TDS u/s 194 C Deduction on Common Maintenance Charges: ITAT Accepts Additional Evidence [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has accepted additional evidence regarding Tax Deducted at Source ( TDS ) under Section 194C of Income Tax Act, 1961, deduction on common maintenance charges.

The assessee company, engaged in the restaurant and bar business, underwent scrutiny as a survey under Section 133A(2A) of the Income Tax Act ,1961, was conducted on February 12, 2018, as part of an assessment of Ambiance Group's compliance with Chapter XVII B of the Income Tax Act, 1961. The Assessing Officer ( AO ) identified various units/shops within the malls that were either sold or rented. Notably, the AO observed that the group, representing mall owners, had recovered expenses in the form of Common Area Maintenance charges.

The AO further noted that detectors/tenants had been deducting TDS at a rate of 2%, believing it to fall under the provisions of Section 194C of the Income Tax Act 1961. However, the AO held a differing opinion, asserting that the deduction should have been carried out under section 194I, warranting TDS at a rate of 10%. Consequently, the AO proceeded to make the disallowance accordingly.

The Commissioner of Income Tax ( Appeals ) ( CIT(A) ) made a distinction in the case by noting that in a specific judgment, it was highlighted that "there was a separate agreement between the Owner, Tenant, and service provider for common area maintenance which is a distinguishing fact, and thus, the decision of the Punjab and Haryana High Court will not be applicable in the present case." However, in the assessee's situation, no separate agreement between the assessee, the owner, and the service provider for common maintenance was presented as evidence. Consequently, the CIT (A) upheld the Assessing Officer's order.

The  counsel for the assessee Ravi Khanna has submitted additional evidence in the form of a Common Area Maintenance Agreement, which was not presented to the Commissioner of Income Tax ( Appeals ) ( CIT(A) ) or the Assessing Officer previously, citing misplacement. The counsel now contends that, in the interest of justice, the supplementary evidence should be admitted.

The two member bench of the tribunal comprising Challa Nagendra prasad (Judicial member) and Shamim Yahya ( Accountant member ) accepted the additional evidence. Consequently, the matter was sent back to the Commissioner of Income Tax ( Appeals ) ( CIT (A) ) for a fresh examination, considering the implications of the Common Area Maintenance Agreement. It was imperative to note that the assessee should have been afforded the opportunity to present their case and be heard during this reconsideration process.

In the result, the appeal of the assessee stand allowed

To Read the full text of the Order CLICK HERE

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