Deduction for TDS under Section 194C of the Income Tax Act when paying Common Area Maintenance Fees
Fact and issue of the case
This appeal filed by the assessee is directed against the order dated 16.01.2020 of the CIT(A)-38, Delhi, relating to Assessment Years 2011-12.
The grounds of appeal raised by the assessee read as under:-
“1. That the order of the learned CIT(A) is bad in law and on facts in confirming the order of AO in respect of following demands u/s 201(1) and u/s 201(1A) of the Income Tax Act, 1961:-
| TDS Demand | DLF Utilities Ltd. | Ambience Facilities Management PVT. LTD. | Ambience Facilities Services PVT. LTD. | Total |
| Short deduction of TDS | 21,154 | —– | —– | 21,154 |
| Interest on short deduction of TDS | 18,511 | 4,292 | 8,528 | 31,331 |
| Total | 39,665 | 4,292 | 8,528 | 52,485 |
Observation of the court
On careful consideration of the above rival submissions, we find the coordinate bench of the ITAT under identical facts has decided this issue in favour of the assessee in the case of Nijhawan Travel Service (P) Ltd. (supra) and the coordinate Bench of the Tribunal by order dated 01.07.2022 in ITA No.1417/Del/2020, for AY 2012-13, held as follows:-
On careful consideration of the above submissions, first of all from the copies of the agreements placed by the assessee at serial nos. 13 to 17, pages 24 to 138, it is clearly gathered that CAM chares have been paid to different parties by executing agreements which do not form part of rent payment. It has not been disputed by the authorities below, nor by the learned Sr. DR before us, that the assessee has deducted TDS u/s 194C o f the Act on the payment of CAM charges to the respective third parties who provided services to maintain common area.
Now I advert to the proposition rendered by ITAT Delhi Bench “B” in the case of Connaught Plaza Restaurants P. Ltd. Vs. DCIT(supra), where in paras 11 to 13, the coordinate Bench of the Tribunal, by referring earlier judgment of the ITAT Delhi Bench in the case of Kapoor Watch Company Pvt. Ltd. (supra), held as under:
We shall now advert to the claim of the assessee that both the lower authorities had erred in law and the facts of the case in concluding that the CAM charges paid by the assessee to Ambience Group (supra) were liable for deduction of tax at source @10%, i.e., u/s 194-1 and not @2%, i.e., U/S.194C of the Act, as claimed by the assessee.
Respectfully following the same, we hold that the assessee was right in deducting tax @ 2% u/s 194C of the Act on payment of Common Area Maintenance charges and the provisions of section 194I of the Act is not applicable to this payment. Therefore, the assessee cannot be treated as an assessee in default and, thus, the assessee is not liable to pay any amount u/s 201(1) and u/s 201(1A) of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 20.02.2023.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
Johnson-Watch-Company-Pvt
