Case Number: ITA 1115/DEL/2020
Appellant: Yum Restaurants India Pvt. Ltd., Gurgaon
Respondent: ACIT (TDS), Circle-78(1), New Delhi
Assessment Year: 2012-13
Result: 2012-13
Case Filed On: 2020-03-19
Order Type: Final Tribunal Order
Date of Order: 2022-10-03
Pronounced On: 2022-10-03
This case revolves around the issue of whether the payments made by Yum Restaurants India Pvt. Ltd. for Common Area Maintenance (CAM) charges should be treated as ‘Rent’ and thus attract TDS under Section 194I of the Income Tax Act, or whether they should be considered as payments for contractual services and hence fall under Section 194C.
The appellant, Yum Restaurants India Pvt. Ltd., had entered into lease agreements with various lessors, including M/s Gopalan Enterprises, for leasing commercial spaces and making payments for CAM services. The lease agreements stipulated that the appellant would pay rent based on a percentage of revenue and CAM charges on a per square foot basis.
The Assessing Officer (AO) contended that CAM charges should be considered part of the rent and therefore be subjected to TDS under Section 194I. The appellant argued that CAM charges were payments for maintenance services and should be covered under Section 194C.
The AO held that the CAM charges were essentially a part of the lease agreement and thus should be subjected to TDS under Section 194I. The AO’s position was that the CAM charges were integral to the lease agreement and therefore constituted rent.
The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, stating that the CAM charges were part of the rent payable under the lease agreements. The CIT(A) relied on the Explanation to Section 194I, which defines ‘Rent’ to include any payment under any lease, sub-lease, tenancy, or arrangement for the use of land, building, etc.
The Income Tax Appellate Tribunal (ITAT) examined the nature of the CAM charges and their relationship to the lease agreements. The key points discussed were:
The appellant argued that CAM charges were for maintenance services and should be categorized under Section 194C. They provided sample invoices and agreements to demonstrate that CAM charges were based on per square foot area and involved separate services distinct from the rent.
The Departmental Representative supported the AO’s view that CAM charges were part of the rent. They argued that the CAM charges were integral to the lease agreements and should be treated as rent under Section 194I.
The Tribunal analyzed the submissions and concluded:
Based on these findings, the ITAT held that CAM charges should be subjected to TDS under Section 194C and not Section 194I.
The ITAT concluded that the CAM charges paid by Yum Restaurants India Pvt. Ltd. were for maintenance services and should be subjected to TDS under Section 194C. The Tribunal directed the AO to recompute the CAM charges, taking into consideration the two sections mentioned above.
Order pronounced in the open court on 03/10/2022 by Dr. B. R. R. Kumar, Accountant Member, and Anubhav Sharma, Judicial Member.
The appeal of the assessee is allowed for statistical purposes.
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