2023 (6) TMI 208 - AT - Income Tax

Short deduction of TDS - TDS at 10% u/s 194I or at 2% u/s 194C - Common Area Maintenance charges (CAM) paid - HELD THAT - CAM charges paid by the assessee or not for land used or area allotted simplicitor. These are the charges for various common services provided to various lessees. As relying on CONNAUGHT PLAZA RESTAURANTS P. LTD. case 2022 (1) TMI 409 - ITAT DELHI and M/S AERO CLUB 2023 (3) TMI 101 - ITAT DELHI CAM charges paid by the assessee are liable for TDS only at 2% u/s 194C of the Act and not at 10% u/s 194I of the Act. Grounds raised by the assessee on this issue are allowed.

Summary

Issues Involved:

1. Whether the Common Area Maintenance (CAM) charges paid by the assessee were liable for TDS at 10% u/s 194I or at 2% u/s 194C of the Income Tax Act.

Summary:

The assessee filed appeals against the orders of Ld.CIT(Appeals)-38, Delhi, which upheld the action of the AO in treating the assessee in default u/s 201(1) for failing to deduct tax at source on CAM charges at 10% u/s 194I, instead of 2% u/s 194C.

The facts reveal that a survey u/s 133A(2A) was conducted in the case of the Ambience Group, disclosing that CAM charges were deducted at 2% u/s 194C by the payers, including the assessee. The AO issued a show cause notice, asserting that tax should have been deducted at 10% u/s 194I. Despite the assessee's detailed reply, the AO treated the assessee as in default for short deduction of TDS u/s 194I. The Ld.CIT(Appeals) sustained this action.

Before the Tribunal, the assessee's counsel argued that various benches, including the Delhi Tribunal in Connaught Plaza Restaurant Vs. DCIT, held that CAM charges are liable for TDS at 2% u/s 194C. The Tribunal examined the nature of CAM charges, which include maintenance fees for common areas, security, repairs, and other services, concluding that these are not for land use but for common services.

The Tribunal observed that the identical issue was addressed in Connaught Plaza Restaurant Vs. DCIT, where it was held that CAM charges are independent of rental payments and are for availing common area maintenance services. Thus, these charges fall within the meaning of "work" u/s 194C, not "rent" u/s 194I. The Tribunal concurred with this view, stating that CAM charges are contractual payments for maintenance services, not for the use of premises.

Further, the Tribunal noted similar rulings in Aero Club Vs. DCIT and other cases, where it was consistently held that CAM charges are subject to TDS at 2% u/s 194C. Additionally, in the assessee's own case for AY 2013-14, the Ld.CIT(A) (NFAC), Delhi, following these decisions, directed that CAM charges are liable for TDS at 2% u/s 194C.

In conclusion, the Tribunal held that CAM charges paid by the assessee are liable for TDS at 2% u/s 194C, not 10% u/s 194I. The appeals of the assessee were allowed.

Order pronounced in the open court on 31.05.2023.