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.
