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2022 (1) TMI 409 - AT - Income TaxTDS u/s 194C or 194I - short deduction of TDS - CAM charges Maintenance Charges along with Rent - period of limitation - assessee-in-default u/s. 201(1) for having short deducted the amount of tax at source - HELD THAT - As the time limitation for passing an order under sub-section (1) to Section 201 i.e. deeming the present assessee before us, as an assessee-in-default under sub-section (1) to Section 201 could have validly been done within a period of 2 years from the end of the financial year in which the statement u/s. 200 was filed by the assessee, i.e., latest by 31.03.2014, as per the law as was then available on the statute, therefore, the order passed by the AO u/ss. 201(1) /201(1A) dated 29.03.2018 is clearly barred by limitation. We, thus, in terms of our aforesaid observations quash the order passed by the AO u/s. 201(1)/201(1A), dated 29.03.2018 as barred by limitation. The Grounds of appeal Nos. 1 to 3 are allowed in terms of our aforesaid observations. TDS on CAM charges paid by the assessee - liable for deduction of tax at source @10% u/s. 194-I OR @2% u/s. 194C - HELD THAT - As the CAM charges are completely independent and separate from rental payments, and are fundamentally for availing common area maintenance services which may be provided by the landlord or any other agency, therefore, the same cannot be brought within the scope and gamut of the definition of terminology rent . On the other hand, we are of the considered view, that as the CAM charges are in the nature of a contractual payment made to a person for carrying out the work in lieu of a contract, therefore, the same would clearly fall within the meaning of work as defined in Section 194C of the Act. In our considered view, as the CAM charges are not paid for use of land/building but are paid for carrying out the work for maintenance of the common area/facilities that are available along with the lease premises, therefore, the same could not be characterized and/or brought within the meaning of rent as defined in Section 194-I. 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% i.e. 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/ss. 201(1)/201(1A) - 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 conclude, 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 CIT(A) who had approved the order passed by the AO treating the assessee company as an assessee-in-default u/s. 201(1).
Issues Involved:
1. Jurisdiction and legality of the order passed under Section 201(1)/201(1A) of the Income Tax Act, 1961. 2. Correct appreciation of facts by the Commissioner of Income Tax (Appeals) [CIT(A)]. 3. Validity of the assessment order concerning the period of limitation under Section 201(3) of the Act. 4. Applicability of Section 194I versus Section 194C for Common Area Maintenance Charges (CAM charges). 5. Interest charged under Section 201(1A) of the Act. Detailed Analysis: 1. Jurisdiction and Legality of the Order: The assessee company challenged the order dated 29.03.2018 passed by the assessing officer under Section 201(1)/201(1A) of the Income Tax Act, 1961, arguing that it was without jurisdiction, illegal, and liable to be quashed. The Tribunal found that the order passed by the AO was barred by limitation. As per the law available on the statute at the time, the time limit for passing an order under Section 201(1) was two years from the end of the financial year in which the statement was filed. Therefore, the order passed on 29.03.2018 was beyond the permissible period, making it invalid. 2. Correct Appreciation of Facts by CIT(A): The Tribunal noted that the CIT(A) failed to correctly appreciate the facts of the case. The CIT(A) had observed that there was a single lease agreement for payment of rent as well as CAM charges and concluded that the CAM charges were part of the rent. However, the Tribunal disagreed, noting that CAM charges are fundamentally for availing common area maintenance services and are separate from rental payments. 3. Validity of the Assessment Order Concerning the Period of Limitation: The Tribunal examined the period of limitation for passing an order under Section 201(1) of the Act. It was noted that the Finance Act, 2014, extended the time limit for passing an order to seven years from the end of the financial year in which payment was made or credit was given. However, the Tribunal held that this amendment was not retrospective and could not revive the limitation period that had already expired. Therefore, the order passed by the AO was barred by limitation. 4. Applicability of Section 194I versus Section 194C for CAM Charges: The Tribunal analyzed whether CAM charges paid by the assessee were liable for deduction of tax at source under Section 194-I (rent) or Section 194C (contractual payments). It concluded that CAM charges are for availing common area maintenance services and not for the use of any premises or equipment. Therefore, these charges should be subjected to deduction of tax at source under Section 194C of the Act, not Section 194-I. 5. Interest Charged Under Section 201(1A) of the Act: Given that the Tribunal quashed the order passed by the AO under Sections 201(1)/201(1A) as barred by limitation and held that CAM charges were liable for deduction of tax at source under Section 194C, the claim regarding the deletion of interest charged under Section 201(1A) was rendered infructuous and dismissed. Conclusion: The appeal for AY 2011-12 was allowed, and the order passed by the AO under Sections 201(1)/201(1A) was quashed as barred by limitation. The Tribunal also held that CAM charges paid by the assessee were liable for deduction of tax at source under Section 194C and not Section 194-I. The appeal for AY 2012-13 was partly allowed based on similar grounds. The Tribunal's decision was pronounced in the open court on 31st December 2021.
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