2% TDS Deductible On Common Area Maintenance Charges: ITAT

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that 2% TDS is deductible on common area maintenance charges.

The two-member bench of C.M. Garg (Judicial Member) and Pradip Kumar Khedia (Accountant Member) has observed that the common area maintenance charges were not part of the actual rent paid to the owner by the assessee company. Payments of rent and common area maintenance charges have been made to distinct entities or companies; therefore, the authorities below were not right in creating the liability payable by the assessee firm.

The appellant/assessee submitted a copy of the agreement for taking possession of rented premises and argued that the agreement clearly shows that there is a separate clause for "payment of rent" and "payment of common area maintenance charges." Therefore, these payments cannot be mixed to attract the provisions of TDS.

The assessee submitted that, as per the certificate issued by the TDS Officer, the TDS charges are applicable at a rate of 0.5% instead of 10%, and the assessee has deducted 2% TDS, which is sufficient to comply with the provisions of the Act. Therefore, no further disallowance or addition can be made.

The AO in the assessment order observed that the payments received by Ambience Group are split between two companies of the same group on a single contract, one for rent and the other for maintenance charges. The AO stated that the arrangement was made to avoid the higher TDS deduction rate that was applicable.

The tribunal held that when the receiver of rent and the receiver of maintenance charges are different and distinct, and the character of the payment is also different and distinct, then the payments towards maintenance charges have to be made after 2% TDS and not 10%.

Case Title: HV Global Pvt. Ltd. Versus ITO

Citation: ITA No.1676/Del/2020

Date: 06/12/2022

Counsel For Appellant: CA Manoj Kumar

Counsel For Respondent: Sr. DR Kumar Pranav

Click Here To Read The Order