PARAMOUNT RESTAURANTS PRIVATE LTD. ,VASANT KUNJ DELHI vs. CIRCLE 19(1), DELHI

O R D E R PER ANUBHAV SHARMA, J. M.:

1. 1. The present appeal has been preferred by the Assessee against the order dated 29.08.2021 of Ld. CIT(A), National Faceless Appeal Centre (NFAC) (hereinafter referred as Ld. First Appellate Authority) arising out of an appeal before it against the assessment order dated 23.03.2020 passed u/s 201(1A) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the AO, (hereinafter referred as the Ld. AO).

2. The assessee has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case the learned Assessing Officer has erred in law in treating the Common Maintenance Charges as part of rent.

2. The appellant had correctly deducted tax at source at 2 percent on these payments and interference by the learned Paramount Restaurants Pvt. Ltd Assessing Officer for treating it as part of rent and deduction of TDS at 10% is uncalled for, unjustified and dese3rves to be deleted.

3. The learned Assessing Officer has wrongly charged interest u/s 201(1A) of the Income Tax Act.”

3. Heard and perused the record.

4. None appeared on behalf of the assessee and the record shows that in spite of notice of listing of appeal, none has appeared and the assessee is not available at the address.

5. The ld DR supported the findings of the Tax Authorities below. It was submitted that the ld CIT(A) has taken into account the fact that there was no separate agreement between the assessee, the landlord and service provider for common maintenance. It was submitted that copies of invoices submitted indicate that, charges were being paid to associate company of the landlord and the ld DR also pointed out that the invoices show that high proportion of common maintenance charges were paid in a manner to bifurcate rental.

6. Giving thoughtful consideration to the matter on record, the bench is of considered opinion that primarily the dispute is with regard to applicability of section 194 Explanations and whether the assessee had rightly deducted tax @10% on rent and @2% on the common maintenance charges. The ld Tax Authorities below have primarily considered the provisions of explanation (i) of section 194 of the Act to conclude that any payment made to the landlord, other than under the head rent, falls into the category of rent and relied the judgment of Hon’ble Punjab and Haryana High court in the case of Sunil Kumar Gupta Vs. ACIT (2016) 389 ITR 38/73.

7. Now admittedly in the case in hand there was no separate agreement between the assessee tenant, the landlord and the service provider for common maintenance, M/s. Ambience Facilities Management Pvt. Ltd which is owned by Ambience Group to which ITA No. 1730/Del/2021 Paramount Restaurants Pvt. Ltd the rent was paid. The coordinate bench, on which one of us, the judicial member, was in quorum, in in case of M/s. Johnson Watch Company Pvt. Ltd. Vs. ACIT, vide order dated 9/11/22, has taken into account similar circumstances including the judgment of Sunil Kumar Gupta vs. ACIT (supra) and observed as below:- “7. Now, when the definition of „rent‟ as Explanation of section 194-I is seen it is the „payment‟ made for the „use‟ of certain immovable properties like land or building (including factory building) or land appurtenant to a building (including factory building) or movable properties like machinery or plant or equipment or furniture or fittings, is considered to be rent. Thus, what is important is the „use‟ of these immovable properties or those things appurtenant or fittings with the building that is essential to make a payment fall in definition of rent for purpose of Explanation to Section 194-I of the Act. 7.1 The common area maintenance for which the CAM charges are paid are not for the „use‟ of immovable or immovable properties included in the definition of rent above as the „rent‟ becomes payable for getting exclusive interest of user of aforesaid properties. The word „use‟ here would mean use exclusively by the lessee. The rent as such is consideration for contract of tenancy or lease, where lessee gets beneficial interest of user of demised property to the exclusion of others, including the Landlord/lessor. However, the common areas have access to and can be used not only by co- tenants but the landlord/lessor too or even other visitors without any right of exclusion by the assessee. Any payment for it‟s maintenance cannot be said to be consideration for any beneficial interest to exclusion of others.