• Notification Date: 04-04-2023
  • Notification No: N/A

ITAT Rules that TDS will be applicable on CAM Charges under Section 194C of Income Tax Act

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that CAM charges are subject to TDS u/s 194C of the Income Tax Act. The aforesaid observation was made by the Delhi ITAT, when appeals were filed before it by the assessee PVR Ltd., as against the order of the CIT(A)-31, New Delhi dated 30.07.2019 and the order of ld. CIT(A)-38, Delhi dated 29.11.2019. 

The issues involved in the assessee’s appeal being that on the facts and in the circumstances of the case and in law , the CIT (A) has erred in holding that Common Area Maintenance (‘CAM’) charges paid by the Appellant are in the nature of rent and are liable to TDS u/s 194I of the Income Tax Act, and further that on the facts and circumstances of the case and in law , the CIT (A) has failed to appreciate that the CAM charges paid are towards services in relation to common area, which is not in the possession of the Appellant and comprise services like cleaning, maintenance, upkeep , security, air conditioning, landscaping , signages, water , electricity, consumables, lighting, sinking fund etc., wherein the charges for the said services are not in the nature of rent and are thus liable to TDS u/s 194C of the  Income Tax Act, the Delhi ITAT observed that similar issue involving deduction of TDS on rent and CAM charges stands ad judicated by the order of the Tribunal in the case of Yum Restaurants India (P.) Ltd ., for A .Y. 2012-13 vide order dated 03.10.2022. 

With Sh. G. C. Srivastava, Sr. Counsel, and Sh. Kalrav Malhotra, Adv, on the assessee’s behalf conveying to the ITAT that the assessee have submitted the sample invoice for payment of CAM charges, as entered into an agreement for common area maintenance with GVK Properties & Management Company Pvt. Ltd., for maintenance of the area at Rs.22/- per sq. ft., for a combined area of 4427 sq. ft. for which monthly maintenance of Rs.97,390/- had been paid, the Delhi ITAT Panel comprising of Yogesh Kumar US, the Judicial Member, along with Dr. B. R. R. Kumar, the Accountant Member, noted: 

“The issue before us narrows down to deductibility of the tax on the entire payment as rent or to be segregated into rent and CAM.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 staff and separate operations involved on day-to-day basis.” 

Thus, allowing the assessee’s appeals the Delhi ITAT held: “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.”