;

(b) Security;

(c) Power backup;

The amount so received is known as “composite rent”.

(ii) Tax treatment of composite rent

(1) Where composite rent includes rent of building and charges for different services (lifts, security etc.), the composite rent is has to be split up in the following manner –

(a) the sum attributable to use of property is to be assessed under section 22 as income from house property;

(b) the sum attributable to use of services is to charged to tax under the head “Profits and gains of business or profession” or under the head “Income from other sources”.

(2) Where composite rent is received from letting out of building and other assets (like furniture) and the two lettings are not separable –

(a) If the letting out of building and other assets are not separable i.e. the other party does not accept letting out of buildings without other assets, then the rent is taxable either as business income or income from other sources;

(b) This is applicable even if sum receivable for the two lettings is fixed separately.

(3) Where composite rent is received from letting out of buildings and other assets and the two lettings are separable –

(a) If building is let out along with other assets, but the two lettings are separable i.e. letting out of one is acceptable to the other party without letting out of the other, then income from letting out of building is taxable under “Income from house property”;

(b) Income from letting out of other assets is taxable as business income or income from other sources;

(c) This is applicable even if a composite rent is received by the assessee from his tenant for the two lettings.