TDS @ 2% u/s 194C to be deducted on payment of Common Area Maintenance charges: ITAT

The assessee has filed an appeal against the order dated 16.01.2020 of the CIT(A)-38, Delhi, relating to the assessment years 2011-12.

Assessee alleged that the CIT(A) has erred by treating the common area maintenance charges (CAM) paid by the lessee to the maintenance company as part of the rent and thus making lessee liable for deduction of tax at source u/s 1941 @ 10% and not u/s 194C @ 2% in respect of such payment.

Further, the ground of the appeal was that the learned CIT(A) has erred by observing that the lessor is paying the common area maintenance charges to the maintenance company and same are recovered by the lessor company from the lessee and thus such CAM charges are part of the rent and are liable for deduction of tax at source u/s 1941 @ 10% instead of deduction of tax at source u/s 194C @ 2%.

The Next ground of appeal was that the learned CIT(A) erred by confirming the demand of Rs. 21,154/- u/s 201(1) of the Income Tax Act, 1961 in respect of short deduction of tax by ignoring the certificate from Chartered Accountant of DLF Utilities Ltd. annexed with Form 26A u/s 201(1) r/w rule 31ACB and Rs. 18,511/- in respect of interest on short deduction by applying section 1941 instead of section 194C.

The ld. Counsel for the assessee submitted that the issue is covered by the decision of the coordinate Bench of the ITAT in the case of Kapoor Watch Company Pvt. Ltd., vide order dated 05.01.2021 in ITA No.889/Del/2020, for AY 2011-12. He has also placed reliance on the decision of the ITAT Delhi, ‘SMC’ Bench dated 1st July, 2022 in the case of Nijhawan Travel Service (P) Ltd. vs. ACIT in ITA No.1417/Del/2020 for AY 2012-13.

Respectfully following reliance on the decision of the ITAT Delhi, ‘SMC’ Bench dated 1st July, 2022 in the case of Nijhawan Travel Service (P) Ltd. vs. ACIT in ITA No.1417/Del/2020 for AY 2012-13, ITAT held that the assessee was right in deducting tax @ 2% u/s 194C of the Act on payment of Common Area Maintenance charges and the provisions of section 194I of the Act is not applicable to this payment. Therefore, the assessee cannot be treated as an assessee in default and, thus, the assessee is not liable to pay any amount u/s 201(1) and u/s 201(1A) of the Act.

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