Common area maintenance charges treated as contractual service payments, attracting tax deduction under section 194C not rent treatment.

Common area maintenance charges paid for security, housekeeping, repair and maintenance were treated as contractual payments for carrying out work, not as rent for use of land, building or premises. On that basis, the article states that tax was deductible under section 194C and not under section 194I. It further notes that, applying this classification, the assessee was not to be treated as an assessee in default under sections 201(1) and 201(1A), and the demand was directed to be deleted.

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Issues: Whether common area maintenance charges paid by the assessee were liable for deduction of tax at source under section 194C of the Income-tax Act, 1961, or were to be treated as rent chargeable to deduction under section 194I, and whether the assessee could be treated as an assessee in default under section 201(1) and section 201(1A).

Analysis: The payment in question was found to be separate from rent and was made for availing common area maintenance services such as security, housekeeping, repair and maintenance. Such payments were held to be contractual in nature, made for carrying out work, and not for use of land, building or premises. The reasoning adopted distinguished CAM charges from rent and applied the view that payments for maintenance services fall within the scope of section 194C rather than section 194I.

Conclusion: The CAM charges were held to be subject to deduction of tax at source under section 194C and not under section 194I. The assessee was not liable to be treated as an assessee in default on the basis adopted by the revenue authorities, and the demand was directed to be deleted.

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