CAM Charges Not ‘Rent’ u/s 194‑I of IT Act: SC Upholds Delhi HC Ruling, ₹4.4 Lakh TDS Demand on Fashion Retailer Set Aside [Read Order]

The Supreme Court of India, in a recent case, has dismissed the Revenue’s SpecialLeave Petition (SLP) challenging a Delhi High Court judgment that held Common Area Maintenance (CAM) charges are not “rent” within the meaning of Section 194‑I of the Income Tax Act, 1961.

The ruling effectively upholds the deletion of a ₹4,41,121 TDS demand and ₹4,23,477 interest raised against the assesee, a fashion retailer operating from Ambience Mall, Vasant Kunj. The apex court, after condoning the delay, found no error or illegality in the High Court’s reasoning and declined to interfere with the order.

The dispute originated from the AO’s view that CAM charges paid by tenants of Ambience Mall were intrinsically linked to the rental arrangement and therefore attracted TDS at 10% under Section 194‑I, which governs rent.

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The assessee, like other tenants, had deducted TDS at 2% under Section 194‑C, treating CAM charges as contractual payments for maintenance services. The AO held the retailer to be an assessee‑in‑default under Sections 201(1) and 201(1A), prompting the company to challenge the determination.

The Commissioner of Income Tax (Appeals) upheld the AO’s view, but the Income Tax Appellate Tribunal (ITAT) reversed the decision. The ITAT relied on its earlier ruling in ITA No. 504/Del/2020 involving another tenant of the same mall, where it held that CAM charges are fundamentally payments for services, cleaning, utilities, upkeep of common spaces, and not consideration for the use of land or building.

The Tribunal highlighted that CAM charges are independent of rent and may even be provided by third‑party agencies, reinforcing their character as contractual service payments.

It was observed that,“ In our considered view, as the CAM charges are completely dependent and separate from rental payments, and are fundamentally for availing common area maintenance services which may be provided by the landlord or any other agency, therefore, the same cannot be brought within the scope and gamut of the definition of terminology “rent”.”

The Delhi High Court, in its detailed judgment dated 22 May 2025, agreed with the ITAT’s reasoning. The Court observed that CAM charges are shared expenses for maintaining common facilities and cannot be construed as rent “by any stretch.”

It rejected the Revenue’s argument that CAM charges form part of the lease arrangement, noting that the statutory definition of “rent” under Section 194‑I does not extend to payments for maintenance services. The High Court concluded that the AO’s premise was fundamentally flawed and that the ITAT had rightly set aside the demand.

The court ruled that,

“CAM charges are essentially maintenance charges paid by a unit for proper maintenance of the common area. The said charges are contributed towards expenditure ON cleanliness, utilities and maintenance. These charges are shared expenses for common works and utilities. The said charges cannot, by any stretch, be construed as payment of rent for occupying the premises in question.”

When the matter reached the Supreme Court, the Revenue sought to reopen the question of whether CAM charges should be treated as rent for TDS purposes. However, the bench comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti found no merit in the challenge.

The Court succinctly held that there was “no error or illegality” in the High Court’s order and dismissed the SLP, affirming the legal position adopted by the ITAT and the High Court.

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