Common area maintenance charges are contractual service payments, requiring TDS under Section 194C rather than rent-based deduction.

Common area maintenance charges paid by mall occupants for maintenance, housekeeping, security and related facilities are characterised as contractual payments, not rent for use of premises or equipment. Applying earlier coordinate-bench decisions in the assessee's own assessment years, the charges do not form part of rent and are subject to tax deduction at source at 2% under Section 194C rather than 10% under Section 194I. Consequently, short deduction based on applying the contractual-payment rate does not render the payer an assessee in default.

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Issues: Whether common area maintenance charges paid by mall occupants are subject to tax deduction at source as contractual payments or as rent.

Analysis: Common area maintenance charges represented consideration for maintenance, housekeeping, security and related facilities, rather than consideration for the use of premises or equipment. Applying the binding coordinate-bench decisions in the assessee's own earlier assessment years, such charges retained the character of contractual payments and did not form part of rent.

Conclusion: Common area maintenance charges are liable to tax deduction at source at 2% under Section 194C of the Income-tax Act, 1961, and not at 10% under Section 194I of the Income-tax Act, 1961; the assessee could not be treated as an assessee in default for short deduction.

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