Common area maintenance charges treated as contractual service payments, not rent, so TDS demand was unsustainable.

Common area maintenance charges paid for upkeep, cleanliness, utilities and related services were treated as contractual payments for work and services, not rent for use of land, building or premises. Applying its earlier coordinate bench decisions on identical facts, the ITAT Delhi held that such payments fell within section 194C rather than section 194I of the Income-tax Act, 1961. The demand for short deduction of tax at source under section 201(1) and interest under section 201(1A) was therefore not sustainable, and the assessee was not liable to be treated as in default on that basis.

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Issues: Whether Common Area Maintenance charges paid by the assessee were contractual service payments liable for deduction of tax at source under section 194C of the Income-tax Act, 1961, and not rent within section 194I of the Income-tax Act, 1961, so as to justify the demand raised under section 201(1) and section 201(1A) of the Income-tax Act, 1961.

Analysis: The Tribunal followed its earlier co-ordinate bench decisions on identical facts and held that CAM charges are separate from rent and are paid for maintenance of common areas and related services such as cleanliness, utilities and upkeep. Such payments do not represent consideration for use of land, building or premises and therefore do not fall within the statutory concept of rent. The Tribunal accepted that these charges are in the nature of a contractual payment for work and services, attracting deduction under section 194C rather than section 194I.

Conclusion: The demand for short deduction of tax at source was not sustainable, and the assessee was not liable to be treated as in default on that basis.

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