The Income Tax Appellate Tribunal (ITAT), Delhi Bench held that Common Area Maintenance Charges not forming part of Actual Rent not Taxable as ‘House Property Income’.
The assessee, Kapoor Watch Company Pvt. Ltd. is in the business of selling and marketing in the retail market of luxury watches of international brands.
The assessee company should have deducted TDS under section 194-I of the Act as against under section 194C of the Act on the Common Area Maintenance Charges (CAM) paid by the assessee company.
There was a tripartite agreement between the assessee company (tenant), owner, and operation/ maintenance services providers agency. The assessee company has paid rent to the owner after deduction of TDS under section 194-I of the Act and, to operation/maintenance services providers directly after deduction of TDS under section 194C of the Act.
The dispute arose by revenue was that the assessee company should deduct TDS on payment made directly to operation/maintenance services providers under section 194I of the Act instead of Section 194C of the Act.
The assessee submitted that issue under consideration is of deduction of TDS that too for maintenance charges paid directly by assessee tenant to maintenance services provider agency and, it is not the case of revenue that income should be added in the hands of landlord/ operation/maintenance services providers agency under the head “Income from house property”.
The assessee further urged that obligation to deduct TDS arises under section 194-I of the Act only if the nature of payment in hands of payee is rent. In the instant case payment in the nature of maintenance charges undisputedly in hands of payee and once it is the factual position then both legally and logically section applicable is 194C of the Act.
The coram consisting of O.P. Kant and Suchitra Kamable, while allowing the appeal noted that the common area maintenance charges were not forming the part of the actual rent paid to the owner by the assessee company.
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