The appeal by Devyani International Limited challenges the order of the CIT(A) confirming the action of the AO, which held the appellant as an assessee in default under Section 201(1) for under-deducting TDS on CAM charges for the fiscal year 2011-12.
The case revolves around the classification of Common Area Maintenance (CAM) charges and whether they should be treated as part of rent, subjecting them to higher TDS rates under Section 194I of the Income Tax Act, instead of Section 194C. The controversy started from a TDS survey revealing discrepancies in TDS deductions by various payers on such charges.
The main issue concerns whether CAM charges paid by Devyani International to a third-party maintenance company constitute rent payments to the property owner, thus requiring a higher rate of TDS deduction.
The Tribunal noted that the CAM charges were paid to a separate entity from the lessor, and thus did not form part of the rent payments. It referenced a co-ordinate bench decision in a similar case, where it was held that separate agreements for CAM charges exempt the assessee from higher TDS rates applicable to rent.
The Tribunal found in favor of the assessee, noting that the CAM charges did not partake the character of rent and were correctly subjected to TDS under Section 194C. The decision reversed the lower authority’s ruling, thus relieving Devyani International of the assessee-in-default status under Section 201(1).
This case highlights the complexities in interpreting tax deductions on property-related payments and the importance of clear contractual terms distinguishing between different types of payments. It sets a precedent for similar disputes and underscores the necessity for thorough documentation and compliance with TDS provisions.
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