TaxTMI 
TaxTMI 
2022 (4) TMI 1278
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....ng officer (AO) is time barred u/s. 201(3) of the income tax Act 1961 (the Act). The grounds raised by the assessee for the assessment year 2013-14 are reproduced below. "I. The order passed by the Learned assessing officer ["AO"] is barred u/s. 201(3) of the Income-tax Act, 1961 ["the Act"] 1. The order passed by the learned assessing officer ["AO"] u/s. 201 of the Income tax Act, 1961 ["the Act"] dated 18 February 2020 (as upheld by the Learned Commissioner of Income-tax (Appeals) ["CIT(A)"]) was barred by time as per the erstwhile provisions of section 201(3) of the Act as it stood prior to Finance Act 2014. 2. The Learned CIT(A) and Learned AO failed to appreciate that the amendment vide Finance Act 2014, which extended the time limit to pass order u/s. 201 of the Act, is effective from 1 October 2014. 3. The Learned CIT(A) and Learned AD have erred in not relying on various judicial pronouncements which have held that the amendment brought vide Finance Act 2014 has to be applied prospectively. 4. The Learned CIT(A) and the Learned AD have erred in not taking into consideration the favourable order passed by the Hon'ble Income ta....
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....ned CIT(A) and Learned AO have erred in levying interest u/s. 201(1A) of the Act amounting to INR 868,207/- which is consequential in nature." 3. The assessee is a private limited company and is engaged primarily in retailing in ready-made garments, leather products, furniture, toys, baby basics, footwear and other household accessories. The survey u/s. 133A(2A) of the Act was conducted on the registered address of the assessee on 08.03.2018 for the purpose of verifying whether appropriate taxes have been deducted at source on the expenses incurred/payments made by the assessee. During the survey the AO observed that the assessee has taken many properties on lease and the assessee has been deducting TDS on rent payments u/s. 194I of the Act. The AO also noticed that the common area maintenance charges (CAM charges) paid on these leased properties is treated as contractual payments and tax is deducted u/s. 194C at the rate of 2%. The AO stated that the CAM charges are directly relatable to and are part of the rental activity hence prime facie these payments fall under the purview of 194I and not of 194C calling for a deduction at 10% instead of 2%. The AO therefore treated the as....
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.... from the end of the financial year in which the payment is made or credit is given and hence the order passed by the AO u/s. 201(1) is not time barred. 8. We heard the rival submissions and perused the materials on record. Sub-section (3) to Section 201 of the Act, as was made available on the statute vide the Finance Act, 2009 w.e.f. 01.04.2010, reads as under: "(3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of - (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed; (ii) four years from the end of the financial year in which payment is made or credit is given, in any other case" (emphasis supplied)" 9. In so far the time limit for passing of an order u/s. 201(1) of the Act in a case where statement of tax deducted at source u/s. 200 of the Act was not filed by the deductor, the same was thereafter extended vide the Finance Act, 2012 from 4 years as was earlier provided in clause (ii) to ....
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.... for the assessment year 2014-15 as per the law as was then available on the statute. Therefore the order passed u/s. 201(1) / 201(1A) for these assessment years on18.02.2020 is clearly beyond the time limit as per clause (i) of section 201(3). We, thus, in terms of our aforesaid observations quash the order passed by the AO u/s.201(1)/201(1A), dated 18.02.2020 as barred by limitation. 12. We will consider now the issue on merits whereby it is contented that the lower authorities have erred in law and the facts of the case in concluding that the CAM charges paid by the assessee were liable for deduction of tax at source at 10% u/s. 194I and not @ 2% u/s. 194C. 13. The learned AR submitted that the assessee has entered into a common agreement with the owner of the property for rent as well common area maintenance. The learned AR drew our attention to the relevant clauses of the agreement relating to payment of CAM charges. The learned AR stated that as per the provisions of section 194I rent means any payment made towards use of land, building, machinery, plant etc. The learned AR also submitted that in the assessee's case the CAM charges are paid towards common maintenance su....
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.... Provided that no deduction shall be made under this section where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed one hundred and eighty thousand rupees: Explanation.-For the purposes of this section,- (i) "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any, - (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee"; 15. From the definition, the term "rent" would include payments for the use of land building land pertinent to building, machinery, plant, equipment, furniture, fitting. In short the payments for use of premises/equipment are covered by section 19....
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....e charges paid are not paid for use of land/building to fall within the ambit of the definition of rent u/s. 194I. The CAM charges are in the nature of contractual payments towards electricity, water supply, security, lift maintenance etc., falling within the meaning of section 194C whereby these charges are paid for carrying out the work for maintenance of the common area that are available along with the lease premises. The fact that these two payments are agreed and paid under the same agreement does not change the character / nature of such payments warranting single rate of tax deduction at source. The law has provided for different rates of tax deduction at source based on the nature of payment and it is imperative that the correct rate of tax is applied depending on the nature of payments. 17. In view of the aforesaid discussions we are of the considered view that the payments made towards CAM charges are in the nature of contractual is payments that are made for availing maintenance services and they are not paid for use of any premises/equipment. Therefore the cam charges would be subjected to deduction of tax at source u/s. 194C of the Act at 2%. The assessee has appli....