ITAT Delhi Holds TDS Applicable On CAM Charges As They Are Maintenance Payments, Not Rent

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 26 May held that Common Area Maintenance (CAM) charges paid by tenants in shopping malls constitute payments for maintenance services and not rent, and therefore attract Tax Deducted at Source (TDS) under Section 194C of the Income Tax Act and not under Section 194-I.

Judicial Member Raj Kumar Chauhan and Accountant Member Renu Jauhri dismissed Revenue's appeals against Biba Apparels Pvt. Ltd. for Assessment Years 2013–14, 2014–15 and 2015–16, upholding the deletion of the tax demand. The Bench held:

“The said charges cannot, by any stretch, be construed as payment of rent for occupying the premises in question.”

The dispute arose after the tax department treated CAM charges paid by Biba Apparels Pvt. Ltd. for its retail outlets in Ambience Mall as part of rent and alleged short deduction of TDS. The department contended that the payments ought to have been subjected to deduction at 10% under Section 194-I, whereas the company had deducted tax at 2% under Section 194C.

Biba Apparels submitted that CAM charges were distinct payments made towards services such as maintenance, cleanliness, utilities and upkeep of common areas, and were not consideration for use of the premises. It further pointed out that these charges were governed by separate arrangements from the lease agreements.

The Tribunal noted that CAM charges were paid under independent service arrangements and did not form part of the rent payable for occupying the premises, thereby reinforcing that the payments related to contractual maintenance services.

Relying on earlier judicial precedent, including the Delhi High Court's decision in Commissioner of Income-tax (TDS) v. Liberty Retail Revolutions Ltd., the Bench held that CAM charges fall within the ambit of Section 194C.

Accordingly, the ITAT upheld the deletion of the tax demand and dismissed the Revenue's appeals.