Income from House Property Charge

Section 20 — INCOME FROM HOUSE PROPERTY (CHARGE)

Section 20 is the charging section for the House Property head. It charges to tax the 'annual value' of property consisting of buildings or lands appurtenant thereto, owned (legally OR deemed) by the assessee, and not used for the assessee's own business or profession. The chargeable person is the OWNER (under Podar Cement beneficial-ownership theory), not necessarily the registered title-holder. The exclusion for self-occupied business premises preserves the inter-Head primacy of PGBP for business-use buildings.

STATUTORY ARCHITECTURE

Section 20 has four operative limbs: (i) Annual value (computed under s. 21) — the chargeable measure; (ii) Of buildings or lands appurtenant thereto — the chargeable subject (vacant land alone is not HP; it must be appurtenant to a building); (iii) Of which the assessee is the OWNER — the chargeable person (legal or deemed under s. 25); (iv) Other than self-occupied for own business / profession — exclusion preserves PGBP primacy. Where any limb fails, the income falls outside the HP head and lands either in PGBP (s. 26) or Other Sources (s. 92) by default.

JUDICIAL EVOLUTION — Beneficial Ownership

The leading Supreme Court authority is CIT v. Podar Cement (P.) Ltd., (1997) 226 ITR 625 (SC), which laid down that 'owner' for s. 22 (now s. 20) means the person entitled to receive the rental income — not necessarily the registered title-holder. The 'beneficial ownership' theory was formally adopted.

HELD: In the context of section 22, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, owner is the person who is entitled to receive income from the property in his own right. Registered title is not indispensable. (per Podar Cement ¶ 73).

JUDICIAL EVOLUTION — Cooperative / DDA Allotment as Ownership

The Punjab & Haryana High Court in Vinod Kumar Jain v. CIT, (2010) 344 ITR 501 (P&H HC), held that the date of allotment by DDA, not the date of possession, is the relevant date for computing the holding period for capital-gains purposes. The allottee acquires a 'right' on the date of allotment which crystallises into title on possession.

HELD: The allottee gets the right to a particular flat on issuance of allotment letter and the payment of instalments is only a follow-up action. There is no question of any dilution of rights under the allotment letter on account of subsequent possession. (per Vinod Kumar Jain ¶ 11).

Followed in Madhu Kaul v. CIT, (2014) 363 ITR 54 (P&H HC) — extended the principle to cooperative-society allotment letters; member is owner from date of allotment.

JUDICIAL EVOLUTION — Self-Occupied Business Premises Exclusion

Karnani Properties Ltd. v. CIT, (1971) 82 ITR 547 (SC) — the 'self-occupied for own business' carve-out applies even where the assessee occupies a building partially for business and partially for residence; income from the residential portion would still fall under HP head. The carve-out is parsed proportionately.

DEPARTMENTAL PRACTICE

ITR-2 / ITR-3 Schedule HP — separate reporting per property with details of (a) whether self-occupied, deemed let-out, or actually let; (b) annual value computation; (c) interest on borrowed capital. For commercial property let on rent (e.g., shopping centre rental), the income falls under HP head u/s 20; for business of letting (e.g., property leasing as principal business), the income may be classified as PGBP — this fact-sensitive distinction has been litigated extensively. CBDT Circular 16/2017 dated 25-04-2017 clarifies the rental-income vs. PGBP distinction for business of leasing.

PLANNING NOTES & LITIGATION DEFENCE

(i) For under-construction flats (DDA/cooperative allotment), retain allotment letter and instalment receipts — these establish the early acquisition date for capital-gains holding period and HP-ownership status. Cite Vinod Kumar Jain / Madhu Kaul. (ii) For mixed-use property (residential + business), apply the Karnani Properties proportionality test — bifurcate based on actual area / value. (iii) For property held by trust / company / HUF, the substantive owner identity governs — registered-name irregularities (e.g., Hindu coparcener buying in own name with HUF funds) are pierced under Podar Cement beneficial-ownership doctrine. (iv) For property let to one's own company / firm, ensure arms-length rental is documented to defeat any related-party deeming.

CROSS-REFERENCES

• Section 21 — Determination of annual value (next section).
• Section 22 — Deductions from HP income.
• Section 23 — Arrears of rent / unrealised rent.
• Section 24 — Property owned by co-owners.
• Section 25 — Interpretation / deemed-owner cases (1961 s. 27 equivalent).
• Section 26 — PGBP charge (excluded business-use buildings fall here).
• Section 92 — Other Sources (residual head where HP charge fails).