The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) recently held that the 2 % of Tax Deducted at Source ( TDS ) is applicable to Common Area Maintenance charges under section 194C and the provisions of section 194I of the Income Tax Act 1961, is not applicable to this payment.
The commissioner of Income Tax (CIT (A)) has erred by treating the common area maintenance charges (CAM) paid by the lessee to the maintenance company as part of the rent and making lessee is liable for deduction of tax at source under section 194 I at10% and not under section 194C at 2% in respect of such payment.
The commissioner of income tax (CIT (A)) has erred by observing that the lessor is paying the common area maintenance charges to the maintenance company and same are recovered by the lessor company from the lessee and such Common Area Maintenance Charges (CAM).
The demand of Rs. 21,154/- under section 201(1) of the Income Tax Act, 1961 in respect of short deduction of tax by ignoring the certificate from chartered accountant of DLF utilities Ltd. annexed with form 26 under section 201(1) read with rule 31ACB and Rs. 18,511/- in respect of interest on short deduction by applying section 194 I instead of section 194C.
The counsel for the revenue submitted that the assessee has not complied with the tax deducted at source (TDS) provisions of section 194I of the Income Tax Act, 1961 and he deducted TDS at 2% under section 194C of the Income Tax Act, 1961 instead of TDS at 10% under section 194I of the Income Tax Act as per the facts of the case.
The Coram comprising the account member Pradip Kumar Kedia and the judicial member C M Garg held that the assessee was right in deducting tax at 2% under section 194C of the Act on payment of common area maintenance charges and the provisions of section 194I of the Income Tax Act is not applicable to this payment. Therefore, the assessee cannot be treated as an assessee in default and the assessee is not liable to pay any amount under section 201(1) and under section 201(1A) of the Income Tax Act. The appeal filed by the assessee got allowed.
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