S H Donut Empire India Private Limited Vs ADDL/JCIT (ITAT Mumbai)
Mumbai ITAT: CAM, Electricity and Water Charges Form Part of ‘Rent’; Separate Invoices Do Not Alter TDS Liability Under Section 194-I
The Mumbai ITAT dismissed the assessee’s appeal and held that Common Area Maintenance (CAM), electricity, water and allied charges paid under a composite conducting agreement are part of “rent” under Section 194-I, attracting TDS at the prescribed rate. The Tribunal upheld the orders treating the assessee as an assessee-in-default under Sections 201(1) and 201(1A) for short deduction of tax.
The dispute arose from a TDS survey in the Runwal Group, where it was found that occupants of the mall, including the assessee, had deducted tax at 2% under Section 194C on CAM charges instead of 10% under Section 194-I. The assessee contended that the CAM, electricity and water charges were merely reimbursements of actual expenses, supported by separate invoices, and therefore did not constitute “rent”.
The CIT(A), whose findings were affirmed by the Tribunal, held that the CAM and utility charges were mandatory, recurring and inseparably linked to the occupation and use of the commercial premises. The conducting agreement did not provide any independent cost-to-cost reimbursement mechanism or separate contractual framework for these charges. Consequently, the payments formed part of the commercial consideration for the use of the premises and fell squarely within the inclusive definition of “rent” under the Explanation to Section 194-I.
The Tribunal further held that raising separate invoices or maintaining separate ledger accounts does not determine the character of the payment. Since the conducting fees as well as CAM and utility charges were paid to the same payee under the same composite arrangement and arose solely because the assessee was permitted to occupy the mall premises, the bifurcation of invoices was of no legal consequence in determining the TDS obligation.
Finding no new material to rebut the detailed findings of the CIT(A), the Tribunal upheld the demand for short deduction of TDS and consequential interest under Sections 201(1) and 201(1A) and dismissed the assessee’s appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the Assessee against the order of Ld. ADDL-JCIT (A)-1 vide DIN: ITBA/APL/S/250/2025-26/1084095546(1) dated 19-Feb-2026 for the Assessment Year 2012-13. The Assessee has raised the following grounds of appeal:
1. Reimbursement of Expenses outside the Definition of Rent u/s 1941 of the Income Tax Act Liability of actual expenses is upon Petitioner specifically mentioned in Agreement Para 7 and Para 11. Supported by Separate Bills. Company itself neither generate and supply electricity nor water nor maintain the lift. Expenses are of Indivisible Nature.
2. Separate Invoice being issued by the Conductor for Conducting Fees and Reimbursement of Expenses
Separate bills have been issued by the Conductor with respect to the Reimbursement of Expenses, hence no TDS is not deductible on such Expenses. ITO has erred by invoking the provision of section 1941 in the context of Reimbursement of Expenses.
3. No separate Agreement is made by the Conductor for the Common Area Maintenance (CAM) Charges, water charges and electricity charges.
ITO has failed to take cognizance of the Agreement being only one for the Rent and the Reimbursement of Expenses of Common Area Maintenance (CAM) Charges, water charges and electricity charges.
4. Order passed on the basis of Predecessors assumptions
ITO has failed to take cognizance of the submissions and has passed the Order on the basis of the Predecessors assumptions and also on basis of Assessment Order of AY 2011-12. It is not based on Merits.
2. None appeared on behalf of the assessee when the case was called out repeatedly.
