Common Area Maintenance Charges subject to TDS u/s 194C: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that common area maintenance charges are subject to TDS u/s 194 C.

The aforesaid observation was made by the Delhi ITAT, when an appeal was preferred before it by the assessee M/s Welgrow Hotels (P) Ltd, as against the order dated 24.01.2019, passed by theCommissioner of Income tax (Appeals), New Delhi, u/s 250 of the Income Tax Act, 1961, pertaining to the assessment year 2012-13.

In the instant case the Assessing Officer vide order dated 26.03.2019, passed u/s 201(1)/(1A) of the Income Tax Act, had directed the assessee to pay TDS amounting to Rs. 2,55,745/- u/s 201(1) and the interest thereon to the tune of Rs. 2,29,478/- u/s 201(1A) ,on account of CAM charges under Section 194-I of the Income Tax Act.

However, the assessee had claimed that the assessee was liable to deduct TDS u/s 194-C of the Income Tax Act. And being aggrieved, the assesseechallenged the directions/additions made by the AO before theCommissioner, who vide the impugned order though affirmed the action of the AO in holding that CAM charges paid by the Assessee are part of rent, liable for TDS u/s 194-I of the Income Tax Act, however, held that if the deductee has paid tax on the CAM charges received from the assessee, then the assessee cannot be treated as an assessee in default.

The Commissioner further, noticing from the form no. 26A filed by the assessee, thus, directed the AO under the proviso to Section 201(1) of the Income Tax Act, to verify the factual position to find out  if the deductee has paid taxes on the CAM charges received from the assessee by filing return of income u/s 139, and if so, then the assessee cannot be treated as assessee in default and no further tax can be collected, but that the assessee shall provide necessary evidences such as Form 26A etc. to the AO.

 And it is being aggrieved by the same, that the assessee preferred the instant appeal before the Delhi ITAT, claiming that the Commissioner has erred in not directing relief qua CAM charges paid after deducting tax at source under section 194C of the Income Tax Act, in spite of the fact that common area maintenance charges were paid under a single lease agreement.

With Sh. S Krishnan, the counsel for the assessee, in support of its claim,having relied upon the order dated 03.10.2022 passed by the Coordinate Bench in the case of Yum Restaurants India (P) Ltd., whereinit was held that provisions of Section 194-C of the Income Tax Act are applicable to CAM charges, Sh. S.L. Verma, the Sr. DR, on the contrary,heavily relied upon the impugned order.

Hearing the opposing contentions of either sides and perusing the materials available on record, the ITAT Bench consisting of Dr. B.R.R Kumar, the Accountant Member, along with N.K Choudhry, the Judicial Member, observed:

“We have given thoughtful consideration to the peculiar facts and circumstances of the case. Considering the peculiar facts and circumstances of the case, as the Hon’ble Coordinate Bench has already dealt with the identical issue and categorically held that for CAM charges, the provisions of Section 194-C of the Act are applicable.”

Thus, allowing the assessee’s appeal the Delhi ITAT held:

“In the instant case it is an admitted fact, as not refuted by the learned DR, that the Assessee has deducted TDS u/s 194C of the Act, and the facts are not distinguishable to the facts involved in Yum Restaurants India case (Supra) consequently we are inclined to direct the AO to recompute the tax liability accordingly.”

To Read the full text of the Order CLICK HERE

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