The Delhi High Court recently clarified that since the Common Area Maintenance (CAM) charges paid by showroom owners to shopping malls are shared expenses contributed towards cleanliness, utilities, and maintenance, covered under provisions of Section 194C of the Income Tax Act, the said charges cannot be construed as payment of rent for occupying the premises in question. The Court therefore negated the concept of TDS u/s 194I on said CAM charges and dismissed the appeal in favour of the Respondent.
Reference was made to the decision of this Court in Commissioner of Income Tax (TDS)-1, Delhi v. Liberty Retail Revolutions Limited [2025: DHC:4589-DB], where it was held that “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”.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar therefore ended the debate as to under which of the provisions, namely Section 194I or Section 194C of the Income Tax Act, the Tax Deducted at Source (TDS) liability shall be fastened on the Common Area Maintenance (CAM) charges. The Bench reiterated that as the CAM charges are a contractual payment made to a person for carrying out the work in lieu of a contract, the same would clearly fall within the meaning of “work” as defined in Section 194C of the Income Tax Act.
The dispute arose when the ITAT, relying on its Coordinate Bench decision in the case of Connaught Plaza Restaurants vs DCIT [ITA Nos. 993 & 1984/2020] and Kapoor Watch Company vs ACIT [ITA No. 889/Del/2020], had rejected the claim of the Revenue Department that a composite agreement for rent as well as common area maintenance (CAM) charges, attracts a higher rate of TDS deduction u/s 194I of the Income Tax Act, by holding that the payments towards CAM charges are contractual payments made for availing certain services/facilities, and not for use of any premises/equipment, and therefore, the same would be subjected to deduction of tax at source u/s 194C and not u/s 194-I.
Case Relied On:
Commissioner of Income Tax (TDS)-1, Delhi v. Liberty Retail Revolutions Limited [2025: DHC:4589-DB]
Appearances:
Advocates Ruchir Bhatia, Anant Mann, and Aditi Sabharwal, for the Appellant
None, for the Respondent
