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Common Area Maintenance Charges Paid to Mall is not Construed as ‘Rent’ for the Purposes of TDS: Delhi HC [Read Order]

The Delhi High Court concurred with the earlier ruling of the ITAT which granted relief to the Assessee.

Common Area Maintenance - Charges - TDS - Delhi HC - Taxscan
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Common Area Maintenance - Charges - TDS - Delhi HC - Taxscan

The Delhi High Court recently held that Common Area Maintenance (CAM) charges paid by a tenant to the owners of mall where they are situated cannot be construed as ‘rent’ for the purposes of calculating Tax Deducted at Source (TDS) as per the provisions of Section 194I of the Income Tax Act, 1961.

Two appeals were filed by the Revenue against the Respondent-Assessee Diamond Tree, challenging the common order of the Income Tax Appellate Tribunal (ITAT), wherein it was ruled that CAM charges did not form part of rental payments and were thus not liable for TDS under Section 194I.

Before the Delhi High Court, the Revenue was represented by Senior Standing Counsel Ruchir Bhatia, Anant Mann and Aditi Sabharwal while no one appeared for the respondent Diamond Tree.

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Counsel for the Revenue fairly conceded that the issue stood covered by the Court’s earlier ruling in Commissioner of Income Tax (TDS)-1, Delhi v. Liberty Retail Revolutions Limited (2023), where it was categorically held that CAM charges cannot be equated with rent as they are meant for maintenance of common facilities and not for the use of premises.

Before the ITAT, however, the Revenue had urged that CAM charges, being part of a composite agreement along with rent, attracted deduction of TDS under Section 194I.

The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar considered the reasoning given by the ITAT in the impugned decision.

The ITAT had referred to its own rulings in Kapoor Watch Company Pvt. Ltd. v. ACIT (2020) and Connaught Plaza Restaurants Pvt. Ltd. v. DCIT (2020) where it was held that CAM charges were not rent but contractual payments for availing facilities and services, thereby covered under Section 194C of the Income Tax Act, 1961.

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The Tribunal observed that CAM charges are essentially maintenance contributions by tenants towards cleanliness, utilities and upkeep of shared spaces and could not be considered as lease rentals or license fees.

Aligning with the ruling of the Tribunal, the High Court ruled in favour of the assessee, affirming that such payments are squarely covered under Section 194C and not Section 194I, thereby granting relief to the assessee from higher TDS liability on CAM charges.

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COMMISSIONER OF INCOME TAX-TDS-01 vs DIAMOND TREE
CITATION :  2025 TAXSCAN (HC) 1758Case Number :  ITA 275/2025Date of Judgement :  06 August 2025Coram :  V. KAMESWAR RAO and VINOD KUMARCounsel of Appellant :  Ruchir Bhatia, Anant Mann, Aditi Sabharwal

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