CAM Charges Not Rent, TDS Under 194C Upheld by SC Due to Nature of Payment

CIT (TDS)-1 Vs Liberty Retail Revolutions Ltd. (Supreme Court of India)

The dispute concerned the correct provision for deduction of tax at source (TDS) on Common Area Maintenance (CAM) charges paid by a tenant operating from a shopping mall. The Assessing Officer treated CAM charges as part of rent and held that tax should have been deducted under Section 194-I of the Income Tax Act, 1961 at 10%, instead of 2% under Section 194-C. On this basis, the assessee was treated as an assessee-in-default under Sections 201(1) and 201(1A), and demands for tax and interest were raised. The Commissioner (Appeals) confirmed this view.

On further appeal, the Income Tax Appellate Tribunal set aside the demand, holding that CAM charges are not rent but payments for maintenance and related services. The Tribunal relied on its earlier coordinate bench decisions involving identical facts, including cases arising from proceedings against the same mall owner. It reasoned that CAM charges are paid for cleanliness, utilities, and upkeep of common areas and facilities, and are independent of lease rentals. Since these payments are made pursuant to a contractual arrangement for carrying out work and services, they fall within the scope of “work” under Section 194-C and not “rent” under Section 194-I.

The Delhi High Court upheld the Tribunal’s reasoning. It observed that CAM charges are shared maintenance expenses and cannot be construed as consideration for use of land or building. The Court held that the assumption that CAM charges are essentially rental payments was erroneous and found no infirmity in the Tribunal’s view. It further held that no substantial question of law arose for consideration and dismissed the Revenue’s appeal.

The matter was carried to the Supreme Court of India, which condoned the delay and dismissed the petitions. The Supreme Court found no error or illegality in the High Court’s order and affirmed the conclusion that CAM charges are not liable for TDS under Section 194-I. As a result, the deletion of demands raised under Sections 201(1) and 201(1A) stood confirmed.

Read HC judgment: CIT (TDS)-1 Vs Liberty Retail Revolutions Ltd (Delhi High Court)

FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER

1. Delay condoned.

2. In the facts and circumstances of the case, we find no error or illegality in the order(s) passed by the High Court.

3. The present petitions are, accordingly, dismissed. Pending application(s), if any, shall stand disposed of.