Common Area Maintenance Charges not rent liable to TDS u/s 194-I – SLP dismissed

Common Area Maintenance (CAM) Charges cannot, by any stretch, be construed as payment of rent liable to TDS under section 194-I – Supreme Court dismissed SLP. 

In a recent judgment, Hon’ble Supreme Court has dismissed SLP of the Income Tax Department against the judgment of the High Court that Common Area Maintenance (CAM) Charges are cannot, by any stretch, be construed as payment of rent for occupying the premises and hence not liable to TDS.

ABCAUS Case Law Citation:
4941 (2025) (12) abcaus.in SC

The respondent assessee had taken a shop on rent at a Mall. The AO found that Business Group owning the Mall received Common Area Maintenance (CAM) charges from various persons in connection with occupation and license of units in the said malls.

It was noted by the AO that the Assessee had paid CAM charges after deducting TDS at the rate of 2% of the said charges, and had deposited the same on the basis that the payments were payments under contract covered under the provisions of Section 194-C of the Act.

However, according to the AO, CAM charges paid by the mall owners were essentially a part of rental activities and, therefore, TDS was required to be deducted on such payments under Section 194-I of the Act.

On the aforesaid basis, the AO concluded that the TDS was required to be deducted at the rate of 10% on such payments. The AO passed an order determining the TDS amount payable under Section 201(1) of the Act and also computed the interest on the said amount under Section 201(1A) of the Act.

Aggrieved by the aforesaid decision, the Assessee preferred an appeal before the CIT(A). However, the same was dismissed.

However, the ITAT allowed the appeal of the assessee concluding that CAM charges could not be brought within the scope of definition of “rent” as defined under Section 194-I of the Act. According to the ITAT, the payments made would fall within the meaning of “work” as defined under Section 194-C of the Act.

The Revenue challenged the order passed by the ITAT before the Hon’ble High Court. However, the Hon’ble High Court opined that there was find no infirmity with the reasoning adopted by ITAT.

The Hon’ble High Court observed that CAM charges are essentially maintenance charges paid by a unit for proper maintenance of the common area. The said charges are contributed towards expenditure ON cleanliness, utilities and maintenance. These charges are shared expenses for common works and utilities. The said charges cannot, by any stretch, be construed as payment of rent for occupying the premises in question. The fundamental premise that CAM charges are, by their nature, lease rentals or license charges is erroneous.

As a result, the Hon’ble High Court upheld the order of the ITAT.

Not satisfied with the judgment of the High Court, the Department challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition. However, the Apex Court dismissed the SLP observing in the facts and circumstances of the case, there was no error or illegality in the order passed by the High Court. 

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