2022 (11) TMI 1106 - AT - Income Tax
TDS u/s 194I - CAM charges paid by the appellant company considering the common area maintenance charges as part of the rental activity covered u/s 194I and treated the appellant company as assessee in default within the meaning of section 201(1) for short deduction of TDS on CAM Charges - HELD THAT:- 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.
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. 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.
Merely because a single agreement is executed between lessor and lessee creating liability on lessee for both rent and CAM charges does not discard the distinguishing nature of the two payments. As for the Rent and Eviction Laws the two may have no difference but under ‘the Act’, they are different head of expenditures of the lessee. The ‘rent’ is on account of ‘use’ of the property given into a exclusive possession of the lessee for the running of business but the CAM charges are for maintenance of the common areas, used or not used by the lessee.
There is no reason to distinguish between the nature of two payments made by the lessee to the lessor if lessor keeps rent to himself and the CAM charges are paid further by the lessor unless there is composite rent, inclusive of the CAM. Which is not the case, as admittedly they are paid under different clauses of the agreement and by separate invoices.
In Sunil Kumar Gupta [2016 (9) TMI 1198 - PUNJAB AND HARYANA HIGH COURT] the judgment of Hon’ble Punjab and Haryana High Court, relied by Ld. AO, Hon’ble High Court was considering the question about computing the annual value of the property and in those circumstances observed that the maintenance charges must be included as part of the rent for the purpose of computing the annual value of the property and the wide ambit of the term rent in Section 22 and 23 of the Act was discussed - In the case before us as for the purpose of deduction of tax at source the term rent has to be understood in terms of explanation to Section 194-I which as discussed above makes a distinction between rent for the use of the property by the lessee and expenses of CAM. The appeal of assessee is allowed.