Businesses often pay Common Area Maintenance (CAM) charges for upkeep and shared facilities in commercial premises. A key tax question is whether such payments attract TDS under section 194-I (rent) or section 194C (contract payments).

Background of the Issue

In the present case, the assessee paid CAM charges covering:

• Maintenance of common areas

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• Utility expenses

• Security and facility management services

The Assessing Officer (AO) classified these payments as “rent” under Section 194-I of the Income-tax Act, leading to higher TDS implications.

Judicial Position

Courts have clarified that CAM charges are not rent but payments for services. Accordingly:

• CAM charges are contractual in nature

• They fall under Section 194C, not Section 194-I

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• The Supreme Court has dismissed the SLP, affirming this position

Key Takeaways

• Nature of payment matters: CAM charges are for services, not use of land/building

• Separate agreements help: Distinguishing lease rent and CAM charges is crucial

• Correct TDS compliance avoids disallowances and penalties

Relevant Legal References

• Section 194C & Section 194-I, Income-tax Act, 1961

• CBDT Circular No. 715 dated 08.08.1995

• Judicial precedents affirming CAM as contractual payments

Conclusion

Businesses should carefully classify CAM payments and deduct TDS under the correct section to avoid litigation. Reviewing agreements and payment structures is essential for compliance.

For expert guidance on this topic, contact your tax professional today.