TDS shall be deductible on Common area maintenance charges u/s 194C

Fact and Issue of the case

The grounds of appeal raised by the assessee read as under:-

“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 Private Limited	Ambience Facilities Services Private Limited	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

The CIT(A) has erred by treating the common area maintenance charges (CAM) paid by the lessee to the maintenance company as part of the rent and thus making lessee liable for deduction of tax at source u/s 1941 @ 10% and not u/s 194C @ 2% in respect of such payment.

The learned CIT(A) has erred by observing that the lessor is paying the common area maintenance charges to the maintenance company and same are recovered by the lessor company from the lessee and thus such CAM charges are part of the rent and are liable for deduction of tax at source u/s 1941 @ 10% instead of deduction of tax at source u/s 194C @ 2%.

That the learned CIT(A) erred by confirming the demand of Rs. 21,154/- u/s 201(1) of the Income Tax Act, 1961 in respect of short deduction of tax by ignoring the certificate from Chartered Accountant of DLF Utilities Ltd. annexed with Form 26A u/s 201(1) r/w rule 31ACB and Rs. 18,511/- in respect of interest on short deduction by applying section 1941 instead of section 194C.

The appellant craves leave to add, modify, alter, substitute or delete any of the grounds of appeal on or before the date of hearing.”

Observation of the Tribunal

On careful consideration of the above rival submissions, the tribunal 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. 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.

Conclusion

The tribunal ruled in favour of the assessee stating 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.