S H DONUT EMPIRE INDIA PRIVATE LIMITED,KHAR WEST vs. ADDL/JCIT (A)-1, HYDERABAD

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ITA 2305/MUM/2026Status: DisposedITAT Mumbai06 August 2026AY 2012-138 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that CAM and allied charges paid by the assessee fall within the definition of 'rent' under Section 194I, as they are linked to the use and occupation of the premises. Separate invoices do not alter the substance of the transaction.

What were the facts?

The assessee paid common area maintenance (CAM), electricity, and water charges to a mall owner. The assessee treated these as reimbursements and deducted TDS under Section 194C, while the tax authorities considered them as rent under Section 194I. The assessee did not appear for the hearing.

What were the issues?

Whether common area maintenance, electricity, and water charges paid by a mall occupant constitute 'rent' under Section 194I for TDS purposes, or if they are mere reimbursements.

Which sections of the Income-tax Act were involved?

Section 194I,Section 194C,Section 201(1),Section 201(1A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SANDEEP GOSAIN

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. ADDL- JCIT (A)-1 vide DIN: ITBA/APL/S/250/2025-26/1084095546(1) dated 19- Feb-2026 for the Assessment Year 2012-13. The Assessee has raised the following grounds of appeal:

1.

Reimbursement of Expenses outside the Definition of Rent u/s 1941 of the Income Tax Act Liability of actual expenses is upon Petitioner specifically mentioned in Agreement Para 7 and Para 11. Supported by Separate Bills. Company itself neither generate and supply electricity nor water nor maintain the lift. Expenses are of Indivisible Nature.

2.

Separate Invoice being issued by the Conductor for Conducting Fees and Reimbursement of Expenses

Separate bills have been issued by the Conductor with respect to the Reimbursement of Expenses, hence no TDS is not deductible on such Expenses. ITO has erred by invoking the provision of section 1941 in the context of Reimbursement of Expenses.

3.

No separate Agreement is made by the Conductor for the Common Area Maintenance (CAM) Charges, water charges and electricity charges.

ITO has failed to take cognizance of the Agreement being only one for the Rent and the Reimbursement of Expenses of Common Area Maintenance (CAM) Charges, water charges and electricity charges.

4.

Order passed on the basis of Predecessors assumptions

ITO has failed to take cognizance of the submissions and has passed the Order on the basis of the Predecessors assumptions and also on basis of Assessment Order of AY 2011-12. It is not based on Merits.

2.

None appeared on behalf of the assessee when the case was called out repeatedly.

3.

On the other hand, the learned DR present in the Court was ready with the arguments; therefore, I have decided to proceed with the hearing of the appeal ex parte.

4.

All the grounds raised by the assessee are interrelated and relates to challenging the order of the learned CIT(A) in upholding the order of the AO by invoking the provisions of section 194I of the Act in the context of reimbursement of expenses, thereby making the addition. Thus, I have decided to adjudicate these grounds through the present consolidated order. 2

5.

I have heard the learned DR and perused the material placed on record. From the records, I notice that the learned CIT(A) has dealt with this ground in paragraphs 7 and 8 of his order and the same is reproduced herein below:

7.0 ANALYSIS OF THE FACTS & ADJUDICATION OF THE GROUNDS:

The grounds of appeal, statement of facts, written submissions, paper book, and the documentary material placed on record have been carefully examined. The appellant has challenged the order passed under sections 201(1) and 201(1A) primarily on the plea that payments made towards Common Area Maintenance (CAM), electricity and water charges constitute mere reimbursements and therefore fall outside the ambit of "rent" under section 194-1. The said contentions are not acceptable for the reasons discussed hereunder.

The proceedings originated from a TDS survey conducted in the case of Runwal Group, during which it was noticed that various mall occupants, including the appellant, had been making payments towards Common Area Maintenance (CAM) charges while deducting tax at 2% under section 194C, instead of 10% under section 194-1. Based on this information, statutory proceedings under sections 201(1)/201(1A) were initiated and culminated in the order dated 11.03.2019, raising a demand of 47,553, comprising short deduction of TDS of 25,096 and interest of 22,457as per Order dt. 11.03.2019

On examination of the Conducting Agreement, it is evident that:

The appellant was granted the right to use commercial premises in a mall owned by Runwal Group

The CAM charges were mandatorily payable on a per-square-foot basis, inseparably linked to the occupation and use of the premises.

The agreement does not demonstrate that CAM charges are independent, optional, or severable from the arrangement of use of immovable property.

Further, scrutiny of sample invoices, ledger accounts, and payment schedules reveals that:

CAM charges were billed and recovered along with other occupancy-related payments.

or No separate contractual framework, cost-sharing mechanism, reimbursement model was produced to establish CAM as a standalone works. or service contract.

The appellant failed to furnish any documentary evidence to rebut the statutory definition of "rent" as provided in Explanation to section 194-1, which expressly covers any payment, by whatever name called, under any arrangement for the use of land or building, whether or not owned by the payee.

The argument that CAM charges represent mere reimbursement or are liable under section 194C is therefore untenable, as the dominant character of the payment flows from the use of immovable property and not from execution of any independent work contract. This position stands conclusively supported by the plain language of section 194-1 and the factual matrix on record.

Ground No. 1 Reimbursement of expenses outside the definition of rent u/s 194-1

The appellant's primary contention that CAM, electricity and water charges are "reimbursements of actual expenses" and therefore not liable for deduction of tax at source under section 194-1 is factually and legally untenable. A perusal of the Conducting Agreement dated 22.04.2010 clearly shows that the appellant was granted the right to occupy and operate a food court counter in a commercial mall, and the obligation to pay CAM, electricity, water, lift, staircase, pathways and washroom charges arises solely because of such occupation and use of the premises. These charges are mandatory, recurring and inseparably linked to the enjoyment of the leased premises, and are not optional or independent services. availed at the discretion of the appellant.

The agreement does not provide for any pure cost-to-cost reimbursement mechanism, nor does it establish any one-to-one correlation between the actual expenditure incurred by the mall owner and the amounts recovered from the appellant. On the contrary, the CAM charges are levied on a pre-determined and periodic basis, which clearly indicates that they form part of the commercial consideration for use of the premises and common facilities. Merely stating that the mall owner does not itself generate electricity or water does not alter the character of the payment, as the liability to pay such charges flows from the occupation of the premises and not from any independent supply contract between the appellant and third-party utility providers.

In terms of the Explanation to section 194-1, "rent" means any payment, by whatever name called, under any lease, tenancy or arrangement for the use of land or building. The CAM and allied charges paid by the appellant squarely fall within this statutory definition. Accordingly, this ground is rejected.

Ground No. 2-Separate invoices for conducting fees and reimbursements

The appellant has argued that since separate invoices are raised for conducting fees and CAM / utility charges, the latter cannot be treated as rent. This contention is misconceived. It is a settled principle that tax deduction at source provisions operates on the substance of the transaction and not on nomenclature or billing mechanics.

The mere issuance of separate invoices or maintenance of separate ledger accounts in the appellant's books does not sever the intrinsic nexus between the CAM charges and the right to use the immovable property.

All payments - conducting fees as well as CAM and utility charges-are made to the same payee, under the same composite conducting arrangement, and arise only because the appellant is permitted to occupy and operate from the mall premises. In the absence of any separate, standalone agreement demonstrating that CAM charges are independent of the lease/ conducting arrangement, the bifurcation of invoices is of no legal consequence. The Assessing Officer has therefore rightly invoked the provisions of section 194-1, and this ground is rejected.

Ground No. 3 Order based on predecessor's assumptions / earlier year

The plea that the order has been passed mechanically on the basis of predecessor's assumptions or earlier years' orders is contrary to the record. The Assessing Officer has examined the Conducting Agreement, sample invoices, ledger accounts, and the appellant's submissions dated 09.01.2019, 20.02.2019 and 26.02.2019. The findings recorded in the order are based on the terms of the agreement and the nature of payments, and not merely on past assessments. The appellant has not demonstrated any change in facts or contractual terms that would warrant a different conclusion for the year under appeal. This ground is therefore without merit and is rejected.

8.0 In view of the findings recorded above, it is held that the appellant has failed to deduct tax at source at the prescribed rate of 10% under section 194-1 on CAM charges aggregating to 2,50,956, resulting in short deduction of tax of 25,096. The consequent levy of interest of 22,457 under section 201(1A) is mandatory and compensatory in nature. The action of the Assessing Officer in treating the appellant as an assessee in default under section 201(1) is therefore fully justified. The appeal of the appellant is dismissed.

6.

After considering the facts of the present case, I find that the learned CIT(A), after evaluating the facts and examining the Explanation to section 194I, has rightly held that rent means any payment, by whatever name called, under any lease, tenancy, or arrangement for the use of land or building. Accordingly, the CAM and allied charges paid by the assessee squarely fall within the definition of rent, and the claim of the assessee was rightly rejected.

7.

It was also held that all payments, such as conducting fees as well as CAM charges/utility charges, were made to the same payee under the same composite conducting arrangement and arose only because the assessee was permitted to occupy and operate from the mall premises. Thus, in the absence of any separate standalone agreement under which the CAM charges were independent of the lease/conducting arrangement, the bifurcation of invoices is of no legal consequence. It was, therefore, held that the assessee had failed to deduct tax at source at the prescribed rate of 10% under section 194I on the CAM charges, resulting in short deduction of tax.

8.

No new facts, circumstances, or documents have been placed on record by the assessee in order to controvert or rebut the lawful findings so recorded by the learned CIT(A). Therefore, I see no reason to interfere with or deviate from the findings so recorded by the learned CIT(A). Accordingly, I dismiss the grounds raised by the assessee and uphold the order of the learned CIT(A).

9.

In the result, the appeal filed by the assessee stands dismissed.

Order pronounced in the open court on 06.08.2026.

Sd/- SANDEEP GOSAIN JUDICIAL MEMBER Mumbai Dated: 06.08.2026 RY-SrPS Copy to: S H DONUT EMPIRE INDIA PRIVATE LIMITED, G-1, S.H.RAM BUILDING ,RAOD NO 18-A 1 KHAR WEST, MUMBAI-400052, MAHARASHTRA

ADDL/JCIT (A)-1, OFFICE OF THE COMMISSIONER OF 2 INCOME TAX, APPEAL, HYDERABAD-500001, TELANGANA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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