As a relief to Johnson watches, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that no Tax Deductible at Source (TDS) on common area maintenance charges (CAM) charges paid in addition to rent.
The assessee is a Private Limited Company engaged in the business of trading watches. An order u/s 201 (1 )/201 (I A) of the Income Tax Act, 1961 was passed on 29.03.2019 and a demand of Rs. 31,303/- of interest on short deduction of TDS was worked out to be payable by the Company as per the said order.
The assessee company has paid common area maintenance charges (CAM Charges) to M/s. DLF Utilities Ltd. for the retail store taken on lease in DLF Emporio Mall, Vasant Kunj, New Delhi and to M/s. Ambience Facilities Management Pvt. Ltd. for the retail stores taken on lease in Ambience Mall, Vasant Kunj and Gurgaon and has deducted TDS @ 2% on such CAM charges u/s I94C of the Income Tax Act, 1961.
According to Assessing Officer, TDS should have been deducted @ 10% u/s 1941 of the Income Tax Act, 1961 on the CAM charges paid by the appellant company considering the common area maintenance charges as part of the rental activity covered under section 1941 of the Income Tax Act, 1961 and treated the appellant company as assessee in default within the meaning of section 201(1) of the Income Tax Act, 1961 for short deduction of TDS on CAM Charges.
Interest u/s 201(1 A) of the Income Tax Act, 1961 was charged for a short deduction of TDS on the CAM Charges and a demand of Rs. 31,303/- was raised on account of the short deduction of TDS on the appellant company for A.Y. 2012-
A Coram comprising of Shri Anil Chaturvedi, Accountant Member and Shri Anubhav Sharma, Judicial Member observed that merely because a single agreement is executed between lessor and lessee creating liability on lessee for both rent and CAM charges does not discard the distinguishing nature of the two payments.
The ‘rent’ is on account of the ‘use’ of the property given into exclusive possession of the lessee for the running of the business but the CAM charges are for maintenance of the common areas, used or not used by the lessee.
In the case of Yum Restaurants India (P) Ltd, Vs. ACIT (TDS), it was held that the rent provisions are governed by Section 194I and CAM charges by Section 194C of the Act. By following the above-said ruling, while allowing the appeal of the assessee, the Tribunal set aside the impugned demands u/s 201(1)A of the Act.
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