TDS on Common Maintenance Charges deductible u/s 194C
Facts and Issues of the case
The assesse’s sole grievance is that the Assessing officer (AO) has erred in holding that the claim of common maintenance charges (CAM) was in the nature of rent liable for TDS @ 10% u/s 194-I of the Income Tax Act, 1961. Hence, the assessee committed a default u/s 201(1) of the Act and was, therefore, liable for payment of tax and interest, since there was a short deduction of TDS.
Observations by the Court
The Court has heard the arguments of both the sides and carefully perused the material available on record of the Tribunal, inter alia, two paper books of assessee The learned counsel submitted that AO has erred on facts and law in completing the assessment u/s 201(1)/201(1A) of the Act and making addition on account of short deduction of tax amounting to Rs 11,16,161/-. The learned counsel also submitted that AO has grossly erred in holding that the common maintenance charges paid by the assessee were in the nature of rent liable for TDS @ 10% u/s 194-I of the Act and thus the assessee is liable for payment of tax and interest thereon since there was a short deduction of TDS due to default committed by it u/s 201(1) of the Act. The learned counsel vehemently pointed out that the AO was not correct in holding that the provisions of Section 194-I read with section 201(1) and 201(1A) of the Act were applicable in the present case, because in view of first proviso to Section 201(1),
the assessee cannot be deemed to be in default in respect of short deduction of TDS, since the same, representing common maintenance charges, has already been taken and declared as income and tax has been paid thereon by the recipients of CAM charges. Replying to the above, the learned Sr. DR drew our attention towards the assessment order and submitted that CAM expenses is duly covered u/s 194I of the Act and, therefore, the assessee was rightly treated as an assessee in default within the meaning of Section 201(1) of the Act for failing to appropriately deduct tax on payment as per provisions of the Act. Learned DR also submitted that the Assessing Officer was right in rejecting the explanation of the assessee that TDS on CAM charges has to be deducted u/s 194C of the Act.
On careful consideration of the above submissions, fit 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 that the assessee has deducted TDS u/s 194C of the Act on the payment of CAM charges to the respective third parties who provided services to maintain common area.
The Court is in agreement with the claim of the learned AR that the payment towards CAM charges are in the nature of contractual payment which are made for availing services/ facilities and not for the use of any premises/ equipment, therefore, same would be subject to deduction of tax at source u/s 194C of the Act and not u/s 194I of the Act. I conclude that as claimed by the assessee the TDS on CAM charges paid by it is liable for deduction of tax at source @ 2% u/s 194C of the Act. The Court, thus, in terms of my above noted observation, set aside the order of the AO as well as that of learned CIT(A) treating the assesse company as an assessee in default u/s 201(1) of the Act.
CAM charges paid are in nature of contractual payment made for availing services are subject to deduction of tax at source u/s 194C of the Income Tax Act, 1961.Nijhawan-Travel-Service-Pvt.-Ltd.-Vs-ACIT-ITAT-Delhi