Common area maintenance charges fall under section 194C, not rent under section 194I, so default treatment cannot survive.

Common area maintenance charges paid under a lease arrangement were treated as payments for services and facilities, not as consideration for use of premises. On that basis, the Tribunal applied section 194C rather than section 194I to the source deduction obligation. Because the higher rent-based deduction was not applicable, the consequential treatment of the assessee as an assessee in default under section 201 could not stand. The ruling follows the view that separately identifiable maintenance and allied service charges do not form part of rent where they are relatable to common area services rather than occupancy of the premises.

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Issues: Whether common area maintenance charges paid under the lease arrangement were liable for deduction of tax at source under section 194C of the Income-tax Act, 1961, rather than section 194I of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under section 201 of the Income-tax Act, 1961.

Analysis: The common area maintenance charges were examined as payments made for availing services and facilities, not as consideration for use of premises. The Tribunal followed its earlier view that such charges, even if collected alongside rent under the arrangement, do not form part of the actual rent where they are separately relatable to maintenance and allied services. On that basis, the applicable source deduction was held to be under section 194C and not section 194I. Since the higher deduction rate was not applicable, the consequent treatment of the assessee as in default under section 201 could not survive.

Conclusion: The issue was decided in favour of the assessee; common area maintenance charges were held deductible under section 194C and the assessee was not liable to be treated as an assessee in default under section 201.

Ratio Decidendi: Payments for common area maintenance, when made for services and facilities rather than for use of premises, are contractual payments covered by section 194C and not rent within section 194I.

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