CAM charges paid by TCNS Clothing liable to 2% TDS u/s 194C: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the Common Area Maintenance charges (CAM) paid by the TCNS Clothing Company would be liable to 2% of the Tax Deducted at Source (TDS) under Section 194C of the Income Tax Act 1961.

A survey under Section 133A(2A) of the Income Tax Act was carried out in the case of the Ambience Group on 12.02.2018 for the purpose of verification of compliances of Tax Deducted at Source (TDS) provisions. Survey was carried out at 2 Malls namely Ambience, Gurgaon and Ambience, Vasant Kunj.

It revealed that the Mall owners had collected/recovered expenses in the form of Common Area Maintenance charges (CAM) charges on which TDS was made at 2% under Section 194C of the Income Tax Act by the payers including the assessee, TCNS Clothing Co. Limited.

As per the AO, the tax should have been deducted 10% on CAM charges under Section 194I instead of 2% under Section 194C of the Income Tax Act and, accordingly, a show cause notice was issued to the assessee. The assessee filed a detailed reply stating that a separate invoice for lease expenses and CAM charges had been raised and the area for which CAM charges were paid had not been in sole or exclusive use for possession of the assessee.

Not convinced with the submissions of the assessee, the AO treated the assessee as the assessee in default under Section 201(1) of the Income Tax Act for short deduction of TDS under Section 194I of the Income Tax Act.

Vishal Kalra, on behalf of the assessee placed reliance on the decisions in the case of Nijhawan Travel Services Pvt. Ltd. Vs. ACIT and LifeStyle International Pvt. Ltd. Vs. ACIT

Pramod Kumar, appeared on behalf of the revenue and submitted that the issue as to whether the TDS on CAM charges had to be made under Section 194I of the Income Tax Act at 10% or under Section 194C of the Income Tax Act at 2% had come up before various benches of the Tribunal including the coordinate Delhi Bench in the case of Connaught Plaza Restaurant Vs. DCIT

The two-member Bench of Challa Nagendra Prasad (Judicial Member) and Pradip Kumar Kedia (Accountant Member) allowed the appeal holding that   the CAM charges paid by the assessee would be liable for TDS only at 2% under Section 194C of the Income Tax Act and not at 10% under Section 194I of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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