Tribunal Rules CAM Charges Subject to TDS u/s 194C as Service Payments, Not Rent u/s 194I.

The Tribunal allowed the appeal, determining that Common Area Maintenance (CAM) charges are subject to Tax Deducted at Source (TDS) under Section 194C, not Section 194I, as they constitute payments for services rather than rent for premises use. This decision aligns with prior judicial precedents, ensuring the correct TDS provision for CAM charges.

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Issues:
1. Correct TDS provision on Common Area Maintenance charges.
2. Nature of CAM charges - Rent or payment for services.
3. Applicability of judicial precedents and CBDT Circulars.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A) confirming TDS under Section 201(1)/201(1A) of the Act on Common Area Maintenance (CAM) charges under Section 194I instead of Section 194C as deducted by the assessee. The Tribunal referred to various decisions, including Connaught Plaza Restaurants P. Ltd and Kapoor Watch Company Pvt. Ltd, where it was held that CAM charges are contractual payments for services, not for premises use, thus subject to TDS under Section 194C.

2. The appellant, engaged in garment manufacturing, paid CAM charges along with rent and miscellaneous charges for a leased unit in a mall. The payments were separately quantified under different agreements and specific invoices. The Tribunal emphasized that CAM charges were for services like security, housekeeping, and maintenance, not for building use. The Co-ordinate Benches upheld TDS on CAM charges at 2% under Section 194C in cases with single rent and CAM agreements.

3. The Tribunal considered decisions like Aero Club vs. DCIT, Johnson Watch Company Pvt. Ltd. vs. ACIT, PVR Ltd. vs. ACIT, and Yum Restaurants India (P.) Ltd. vs. ACIT, where TDS on CAM charges was upheld under Section 194C. It also noted Mumbai ITAT's decision in Kamal Jafferali Wadhwania and Bangalore ITAT's ruling in Lifestyle International (P.) Ltd., emphasizing correct TDS rates based on payment nature. The Tribunal concluded that CAM charges were not covered under Section 194I, aligning with previous decisions.

4. The Tribunal allowed the appeal, considering the factual matrix and consistency with legal precedents. The appellant's CAM charges were deemed liable for TDS under Section 194C, not Section 194I. The order was pronounced in favor of the assessee on 28/08/2024.

Conclusion:
The Tribunal allowed the appeal, holding that Common Area Maintenance charges are subject to TDS under Section 194C, not Section 194I, based on the nature of payments for services, not building use. The decision aligned with previous judicial precedents and upheld the correct TDS provision for CAM charges.

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