Common area maintenance charges treated as maintenance payments, not rent, and taxed under section 194C rather than section 194I.

Common area maintenance charges separately quantified and paid for distinct operational services were treated as payments for maintenance work, not rent; they therefore fell under section 194C and not section 194I. The characterization turned on the fact that rent and maintenance were calculated on different bases and the maintenance services were not an integral part of the use of the premises. The limitation challenge to the demand under sections 201(1) and 201(1A) was rejected by following the co-ordinate bench view, so no separate relief was granted on that ground. The matter was directed to be re-computed accordingly.

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Issues: (i) Whether common area maintenance charges formed part of rent liable for deduction of tax at source under section 194I of the Income-tax Act, 1961, or were payments for maintenance work covered by section 194C of the Income-tax Act, 1961; (ii) Whether the demand under sections 201(1) and 201(1A) of the Income-tax Act, 1961 was barred by limitation.

Issue (i): Whether common area maintenance charges formed part of rent liable for deduction of tax at source under section 194I of the Income-tax Act, 1961, or were payments for maintenance work covered by section 194C of the Income-tax Act, 1961.

Analysis: The lease rent and the common area maintenance charges were separately quantified and paid on different bases. The rent was linked to revenue share, while the maintenance charges were calculated per square foot. The maintenance arrangement involved separate staff, operations, and day-to-day services, and was not treated as an integral part of the use of the premises. On these facts, the maintenance payments were distinct from rent.

Conclusion: The common area maintenance charges were held to fall under section 194C of the Income-tax Act, 1961 and not under section 194I of the Income-tax Act, 1961.

Issue (ii): Whether the demand under sections 201(1) and 201(1A) of the Income-tax Act, 1961 was barred by limitation.

Analysis: The limitation plea was rejected by following the co-ordinate bench view relied upon in the order, and no separate relief was granted on this ground.

Conclusion: The limitation challenge was rejected.

Final Conclusion: The assessee obtained relief on the substantive characterization of common area maintenance charges, but failed on the limitation ground, and the matter was directed to be re-computed accordingly.

Ratio Decidendi: Where maintenance charges are separately determined and represent distinct operational services rather than an integral part of the use of premises, such payments are not rent for section 194I of the Income-tax Act, 1961 and may fall under section 194C of the Income-tax Act, 1961.

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