CAM Charges Attract TDS Under Section 194C and not Under 194J: ITAT Delhi

DCIT Vs Air France (ITAT Delhi)

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income-tax (Appeals) [CIT(A)], holding that Common Area Maintenance (CAM) charges are subject to tax deduction at source (TDS) under Section 194C of the Income-tax Act, 1961, and not under Section 194-I applicable to rent. The case arose from proceedings under Sections 201 and 201(1A) for Assessment Year 2017-18.

The assessee, a branch office of a foreign airline operating in India with RBI approval, was engaged in the business of operating aircraft in international traffic. During verification proceedings relating to TDS compliance under Chapter XVII-B of the Income-tax Act, the Assessing Officer (AO) examined payments made by the assessee towards rent and CAM charges.

The AO observed that the assessee had deducted TDS at the rate of 2% under Section 194C on CAM charges. According to the AO, these charges were directly related to rental activity and formed part of the same contractual arrangement governing the tenancy. Therefore, the AO concluded that CAM charges fell within the ambit of “rent” under Section 194-I and should have attracted TDS at 10%. Treating the assessee as an assessee in default under Sections 201 and 201(1A), the AO raised a demand of ₹4,87,705.

On appeal, the CIT(A) deleted the demand. The CIT(A) relied on several judicial precedents, including decisions of the Delhi ITAT, to hold that CAM charges constitute a separately identifiable transaction distinct from rent. The CIT(A) observed that even where rent and CAM charges arise under a single agreement and are paid to the same entity, CAM charges retain their independent character and attract TDS under Section 194C.

The CIT(A) particularly referred to the decision in Aero Club vs. DCIT, where the Delhi ITAT had held that CAM charges are separately identifiable payments and cannot be clubbed with rent merely because they arise from the same lease arrangement. The Tribunal in that case had distinguished CAM charges from rent on the basis that CAM services involve separate staff, day-to-day operational activities, and maintenance functions that are not integral to the use of the leased premises. Consequently, rent attracts TDS under Section 194-I, while CAM charges attract TDS under Section 194C.

Before the ITAT, the Revenue challenged the CIT(A)’s findings and relied upon the Delhi High Court’s decision in Apeejay Surrendra Park Hotels Ltd. to argue that the expression “rent” under Section 194-I should receive a broad interpretation. The assessee, however, contended that the issue had already been decided in its favour in its own case and further relied on judicial precedents supporting the separate treatment of CAM charges.

After considering the rival submissions, the ITAT noted that the issue was squarely covered by earlier decisions, including the assessee’s own case. The Tribunal endorsed the CIT(A)’s reasoning that CAM charges represent payments for services such as maintenance of lifts, water and electricity consumed in common areas, security services, landscaping, parking area maintenance, and similar operational activities. These services fall within the scope of “work” contemplated under Section 194C and cannot be equated with rent.

The ITAT further observed that the judicial position remains unchanged irrespective of whether rent and CAM charges are governed by separate agreements or a single agreement, and irrespective of whether the payments are made to separate entities or the same entity. What is relevant is the distinct nature of the CAM services.

Addressing the Revenue’s reliance on the Delhi High Court decision in Apeejay Surrendra Park Hotels Ltd., the Tribunal held that the facts of that case, which related to TDS on hotel room charges paid by tour operators, were distinguishable from the present matter. Accordingly, the Tribunal found no infirmity in the CIT(A)’s order and dismissed the Revenue’s appeal.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income-tax (Appeals)-42, New Delhi [hereinafter referred to as `1d. CIT(A)] dated 01.04.2025 for the Assessment Year 2017-18.

2. Brief facts of the case are, assessee is a Branch Office of a foreign company i.e. Air France incorporated under the Laws of France and is operating in India by virtue of RBI approval. It is engaged in the business of ‘Operations of aircraft in international traffic’. During verification under section 201/201(1A) of the Income-tax Act, 1961 (for short ‘the Act’) to verify compliance by the assessee with the provisions of Chapter XVII-B of the Act, several notices were issued to the assessee on various dates and in response, ld. AR of the assessee attended from time to time and submitted the relevant information is called for.

3. On perusal of the submission of the assessee, the AO observed that assessee is a tenant and has paid CAM charges after deducting TDS @ 2% u/s 194C of the Act. The AO observed that these collections / payments are directly relatable to and being part of the rental activity and also mentioned in the same contractual agreement, therefore, he was of the view that provisions of section 1941 of the Act is attracted and TDS of 10% is deductible as against 2% deducted by the assessee. Therefore, the AO considered the assessee in default. The AO discussed the provisions of section 1941 in his order and subsequent development and amendment w.e.f. 01.10.2009 was discussed and he was of the view that the provisions of section 1941 were pertained to the meaning of rent to include CAM charges also. By relying on several decisions, he proceeded to treat the assessee in default and proceeded to determine the difference in deduction of tax as per section 201/201(1A) of the Act and accordingly, he levied the total demand of Rs.4,87,705/- u/s 201/201(1A) of the Act.

4. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A), Delhi-42. After considering the detailed submissions of the assessee and grounds raised before him, ld. CIT (A) deleted the addition made by the AO with the following observations :-

“6.6 I have duly gone through the aforementioned ruling of the Hon’ble Delhi ITAT and observe that in that case, the payment for rent is being made to the mall owner and the maintenance charges were paid to a separate entity maintaining the premises. However, in the case of the appellant, both the payments, i.e., rent and maintenance charges are being paid to the one party, i.e., M/s DLF Cyber City Developers Ltd.

6.7 There are plethora of judicial decisions on this issue which also include judgments of the Hon’ble Jurisdictional Delhi ITAT, where the payments are being made to one party only and through the same single agreement for rent and maintenance charges. The Hon’ble Delhi ITAT has come across this situation in the case of ilero Club vs. DCIT [149 taxmann.com 339 (2023), wherein the tenant and landlord had entered into single agreement for Rent and CAM charges. In its decision in this case, it was held by Hon’ble Delhi ITAT that the payment of CAM Charges is a separately identifiable transaction on which TDS is deductible u/s 194C and this payment cannot be clubbed with payment of Rent to which Section 194-1 applies. It is specifically observed by Hon’ble Delhi ITAT at Para 8-11 as under:

“8. After having considered the submissions of the assessee, the Id. CIT(A) held that undisputedly there is single lease agreement for payment of rent as well as CAM charges. The Id. AR has submitted that payment of CAM charges is nothing but reimbursement of common area maintenance expenses incurred by the lessor on general maintenance, electric, water and security services etc. Further, it has been claimed that, the common area is outside the area which is leased out to the assessee. These arguments are not acceptable because the common area and other services provided by the lessor are also enjoyed by the appellant along with the specified area. As per the same agreement, the appellant is required to pay lease rent as well as CAM charges. It is also noticed that there is no distinction between CAM charges and lease rent payments except, for raising separate invoices. The Explanation below section 194-1 which defines “Rent” takes into its ambit any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any (b) building or (c) land appurtenant, to a building (including factory building) or (h) fittings, whether or not any or all of the above are owned by the payee and hence it is clear that any payment even for use of any building and land appurtenant, there to including furniture/fittings is part of rent. CBDT vide circular No. 715 dated 8-8-1995 (Question No. 24) has also clarified that there is composite arrangement for use of premises and provision of manpower, such agreement in essence is for taking premises on rent and hence provisions of section 1941 are-applicable. This view also gets support from the decision of Hon’ble High Court in the case of Sunil Kumar Gupta v. Asstt. CIT [2016] 73 taxmann.com 374/243 Taxman 65/389 ITR 38/120171 298 CTR 106 (Punj. & Har.), in which it is held that where the agreement provides that the owner of the premises shall pay for common facilities, then it is reasonable to presume that the same is factored into the rent payable by the lessee. However, if maintenance charges etc. are stipulated to be payable by the lessor, it must form part of rent for the purposes of computing income from house property. In the case before hand, the CAM charges are paid by the lessor and the appellant has no control on actual expenditure to be incurred by the lessor. In view of above mentioned factual and legal position, thus it is clear that the CAM charges paid by the appellant are part of rent liable for TDS u/s 194-1.

9. Heard the arguments of both the parties and perused the material available on record.

10. At the outset, we find that the issue of deductibility of tax on rent and CAM was examined by the Tribunal in the case of Connaught Plaza Restaurants (P.) Ltd. v. Dy.CIT [IT Appeal Nos. 993 & 1984 (Delhi) of 2020, dated 31-12-2021], Lifestyle International (P.) Ltd. v. Asstt. CIT [2022] 140 com 445 (Bang. – Trib)/[TS-352- ITAT-2022] Bang and Lifestyle International (P.) Ltd. v. Asstt. CIT [2022] 141 taxmann.com 559 (Bang. -Trib)/[ITA No. 400-405 (Bang.) of 2021, dated 26-4-2022] and also by the order of this bench in the case of Yum Restaurants India (P) Ltd. v. ACIT (TDS) [2023] 14 7 taxmann.com 257/100 ITR (T) 239 [IT Appeal No. 1115 (Delhi) of 2020, dated 3-10-2022] (Delhi – Trib)/[IT Appeal No. 1115 (Delhi) of 2020, dated 3-10-2022]. The operative part of the said order is as under:

“6. The undisputable fact in this case is that while the lease rentals are paid based on a fixed percentage on the net revenue, the CAM charges are based on the per sq. ft. area. The observation of the Id. CIT(A) is that the rent by any name, lease, sub-lease, tenancy or the reliance on the judgment wherein the services are intrapolated into the rent stand on a different pedestal. In the instant case, the determination of the rent or CAM are separate and the CAM arrangements are not essential and an integral part for use of the premises. While there are no expenses incurred against the rent except for general building maintenance and municipal charges, the CAM involves employment of separate staff and separate operations involved on day to day basis. Hence, we hold that the provisions for rent are governed by section 194-1 and CAM charges by section 194C of the Act.”

11. Thus, we hold that rent is subjected to TDS @ 10% u/s 194-1 and CAM charges u/s 194-C @ 2% > . Hence, the appeal of the assessee is hereby allowed.

6.8 In view of the aforementioned ruling of the Hon’ble ITAT in the case of Aero Club and other decisions, it is principally decided that payment of CAM charges is a separate transaction to which section 194C applies irrespective whether there are separate agreements or the payments are flowing out of a single agreement and irrespective whether the payment is to a single entity or separate entities. Hence, I am of the considered view that the payment of CAM charges is covered by Section 194C on which TDS @ 2% is deductible. Therefore, Grounds 1, 2,3, 4, 5 & 6 are decided in favour of the appellant.”

5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :-

“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A), Delhi was justified in holding that Common Area Maintenance charge paid by the Appellant are in the nature of contractual payment and are liable to be deducted TDS u/s 194Cof the I.T. Act.

2. Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A), Delhi was justified in not considering the judgement of Hon’ble Delhi High Court in the case of Apeejay Surrendera Park Hotels Ltd. vs. UOI in WP (C) 1924/1999, wherein the Hon’ble Court has held that the Word rent in section 1941 of the I.T. Act has to be interpreted widely and not confined to payments received towards a lease, sub-lease or tenancy or transaction of such like nature.”

6. At the time of hearing, ld. DR of the Revenue brought to our notice relevant facts on record and objected to the findings of the ld. CIT (A) and relied heavily on the detailed findings of the AO. He further relied on the decision in the case of Apeejay Surrendera Park Hotels Ltd. vs. UOI (2016) 383 ITR 697 (Delhi).

7. On the other hand, ld. AR of the assessee submitted that the issue under consideration is squarely covered in favour of the assessee, he brought to our notice pages 53 to 61 of the case laws paper book and submitted that in assessee’s own case, exactly similar issue was considered and decided in favour of the assessee. Further relied on the decision of Hon’ble Delhi High Court in the case of CIT (TDS) vs. Diamond Tree in ITA No.275 & 276/2025 dated 06.08.2025.

8. Considered the rival submissions and material placed on record. We observed that the issue under consideration is squarely covered in favour of the assessee in its own case (supra) and coordinate Bench [in which Accountant Member is also a party to the order] decided the issue in favour of the assessee. The relevant findings are as under :-

“7. Considered the rival submissions and material placed on record. We find that the ld. CIT (A) has given detailed fmding while allowing the appeal of the assessee and for the sake of clarity, the relevant findings are reproduced below :-

“6.4 Considering the facts of the case, I am of the considerate view that CAM charges is for utilization of services received in the form of maintenance of lifts installed in the common area; water, electricity consumed in the common area, security services for the entire complex, maintenance of landscaping attached thereto; parking area; etc., hence, these services cannot be clubbed with Rental Charges of the premises but are in the nature of Maintenance Charges that are necessary to be incurred in the commercial complex and necessarily fall within the meaning of “work” as defined in section 194C- Payment to Contractors and hence can only be taxable under the said section.

6.5 In the course of hearing before this office, the appellant has also drawn inference from the order of the Hon’ble Delhi ITAT in the case of HV Global Pvt Ltd Vs ITO (1TA No. 1676/De12020) dated 23-11-2022 wherein it is held at Para 5 as under:

“5 In the present case also the AO in the assessment order observed that the payments received by Ambience group are split into two companies of same group on single contract one for rent and the other for maintenance charges. However, the AO noted that this arrangement has been made to avoid the higher deduction of TDS ate applicable to which we do not agree as when the receiver of rent and receiver of maintenance charges are different and distinct and the character of the payment is also different and distinct. then, the payments towards maintenance charges has to be made after TDS @ 2% u/s 194C of the Act and not @ 10% u/s 194 of the Act From the material available on record t is clearly discernible that the assessee company has paid rent to the owner after deduction u/s 194 of the Act @ 10% and the payment for operation/maintenance was made directly to the service provider company after deduction of tax u/s 194C of the Act Therefore, we are inclined to hold that in the present case the common area maintenance charges was not forming part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities/companies, therefore, the authorities below were not right in creating the impugned liability payable by the assessee firm under the provisions of sub-sections (1) and (1A) of section 201 of the Act Therefore, respectfully following the order of the coordinate Bench of the Tribunal in the case of Nijhawan Travel Service (P) Ltd. (supra), the grievance/grounds of the assessee are allowed and the AO is directed to delete the impugned liability u/s 201(1) and 201(1A) of the Act.

6.6 I have duly gone through the aforementioned ruling of the Hon’ble Delhi ITAT and observed that in that case, the payment for rent is being made to the mall owner and the maintenance charges were paid to a separate entity maintaining the premises. However, in the case of the appellant, both the payments, i.e., rent and maintenance charges are being paid to the one party, i.e., M/s DLF Cyber City Developers Ltd.

6.7 There are plethora of judicial decisions on this issue which also include judgments of the Hon’ble Jurisdictional Delhi ITAT, where the payments are being made to one party only and through the same single agreement for rent and maintenance charges. The Hon’ble Delhi ITAT has come across this situation in the case of Aero Club vs. DCIT [149 taxmann.com 339 (2023), wherein the tenant and landlord had entered into single agreement for Rent and CAM charges. In its decision in this case, it was held by Hon’ble Delhi ITAT that the payment of CAM Charges is a separately identifiable transaction on which TDS is deductible u/s 194C and this payment cannot be clubbed with payment of Rent to which Section 194-1 applies. It is specifically observed by Hon’ble Delhi ITAT at Para 8-11 as under:

“8 After having considered the submissions of the assessee, the ld. CIT(A) held that undisputedly there is single lease agreement for payment of rent as well as CAM charges The ld AR has submitted that payment of CAM charges is nothing but reimbursement of common area maintenance expenses incurred by the lessor on general maintenance electric, water and security services etc. Further, it has been claimed that, the common area is outside the area which is leased out to the assessee. These arguments are not acceptable because the common area and other services provided by the lessor are also enjoyed by the appellant along with the specified area. AS per the same agreement the appellant is required to pay lease rent as well as CAM charges. It is also noticed that there is no distinction between CAM charges and lease rent payments except for raising separate invoices. The Explanation below section 194- which defines “Rent” takes into its ambit any payment, by whatever name called, under any lease, sub- lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any (b) building or (c) land appurtenant, to a building (including factory building) or (h) fittings, whether or not any or all of the above are owned by the payee and hence it ls clear that any payment even for use of any building and land appurtenant, there to including furniture/fittings is part of rent. CBDT vide circular No. 715 dated 8-8-1995 (Question No. 24) has also clarified that there is composite arrangement for use of premises and provision of manpower, such agreement in essence is for taking premises on rent and hence provisions of section 1941 are-applicable. This view also gets support from the decision of Hon’ble High Court in the case of Sunil Kumar Gupta v. Asstt. CIT 2016] 73 taxmann. com 374/243 Taxman 65/389 ITR 38/2017] 298 CTR 106 (Punj. & Har), in which it is held that where the agreement provides that the owner of the premises shall pay for common facilities, then it is reasonable to presume that the same is factored into the rent payable by the lessee However, it maintenance charges etc. are stipulated to be payable by the lessor, it must form part of rent for the purposes of computing income from house property In the case before hand, the CAM charges are paid by the lessor and the appellant has no control on actual expenditure to be incurred by the lessor. In view of above mentioned factual and legal position, thus it is clear that the CAM charges paid by the appellant are part of rent liable for TDS u/s 194-I.

9. Heard the arguments of both the parties and perused the material available on record.

10. At the outset, we find that the issue of deductibility of tax on rent and CAM was examined by the Tribunal in the case of Connaught Plaza Restaurants (P) Lid. v. Dy CIT (IT Appeal Nos. 993 & 1984 (Delhi) of 2020, dated 31-12-2021). Lifestyle international (P) Ltd v. Asst. CIT (2022) 140 com 445 (Bang. Trib)/[TS-352- ITAT-2022] Bang and Lifestyle International (P) Ltd v. Asst. CIT (2022) 141 taxmann. com 559 (Bang. -Trib)ITA No 400-405 (Bang,) of 2021, dated 26-4-2022] and also by the order of this bench in the case of Yum Restaurants India (P) Ltd. v. ACIT (TDS) (2023] 147 taxmann. com 257/100 ITR (T) 239 [IT Appeal No. 1115 (Delhi) of 2020. dated 3-10­2022) (Delhi – Trib)/[1T Appeal No. 1115 (Delhi) of 2020. dated 3-10-2022) The operative part of the said order is as under :-

“6. The undisputable fact in this case is that while the lease rentals are paid based on a fixed percentage on the net revenue, the CAM charges are based on the per sq ft area The observation of the ld. CITA) s that the rent by any name, lease, sub-lease, tenancy or the reliance on the judgment wherein the services are interpolated into the rent stand on a different pedestal. In the instant case, the determination of the rent or CAM are separate and the CAM arrangements are not essential and an integral part for use of the premises. While there are no expenses incurred against the rent except for general building maintenance and municipal charges, the CAM involves employment of separate staff and separate operations involved on day to day basis. Hence, we hold that the provisions for rent are governed by section 194-1 and CAM charges by section 194C of the Act”

11. Thus, we hold that rent is subjected to TDS @ 10% u/s 194-I and CAM charges u/s 194-C @ 29%. Hence, the appeal of the assessee is hereby allowed.”

6.8 In view of the aforementioned ruling of the Hon’ble TAT in the case of Aero Club and other decisions, it is principally decided that payment of CAM charges is a separate transaction to which section 194C applies irrespective whether there are separate agreements or the payments are flowing out of a single agreement and irrespective whether the payment is to a single entity or separate entities. Hence, 1 am of the considered view that the payment of CAM charges is covered by Section 194C on which TDS @ 2% is deductible. Therefore, Grounds 1, 2, 4, 5 & 6 are decided in favour of the appellant.”

8. Considered the rival submissions and material placed on record. We have gone through the elaborate findings of the ld. CIT (A) as above and we do not fmd any infirmity in the findings of the ld. CIT(A). Accordingly, we are not inclined to interfere with the order of ld. CIT (A) and affirmed the same, hence the grounds taken by the Revenue are dismissed.”

9. With regard to case laws relied upon by the ld. DR of the Revenue in the case of Apeejay Surrendera Park Hotels Ltd. (supra), we observed that Hon’ble High Court has considered the issue relating to the deduction of tax at source in the case of rent chargeable relating to hotel rooms by tour operators. The facts in the above case are distinguishable to the facts in the present case. Accordingly, grounds raised by the Revenue are dismissed.

10. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the open court on this 29^th day of May, 2026.