BEFORE SHRI O. P. KANT, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER

I.T.A. No. 889/DEL/2020 (A.Y 2011-12)

1 ITA No. 889/Del/2020

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: ‘D’ NEW DELHI

BEFORE SHRI O. P. KANT, ACCOUNTANT MEMBER
AND

MS SUCHITRA KAMBLE, JUDICIAL MEMBER

I.T.A. No. 889/DEL/2020 (A.Y 2011-12)

(THROUGH VIDEO CONFERENCING)

Kapoor Watch Company Pvt. Ltd. Vs ACIT
G-7, South Extension, Part-1, Circle-75(1)
New Delhi New Delhi
AAACK3885A (RESPONDENT)
(APPELLANT)

Appellant by Sh. Gautam Jain, Adv &
Sh. Lalit Mohan, CA

Respondent by Sh. Sohail Malik, Sr. DR

Date of Hearing 23.12.2020

Date of Pronouncement 05.01.2021

ORDER

PER SUCHITRA KAMBLE, JM

This appeal is filed by the assessee against the order dated 16/1/2020
passed by CIT(A)-38, Delhi for Assessment Year 2011-12.

2. The grounds of appeal are as under:-

“1. That order dated 30.3.2018 u/s 201(1 )/201(1 A) of the Act for the

financial year 2010-11 was barred by limitation and therefore deserved to be

quashed as such.

1.1 That the learned Commissioner of Income Tax (Appeals) has failed to

appreciate that since order u/s 201(1)/ 201(1 A) of the Act was beyond the

period of six years from the end of financial year in which the payment was
2 ITA No. 889/Del/2020

made or credit was given by the appellant company in view of the provisions

contained in section 201(3) of the Act, therefore order made was barred by

limitation.

2. That the learned Commissioner of Income Tax (Appeals) otherwise too

erred both in law and facts in upholding the order concluding that the appellant

company be „assessee-in-default for a sum of Rs. 1,68,499/- u/s 201(1) of the

Act and Rs. 1,43,963/- u/s 201 (1 A) of the Act.

2.1 That finding that “common area maintenance charges are paid by the

lessor and the appellant has no control on actual expenditure to be incurred by

the lessor. In view of above mentioned factual and legal position, thus it is clear

the common area maintenance charges paid by the appellant are part of rent

liable for TDS u/s 1941 and accordingly other decision relied upon by the AR are

distinguishable on facts” is factually and legally misconceived, and untenable.

2.1 That the learned Commissioner of Income Tax(Appeals) has erred both

in law and on facts in upholding the conclusion that appellant was obliged to

deduct TDS u/s 1941 of the Act as asainst u/s 194C of the Act on the common

area maintenance charges paid by the appellant company.

2.2. That in any case and, even other-wise, the Commissioner of Income Tax

(Appeals) has overlooked the judgment of the Hon‟ble Supreme Court in the case

of Hindustan Coca Cola Beverages Ltd. vs. CIT reported in 293 ITR 26 wherein it

was held that once the deductee has paid the taxes due, then there is no

justification for imposing any liability under section 201(1) of the Act.

3. That in any case and, even other-wise, the Commissioner of Income Tax

(Appeals) has overlooked the judgment of the Hon‟ble Supreme Court in the case

of Hindustan Coca Cola Beverages Ltd. vs. CIT reported in 293 ITR 26 wherein it

was held that once the deductee has paid the taxes due, then there is no

justification for imposing any liability under section 201(1) of the Act.”

3. The assessee company M/s Kapoor Watch Company Pvt. Ltd. is in the

business of selling and marketing in the retail market of luxury watches of
3 ITA No. 889/Del/2020

international brands. A Survey Action u/s 133A(2A) of the I. T. Act, 1961, was
conducted in the case of Ambience Group by ACIT(TDS) - 73(1), Delhi on
12/02/2018 with the purpose to verify compliance by the assessee company to
the provisions of Chapter XVII B of the Income Tax Act,1961. During the course of
Survey Action, it was found that the Ambience group operates two malls, namely
Ambience, Gurgaon and Ambience Mall, Vasant Kunj. The malls have various
units/shops that have been either sold or are rented. It was observed by the
Assessing Officer that the group i.e. mall owners have recovered/collected
expenses in the form of CAM (Common Area Maintenance) Charges. It is seen that
the deductors/tenants have been deducting TDS at 2% being considering the
same to be covered under the provisions of Section 194C. Since these
collections/payments are directly relatable to and being part of the rental activity
and also mentioned in the same contractual agreement should have been covered
by the provisions of Section 1941 calling for TDS at 10% as against deduction of
TDS at 2% being made by the deductors/tenants, thereby prima facie being
assessee in default. On the basis of the information received from Circle 73(1),
New Delhi a notice was served for Section 201 proceedings for FY 2010-11 on
06/03/2018 asking for details the assessee company. In response to this notice,
Authorized Representative of the company appeared on 15/03/2018 filed Balance
sheet, P& L account and Tax Audit Report alongwith annexure, section wise
details of TDS deducted and deposited and also submitted the copy of Provisional
receipt of all TDS return. The Assessing Officer observed that the payments in the
nature of common area maintenance (CAM) which is essentially part of rental
activity are covered u/s 194-I & thus calculated the short deductions at Rs.
1,68,499/- and treated the assessee in default within the meaning of Section
201(1) of the Income Tax Act for failing to appropriately deduct tax as required by
the provisions of the Act. The Assessing Officer also imposed interest for short
deduction of TDS at 1% for every month on the amount of such tax from the date
on which such tax was deducted to the date on which such tax is actually paid.
Thus, the total TDS liabilities u/s 201 (1)/201(1A) was computed at Rs. 3,14,
078/-.
4 ITA No. 889/Del/2020

4. Being aggrieved by the assessment order u/s 201(1)/201(1A), the assessee
filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the
assessee.

5. As regards to Ground No. 2, 2.1 and 3 relating to issue that the assessee
company should have deducted TDS u/s 194-I of the Act as against u/s 194C of
the Act on the Common Area Maintenance Charges (CAM) paid by the assessee
company. The Ld. AR submitted that undisputed facts are that there is tri-parte
agreement between assessee company (tenant), owner and,
operation/maintenance services providers agency. It is also undisputed fact that
assessee company has paid rent to owner after deduction of TDS u/s 194-I of the
Act and, to operation/maintenance services providers directly after deduction of
TDS u/s 194C of the Act. The only dispute that arises by revenue that assessee
company should deduct TDS on payment made directly to operation/maintenance
services providers u/s 194I of the Act instead of Section 194C of the Act by relying
on the judgment of the Hon’ble High Court of Punjab & Haryana in case of Sunil
Kumar Gupta vs. ACIT 389 ITR 38. The Ld. AR submitted that CIT (A) while
sustaining the order of the Assessing Officer has relied upon judgment of the
Hon’ble High Court of Punjab & Haryana in case of Sunil Kumar Gupta vs. ACIT
389 ITR 38 wherein the Hon’ble Court held that maintenance charges must form a
part of the rent while calculating the annual value of property u/s 23(1) of the Act
for the purpose of Section 22 of the Act. However, the Ld. AR submitted that the
issue under consideration is distinguishable from the facts before the Hon’ble
High Court. The Ld. AR submitted that issue under consideration is of deduction
of TDS that too for maintenance charges paid directly by assessee tenant to
maintenance services provider agency and, it is not the case of revenue that
income should be added in the hands of landlord/ operation/maintenance
services providers agency under the head “Income from house property”. The Ld.
AR further submitted that obligation to deduct TDS arises u/s 194-I of the Act
only if nature of payment in hands of payee is rent. In the instant case payment is
5 ITA No. 889/Del/2020

in the nature of maintenance charges undisputedly in hands of payee and once it
is the factual position then both legally and logically section applicable is 194C of
the Act. The allegation of revenue is based on edifice that sum paid by the payer is
rent in hands of landlord who is neither payee nor payer and thus ex-facie the
basis is misconceived. The Ld. AR submitted that it is evident from the plain
reading of Section 190 that notwithstanding that the regular assessment in
respect of any income is to be made in a later assessment year, the tax on such
income shall be payable by deduction or collection at source or by advance
payment or by payment under sub-section (1A) of section 192 of the Act, as the
case may be, in accordance with the provisions of this Chapter. Thus, the Ld. AR
submitted that TDS is a part of tax on income of payee/recipient. Therefore, the
Ld. AR submitted that whether TDS deductible or not and, if deductible under
which Section TDS has to be deducted depend on nature receipt of
payee/recipient from whose payment TDS to be deducted. The Ld. AR relied upon
the following decisions:

i) GE India Technology Centre (P) Ltd. vs. CIT 327 ITR 456 (SC)
ii) Vijay Ship Breaking Corpn. & Ors. Vs. CIT 314 ITR 309 (SC)

The Ld. AR further submitted that nature of payment in hands of payer is not
deciding/relevant factor for deciding nature of receipt in hands of recipient. In this
regard reliance is placed on judgment of the Hon’ble Apex Court in case of Empire
Jute Co. Ltd. vs. CIT 124 ITR 1 by the Ld. AR.

6. The Ld. DR relied upon the order u/s 201(1)/201(1A) and order of the
CIT(A).

7. We have heard both the parties and perused the material available on
record. Ground Nos. 1 and 1.1 are general in nature hence not adjudicated upon.
As regards to Ground Nos. 2, 2.1, 2.2 and 3, it is pertinent to note that the
assessee company has paid the rent to owner after deduction of TDS u/s 194-I of
the Act and the payment for operation/maintenance was made directly to the
6 ITA No. 889/Del/2020

services providers after deduction of TDS u/s 194C of the Act. There is a Tri-party
Agreement which was on record before the Assessing Officer as well as before the
CIT(A). These facts were never disputed by the Assessing Officer as well as the
CIT(A). The only dispute that arises by revenue that assessee company should
deduct TDS on payment made directly to operation/maintenance services
providers u/s 194-I of the Act instead of Section 194C of the Act by relying on the
judgment of the Hon’ble High Court of Punjab & Haryana in case of Sunil Kumar
Gupta vs. ACIT 389 ITR 38 wherein the Hon’ble Court held that maintenance
charges must form a part of the rent while calculating the annual value of
property u/s 23(1) of the Act for the purpose of Section 22 of the Act. However, in
the present assessee company’s case, the common area maintenance charges was
not forming the part of the actual rent paid to the owner by the assessee company.
There is a separate agreement between the Owner, Tenant and service provider for
common area maintenance which is distinguishing fact and thus, the decision of
the Hon’ble Punjab and Harayana High Court will not be applicable in the present
case. Therefore, the CIT(A) was not right in confirming the order of the Assessing
Officer. Hence, appeal of the assessee is allowed.

8. In result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on this 5TH day of January, 2021

-Sd/- -Sd/-
(O. P. KANT) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 5th /01/2021 ASSISTANT REGISTRAR
R. Naheed * ITAT NEW DELHI

Copy forwarded to:

1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT