The Delhi bench of the Income Tax Appellate Tribunal has referred a case involving common area maintenance charges back for renewed consideration, highlighting the ongoing debate over whether such payments should be taxed under section 194C or 194-I of the Income Tax Act.
The Delhi bench of the Income Tax Appellate Tribunal has sent back a dispute over common area maintenance charges for fresh consideration, saying the Commissioner of Income Tax (Appeals) must first decide whether the payments fall under 2% tax deducted at source for contractual work or 10% for rent. According to the report, the tribunal said the matter could not be decided on a mistaken factual footing and allowed the appeal only for statistical purposes.
The case involved Fairwood Holdings Pvt. Ltd., a company engaged in project development and consultancy across energy, transport, city development and infrastructure work, along with related design and layout services. Tax authorities had treated CAM payments as rent-like expenditure covered by section 194-I of the Income Tax Act and raised a demand of ₹3,42,723, but the assessee challenged that view before the appellate authorities.
In sending the matter back, the tribunal noted that the first appellate authority had dealt with the case on a different basis, describing the outlay as fees for professional or technical services rather than addressing the core question of how CAM charges should be taxed. Tax professionals following the issue have pointed to a broader line of Delhi rulings that treat CAM as maintenance service charges rather than rent, which generally brings them under section 194C instead of section 194-I.
That approach has already found support in other cases. TaxGuru reported that the Delhi High Court has clarified CAM charges are not rent and are better understood as payments for maintenance services. Separate reports on Delhi ITAT decisions in matters involving Biba Apparels, Air France and Bose Corporation India say the tribunal has repeatedly viewed these charges as contractual in nature, reinforcing the view that the correct TDS treatment depends on the actual character of the payment rather than the label attached to it.
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