Common area maintenance charges are contractual service payments, so tax deduction applies under section 194C, not rent provisions.

Common area maintenance charges paid by mall tenants for upkeep of common areas and facilities were treated as contractual payments for services, not rent for use of land, building, plant, machinery or equipment. On that basis, tax deduction at source was held to fall under section 194C of the Income-tax Act, 1961, rather than section 194-I. Because the charges were covered by section 194C on identical facts already considered by a coordinate Bench, the payer was not liable to be treated as an assessee in default for short deduction, and the consequential demand under section 201(1) and interest under section 201(1A) were directed to be deleted.

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Issues: Whether common area maintenance charges paid by tenants in a mall were liable for deduction of tax at source under section 194C of the Income-tax Act, 1961, or were to be treated as rent attracting section 194-I of the Income-tax Act, 1961, and whether the consequential demand under section 201(1) and interest under section 201(1A) could stand.

Analysis: The payments in question were found to be common area maintenance charges, distinct from rent, and were made for availing maintenance services in respect of common areas and facilities. Such payments were contractual in nature and were not for the use of land, building, plant, machinery, or equipment. On that basis, the applicable source deduction provision was section 194C and not section 194-I. As the issue was covered by the coordinate Bench decision on identical facts, the assessee could not be treated as an assessee-in-default for short deduction on the premise adopted by the tax authorities.

Conclusion: The issue was decided in favour of the assessee. The CAM charges were held to fall under section 194C, and the additions made under section 201(1) and section 201(1A) were directed to be deleted.

Ratio Decidendi: Common area maintenance charges paid for services and upkeep of common facilities are contractual payments for work and not rent; therefore, they attract deduction of tax at source under section 194C and not section 194-I.

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