CANON INDIA PVT. LTD.,NEW DELHI vs. ACIT, CIRCLE-73(1), NEW DELHI

This appeal by the assessee is preferred against the order of the CIT(A) – 38, New Delhi dated 29.11.2019 pertaining to A.Y. 2011-12.

The grievance of the assessee read as under :-

Briefly stated the facts of the case are that the assessee company is in the business of electronic goods. A survey action was conducted in the case of Ambience Group in which it came to the knowledge of the department that the Ambience Group owns and operates malls which have various units / shops which are either sold or are rented. It came to the notice of the department that the mall owners have recovered/ collected expenses in the form of CAM charges (Common Area Maintenance). It seen that the deductors/ tenants have been deducting TDS at 2% u/s. 194C of the Act. The AO was of the firm belief that the tax should have been deducted at source u/s. 194I of the Act and treated the assessee in default and directed the assessee to pay the TDS amount of Rs.2434248/-.

Assessee carried the matter before the CIT(A) but without any success.

Before us the Counsel for the assessee straightway drew our attention to the decision of this Tribunal in the case of Connaught Plaza Restaurants in and 1984/Del/2020 and pointed out that on identical facts the Tribunal has held that provisions of section 194C are applicable in so far as payment of CAM charges are concerned.

Per contra the DR could not bring any distinguishing decision in favour of the revenue.

We have carefully considered the orders of the authorities below. The undisputed fact is that the impugned payment is not rent but common area maintenance charges paid by various tenants/ owners of the shop to the mall owners. On this undisputed facts the decision of the coordinate Bench (supra) clearly apply wherein the coordinate Bench has held as under :- “In sum and substance, only the payments for use of premises/equipment is covered by Section 194-1 of the Act. In our considered view, as the CAM charges are completely dependent and separate from rental payments, and are fundamentally for availing common area maintenance services which may be provided by the landlord or any other agency, therefore, the same cannot be brought within the scope and gamut of the definition of terminology “rent”. On the other hand, we are of the considered view, that as the CAM charges are in the nature of a contractual payment made to a person for carrying out the work in lieu of a contract, therefore, the same would clearly fall within the meaning of “work” as defined in Section 194C of the Act. In our considered view, as the CAM charges are not paid for use of land/building but are paid for carrying out the work for maintenance of the common area/facilities that are available along with the lease premises, therefore, the same could not be characterized and/or brought within the meaning of “rent” as defined in Section 194-1 of the Act.

In the backdrop of our aforesaid deliberations, we concur with the claim of the Id. AR that as the payments towards CAM charges are in the nature of contractual payments that are made for availing certain services/facilities, and not for use of any premises/equipment, therefore, the same would be subjected to deduction of tax at source u/s. 194C of the Act. Our aforesaid view is supported by the order of the ITAT, Delhi in the case of Kapoor Watch Company P. Ltd. vs. ACIT in ITA No.889/Del/2020. In the aforesaid case, the genesis of the controversy as in the case of the assessee before us were certain proceedings conducted by the Department in the case of Ambience Group (supra) to verify the compliance of the provisions of Chapter XVII-B of the Act. On the basis of the facts that had emerged in the course of the proceedings, it was gathered by the Department that the owners of the malls in addition to the rent had been collecting CAM charges from the lessees on which TDS was deducted @2% i.e u/s.194C of the Act. Observing, that payment of CAM charges were essentially a part of the rent, the AO treated the assessee as an assessee-in-default for short deduction of tax at source u/ss. 201(1)/201(1A) of the Act. On appeal, it was observed by the Tribunal that the CAM charges paid by the assessee did not form part of the actual rent that was paid to the owner by the assessee company. As the facts involved in the case of the assessee before us remains the same as were therein involved in the aforesaid case, therefore, in the backdrop of our aforesaid deliberations, and respectfully following the aforesaid order of the Tribunal, we herein conclude, that as claimed by the assessee, and rightly so, the CAM charges paid by it were liable for deduction of tax at source @2%, i.e., u/s.194C of the Act. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(A) who had approved the order passed by the AO treating the assessee company as an assessee-in-default u/s.201(1) of the Act. The Grounds of appeal