Johnson Watch Company Pvt. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that as common area maintenance (CAM) charges are for maintenance of common area, the same is covered by the provisions of section 194C of the Income Tax Act. Accordingly, TDS is deductible u/s 194C in case of CAM charges payment.
Facts- The assessee is a Private Limited Company engaged in the business of trading watches. An order u/s 201 (1)/201 (IA) of the Income Tax Act, 1961 was passed and a demand of Rs. 31,303/- of interest on short deduction of TDS was worked out to be payable by the Company.
Assessee company has paid common area maintenance charges (CAM Charges) to M/s. DLF Utilities Ltd. for the retail store taken on lease in DLF Emporio Mall, Vasant Kunj, New Delhi and to M/s. Ambience Facilities Management Pvt. Ltd. for the retail stores taken on lease in Ambience Mall, Vasant Kunj and Gurgaon and has deducted TDS @ 2% on such CAM charges u/s I94C of the Income Tax Act, 1961.
As per AO, TDS should have been deducted @ 10% u/s 194I of the Income Tax Act, 1961 on the CAM charges paid by the appellant company considering the common area maintenance charges as part of the rental activity covered under section 194I of the Income Tax Act, 1961 and treated the appellant company as assessee in default within the meaning of section 201(1) of the Income Tax Act, 1961 for short deduction of TDS on CAM Charges.
Interest u/s 201(1 A) of the Income Tax Act, 1961 was charged for a short deduction of TDS on the CAM Charges and a demand of Rs. 31,303/- was raised on account of the short deduction of TDS on the appellant company for A.Y. 2012-13.
Conclusion- Merely because a single agreement is executed between lessor and lessee creating liability on lessee for both rent and CAM charges does not discard the distinguishing nature of the two payments. The ‘rent’ is on account of the ‘use’ of the property given into exclusive possession of the lessee for the running of the business but the CAM charges are for maintenance of the common areas, used or not used by the lessee.
In ITA No. 1115/Del/2020 Yum Restaurants India (P) Ltd, Vs. ACIT (TDS), it was held that the rent provisions are governed by Section 194I and CAM charges by Section 194C of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal has been filed by the assessee against order dated 25.08.2020 in appeal no. ITBA/APL/S/250/2020-21/1027795311(1) New Delhi in assessment year 2012-13 passed by Commissioner of Income Tax (Appeal)-38, New Delhi (hereinafter referred to as the First Appellate Authority or in short ‘Ld. F.A.A.’) in regard to the appeal before it arising out of assessment order dated 29/03/2019 u/s 201(1)/ 201(1A) of the Income Tax Act, 1961 passed by ACIT, (hereinafter referred to as the Assessing Officer or ‘AO’).
2. The facts of the case are that the assessee is a Private Limited Company and is engaged in the business of trading of watches. Verification u/s 201(1)/(1 A) of the Income Tax Act, 1961 was completed for the F.Y. 2011-12 relevant to A.Y. 2012-13. An order u/s 201 (1 )/201 (I A) of the Income Tax Act, 1961 was passed on 29.03.2019 and demand of Rs. 31,303/- of interest on short deduction of TDS was worked out to be payable by the Company as per the said order. Assessee company has paid common area maintenance charges (CAM Charges) to M/s. DLF Utilities Ltd. for the retail store taken on lease in DLF Emporio Mall, Vasant Kunj, New Delhi and to M/s. Ambience Facilities Management Pvt. Ltd. for the retail stores taken on lease in Ambience Mall, Vasant Kunj and Gurgaon and has deducted TDS @ 2% on such CAM charges u/s I94C of the Income Tax Act, 1961. However, as per the Ld. Assessing Officer, TDS should have been deducted @ 10% u/s 1941 of the Income Tax Act, 1961 on the CAM charges paid by the appellant company considering the common area maintenance charges as part of the rental activity covered under section 1941 of the Income Tax Act, 1961 and treated the appellant company as assessee in default within the meaning of section 201(1) of the Income Tax Act, 1961 for short deduction of TDS on CAM Charges. The appellant company has submitted Form 26A along with certificates from Chartered accountants of M/s. DLF Utilities Ltd. and M/s. Ambience Facilities Management (P) Ltd. certifying the accountability of such CAM charges in the computation of total taxable income for the A.Y. 2012-13 and payment of tax thereon. However, interest u/s 201(1 A) of the Income Tax Act, 1961 was charged for short deduction of TDS on the CAM Charges and demand of Rs. 31,303/- was raised on account of short deduction of TDS on the appellant company for A.Y. 201213. The Ld.CIT(A) had sustained the same with following findings in para 4.2;
“4.2 Ground of appeal No.2 (a.b.c.d.e.f and g) – the Appellant has challenged the action of AO in treating CAM charges as part of rent liable for TDS u/s 1941. Undisputedly there is single lease agreement for payment of rent as well as CAM charges. The 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 out side 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 1941 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 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 08.08.1995 (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 Vs ACIT (2016) 389 ITR 38 (P & H), 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 1941 and accordingly other decisions and CBDT circulars relied upon by the AR are distinguishable on facts.”
3. The assessee has come in appeal before this Tribunal raising following grounds :-
“1. That the order of the learned CIT(A) is bad in law and on facts in confirming the order of AO in respect of following demands u/s 201(1A) of the Income Tax Act, 1961 :-
