2022 (7) TMI 176 - AT - Income Tax

TDS u/s 194C OR 194I - Short deduction of TDS - Default u/s 201(1) and 201(1A) - common maintenance charges (CAM) Paid - HELD THAT - As clearly gathered that CAM charges have been paid to different parties by executing agreements which do not form part of rent payment. It has not been disputed by the authorities below, nor by the learned Sr. DR before us, that the assessee has deducted TDS u/s 194C of the Act on the payment of CAM charges to the respective third parties who provided services to maintain common area. As payment towards CAM charges are in the nature of contractual payment which are made for availing services/ facilities and not for the use of any premises/ equipment, therefore, same would be subject to deduction of tax at source u/s 194C of the Act and not u/s 194I of the Act. This view has also been taken by the Tribunal in the case of Kapoor Watch Company Pvt. Ltd. ( 2021 (1) TMI 209 - ITAT DELHI . As the facts involved in the present case of assessee before us are quite identical and similar to the facts of the case involved in the cases of Connaught Plaza Restaurants P. Ltd. ( 2022 (1) TMI 409 - ITAT DELHI and Kapoor Watch Company Pvt. Ltd. (supra), therefore conclude that as claimed by the assessee the TDS on CAM charges paid by it is liable for deduction of tax at source @ 2% u/s 194C - we set aside the order of the AO as well as that of learned CIT(A) treating the assessee company as an assessee in default u/s 201(1) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Whether common maintenance charges (CAM) paid by the assessee are in the nature of rent liable for TDS under section 194-I of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order of CIT(Appeals) for the assessment year 2012-13. The main contention was that the Assessing Officer (AO) erred in treating the CAM charges as rent liable for TDS under section 194-I of the Act, leading to a default under section 201(1) of the Act. The appellant argued that the CAM charges were not rent but payments made to a third party for maintenance services. The appellant relied on previous ITAT judgments to support their claim. The appellant also highlighted that the AO did not consider the first proviso to section 201(1) which states that the assessee cannot be deemed in default if the tax has already been paid by the recipients of CAM charges. The appellant submitted additional evidence to support their case.

The Senior DR argued that CAM expenses were covered under section 194-I of the Act and the assessee was rightly treated as in default under section 201(1) for not deducting tax as per the Act. The DR stated that the AO correctly rejected the explanation that TDS on CAM charges should be deducted under section 194C of the Act.

The Tribunal carefully examined the agreements provided by the assessee and noted that the CAM charges were paid to different parties for maintenance services and were not part of rent payment. It was undisputed that TDS was deducted under section 194C on these payments. Referring to previous ITAT judgments, the Tribunal concluded that CAM charges were not rent but contractual payments for services, falling under section 194C for TDS deduction at 2%, not section 194-I at 10%. The Tribunal set aside the orders of the AO and CIT(A) and allowed the appeal of the assessee.

In conclusion, the Tribunal held that the CAM charges were not rent but payments for services, therefore subject to TDS under section 194C at 2%. The Tribunal relied on previous judgments and factual similarities to decide in favor of the assessee. The orders of the AO and CIT(A) were set aside, and the appeal of the assessee was allowed.