Common area maintenance charges are service payments, not rent, so TDS applies under section 194C instead of section 194I.

Common area maintenance charges separately quantified under distinct agreements and invoiced for services such as security, housekeeping, repair and maintenance were treated as consideration for facilities, not as payment for use of premises. On that basis, the Tribunal held that the applicable TDS provision was section 194C and not section 194I. It also noted that the payee had already offered the receipts to tax as business income. The order treating the assessee as an assessee in default under section 201(1), together with consequential interest under section 201(1A), was therefore not sustainable.

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Issues: Whether common area maintenance charges paid for mall-related facilities were liable to tax deduction at source under section 194I as rent, or under section 194C as contractual payment for services, and whether the assessee could be treated as an assessee in default under section 201(1) read with section 201(1A).

Analysis: The payment towards CAM charges was found to be separately quantified under distinct agreements and raised through specific invoices for identifiable services such as security, housekeeping, repair and maintenance. Such charges were held to be for availing facilities and services, and not for the use of premises so as to constitute rent. The Tribunal followed its earlier coordinate bench decisions on identical facts, and noted that the payee had already offered the receipts to tax as business income. On this factual and legal matrix, the applicable TDS provision was held to be section 194C and not section 194I.

Conclusion: The CAM charges were not rent and were liable for deduction of tax at source under section 194C. The order treating the assessee as in default under section 201(1) and charging consequential interest under section 201(1A) was not sustainable.

Ratio Decidendi: Where CAM charges are separately identified consideration for services and facilities, they do not assume the character of rent and attract deduction under section 194C rather than section 194I.

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