The Delhi Bench of Income Tax Appellate Tribunal (ITAT)has held that the common area maintenance charges would be subjected to 2% of Tax Deducted at Source ( TDS) under Section 194C of the Income Tax Act 1961
A TDS survey hadbeen carried out in the case of Ambience Group o on two malls namely, Ambience, Gurgaon and Ambience Mall, Vasant Kunj revealed that mall owners had collected expenses in the form of common area maintenance charges on which TDS deduction had been carried out at 2% by the payers under Section 194C of the Income Tax Act 1961 as against 10% deductible under Section 194I of the Act. Consequently, the Assessing Officer passed an order under Section 201(1)/201(1A) of the Act towards short deduction of tax at source treating the assessee Devyani International Limited as default who was the diductor.
Section 194 C deals with TDS deduction in the course of contract or subcontract works.
Rajat Jain, on behalf of assesseecontended that the deduction rate applicable on common area maintenance charges (CAM) charges @2% under Section 194C had been rightly deducted. He further submitted that the CAM charges had been paid to a separate entity namely, Ambience Facilities Management Pvt. Ltd.
Kumar Pranav, on behalf of revenue, contented that the CAM charges payable by the assesseewere essentially part of rent payment and also susceptible to higher TDS rates of 10% as attributable to Section 194I of the Act
The Bench of Chandra Mohan Garg, (Judicial Member)and Shri Pradip Kumar Kedia, (Accountant Member) held that the action of the assessee for deduction of TDS at 2% of CAM charges under Section 194C could not be faulted per se and assessee could not be regarded as assessee in default under Section 201(1)/201(1A) of the Act. The bench allowed the appeal observing that the common area maintenance charges were not forming the part of the actual rent paid to the owner by the assessee company as a separate agreement was between the Owner, Tenant and service provider for common area maintenance.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
