CIT Vs Diamond Tree (Delhi High Court)
Common Area Maintenance (CAM) payment shall be liable to deduct TDS under Section 194C not under Section 194I– Delhi High Court
The CAM charges are essentially maintenance charges paid by a unit for proper maintenance of the common area. The said charges are contributed towards expenditure ON cleanliness, utilities and maintenance. These charges are shared expenses for common works and utilities. The said charges cannot, by any stretch, be construed as payment of rent for occupying the premises in question. The position of law being clear in as much as CAM charges can be covered under provisions of 194C of the Act of 1961, the said charges cannot be construed as payment of rent for occupying the premises in question.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1.The challenge in these appeals filed by the Revenue under Section 260A of the Income Tax Act, 1961 (the Act) is to the common order dated 27.02.2025 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi (ITAT) in ITA No.5062/Del/2024 and ITA No.5063/Del/20024.
2. Both the appeals relate to Assessment Year (AY) 2011-12 and AY 2015-16 respectively.
3. The ITAT decided the aforesaid appeals in favour of the respondent/Assessee by stating in paragraph no.4 onwards as under:
“4. It is in this factual backdrop that the Revenue vehemently argues before us that there was a compo site agreement for rent as well as common area maintenance charges which attracts the impugned higher rate of TDS deduction u/s 194I of the Act in light of Sunil Kumar Gupta (2016)(9) TMI 1198 (P&H). We note that this tribunal in Connaught Plaza Restaurants P. Ltd . Vs. DCIT in ITA Nos. 993 & 1984/2020 and Kapoor Watch Company Pvt. Ltd. Vs. ACIT in ITA No . 889/Del/2020 has already settled the very issue in assessee’s favour and against the department, regarding TDS deduction of such common area maintenance charges as under:
13. In the backdrop of our aforesaid deliberations, we concur with the claim of the id. AR that as the payments towards CAM charges are in the nature of contractual payments that are made for availing certain services/facilities, and not for use of any premises/equipment, therefore, the same would be subjected to deduction of tax at source u/s 194C of the Act. Our aforesaid view is supported by the order of the ITAT, Delhi in the case of Kapoor Watch Company Pvt. Ltd. vs. ACIT in ITA No.889/Del/2020. In the aforesaid case, the genesis of the controversy as in the case of the assessee before us were certain proceedings conducted by the Department in the case of Ambience Group (supra) to verify the compliance of the provisions of Chapter XVII-B of the Act. On the basis of the facts that had emerged in the course of the proceedings, it was gathered by the Department that the owners of the malls in addition to the rent had been collecting CAM charges from the lessees on which TDS was deducted 2% Le u/s 194C of the Act. Observing, that payment of CAM charges were essentially a part of the rent, the AO treated the assessee as an assessee-in-default for short deduction of tax at source u/s 201(1)/201(1A) of the Act. On appeal, it was observed by the Tribunal that the CAM charges paid by the assessee did not form part of the actual rent that was paid to the owner by the assessee company. As the facts involved in the case of the assessee before us remains the same as were therein involved in the aforesaid case, therefore, in the backdrop of our aforesaid deliberations, and respectfully following the aforesaid order of the Tribunal, we herein, that as claimed by the assessee, and rightly so, the CAM charges paid by it were liable for deduction of tax at source @2%, i.e., u/s. 194C of the Act. We, thus, in terms of our aforesaid observations set-aside the order of the Id. CIT(A) who had approved the order passed by the AO treating the assessee company as an assessee-in-default u/s 201(1) of the Act. The grounds of appeal no. 4 to 4.5 are allowed in terms of our aforesaid observations.
5. We adopt the above extracted detailed reasoning mutatis mutandis to reverse the lower authorities action treating the assessee as the assessee in default u/s 201(1) of the Act in very terms. Ordered accordingly.
6. These assessee’s twin appeals ITA Nos. 5062 & 5063/Del/2024 are allowed in above terms. A copy of this common order be placed in the respective case files.”
4. The issue that arose before the ITAT was whether the Common Area Maintenance (CAM) shall be liable to Tax Deducted at Source (TDS) under Section 194I or under Section 194C of the Act.
