While granting relief to the KFC owner, Yum Restaurants India, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that TDS on payment of rent and CAM charges are paid to be separately under sections 194I and 194C of the Income Tax Act, 1961 respectively.
As per the lease deed entered by the assessee with M/s Gopalan Enterprises, Bangalore, the assessee obtained piece and parcel o f the shop on lease of unit no . 121 on 1s t Floor with a carpet area of 1920 sq . ft. and shop no. 226 on 2n d Floor with a carpet area of 1722 sq . ft. The assessee shall pay 7% of revenue share on net sales as monthly rent and also pay @Rs .12/- per sq . ft. for maintenance services .
The provisions of TDS on rent are governed by Section 194I and maintenance contract are governed by Section 194C of the Income Tax Act, 1961.
A Two-Member bench of Dr. B. R. R. Kumar, Accountant Member Sh. Anubhav Sharma, Judicial Member held that the undisputable fact in this case is that while the lease rentals are paid based on a fixed percentage on the net revenue, the CAM charges are based on the per sq . ft. area.
“The observation of the ld . CIT(A) is that the rent by any name , lease , sub-lease , tenancy or the reliance on the judgment wherein the services are intrapolated into the rent stand on a different pedestal. In the instant case , the determination of the rent or CAM are separate and the CAM arrangements are not essential and an integral part for use of the premises. While there are no expenses incurred against the rent except for general building maintenance and municipal charges , the CAM involves employment of separate sta ff and separate operations involved on day to day basis. Hence , we hold that the provisions for rent are governed by Section 194I and CAM charges by Section 194C of the Act. The AO is directed to re-compute the CAM charges, taking into consideration the two sections mentioned above,” the Tribunal said.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.
