PVR Ltd., New Delhi V. ACIT Circle-76(1), New Delhi

ITA 7290/DEL/2019

AI Insights

PVR Ltd. filed appeals against the orders of the CIT(A) regarding the treatment of CAM charges and their classification under the Income Tax Act for the assessment years 2011-12 and 2012-13. The primary contention was whether the CAM charges paid by PVR Ltd. should be treated as rent liable for TDS under Section 194I or as payments for services under Section 194C. The Tribunal referenced a similar case, Yum Restaurants India (P.) Ltd., which had set a precedent on this issue. The Tribunal found that the CAM charges were distinct from rent and should not be subjected to TDS under Section 194I but rather under Section 194C.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131065 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 29-11-2022
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2019
• Other Referred Cases: Yum Restaurants India (P.) Ltd. vs. CIT, Japan Airlines Co. Ltd. vs. CIT, Sunil Kumar Gupta vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 72

Judgement Text

Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Sh. Yogesh Kumar US, Judicial Member ITA No. 7290/Del/2019 : Asstt. Year: 2011-12 ITA No. 202/Del/2020 : Asstt. Year: 2012-13 PVR Ltd., 61, Basant Lok, Vasant Vihar, New Delhi-110057 Vs. ACIT, Circle-76(1), New Delhi (APPELLANT) (RESPONDENT) PAN NO. AAACP4526D Assessee by : Sh. G. C. Srivastava, Sr. Counsel, Sh. Kalrav Malhotra, Adv. Revenue by : Sh. Sanjay Nargas, Sr. DR Date of Hearing: 30.11.2022 Date of Pronouncement: 09.02.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeals have been filed by the assessee against the order of ld. CIT(A)-31, New Delhi dated 30.07.2019 and the order of ld. CIT(A)-38, Delhi dated 29.11.2019. 2. Since, the issues involved in both the appeals are identical, they were heard together and being adjudicated by a common order. 3. In ITA No. 7290/Del/2019, following grounds have been raised by the assessee: “ 1. T h a t o n t h e f a c ts a nd c i rc u m s ta nc e s o f t h e ca s e a n d i n l a w , t h e Ld . C IT ( A ) h a s e r r e d i n h ol d i n g th a t Co m mo n Ar e a M a i nt e n a n ce ( ‘ C A M ’ ) ch a r g e s p ai d b y t he A pp e l l a nt a r e i n t h e n a tur e o f r e nt a n d a r e l i ab l e t o T D S u / s 19 4 I o f the A c t . ITA No.7290/Del/2019 ITA No. 202/Del/2020 PVR Ltd. Page | 2 2 . T ha t o n th e f a c t s a n d ci r cu m s t a n ce s o f th e c a s e a n d in l a w , th e L d . CI T ( A) h a s f a i l e d to a p p r e c ia te th a t the C A M c h a r g e s p a i d a r e t o wa r d s s e r vi c e s i n r e l at io n to co m m on a r e a wh i c h i s n o t i n t h e p os se s si o n o f t h e A pp e l l a nt a n d c o mp r i se se r v i ce s l i k e cl e a n i n g , m a in te n a n c e , up k e e p , se c u r i ty , a ir co n d it io n i n g, la n d s c ap i n g , si g n a g e s , wa te r , e l e ctr i ci ty , co n su m ab l e s , l i gh ti n g , s in k i n g fu n d e tc . Ch a r g es fo r th e sa i d se r v i c es a r e n o t in t h e n a tu r e o f r e n t a nd a r e t hu s l i a b l e t o T D S u / s 1 9 4C of th e Ac t. 3 . T ha t o n th e f a c t s a n d ci r cu m s t a n ce s o f th e c a s e a n d in la w , t he L d . C I T( A ) e r r ed in ho l d i ng t h a t t he r a ti o o f th e j u d g me n t of t h e H on ’ b l e Su p r e m e Co u r t in t h e c a s e o f J a p an Ai r l i n es Co . L td . v . C I T ( 20 1 5) 3 77 I T R 3 72 i s n o t a p p l ic a b le i n t h e Ap p e l la n t’ s ca se . 4 . T ha t o n th e f a c t s a n d ci r cu m s t a n ce s o f th e c a s e a n d in la w , t he L d . C I T( A ) e r r ed in ho l d i ng t h a t t he r e l ev a n t cl a r i fi c a t io n s u n de r CB D T Ci r c ul a r No s . 7 15 , 5 5 8 a nd 1 / 20 0 8 ar e no t a p p l ic a b le t o th e Ap p e l la n t’ s fa ct s. 5 . T ha t o n th e f a c t s a n d ci r cu m s t a n ce s o f th e c a s e a n d i n l a w , th e L d . CI T (A ) e r r e d in p l a ci n g r e l i an ce o n th e j u d g m e n t o f t h e H o n ’ bl e P u n j a b a n d H a r y a na H ig h C o u r t in t he ca s e o f S u n i l K u m ar G up ta v AC I T ( 20 1 6) 3 8 9 I T R 3 8 . 6 . T ha t o n th e f a c t s a n d ci r cu m s t a n ce s o f th e c a s e a n d i n l a w , t h e L d . CI T (A ) f a i l e d t o a p p r e c ia te th at th e o r de r u / s 2 0 1( 1 ) /2 0 1(1 A) o f th e Ac t h a d b e e n p a sse d b y th e L d . A O i n a c o n tr a d i cto r y m a n n e r , a s t he Ld . A O h a d hi m se l f h e ld th a t CA M c h ar g e s p a id to i n d ep e n d e nt t hi r d p a rt y se r v i ce p r ov id e rs a r e n o t in t h e n a t u r e o f r e n t . Fu r th e r , t h e L d. A O h a s h e l d t h a t C AM c h a r g e s p a i d d i r e ctl y t o th e o wn e r / d ev e l op e r o f th e p r o p e r t y a re in th e n a t u r e o f r e n t , wi th o u t ta k i ng i n to a c c o un t t he fa c t t ha t th e u n d e r ly i n g c o mm o n ar e a m a i n te n a n ce se r v i ce s a r e i d e n ti c a l . 7 . T h e Ld . CI T ( A) e r r e d i n i g no r i n g t h a t C A M ch a r g e s , w h e t h e r p a i d to in d e p en d e n t se r v i ce ITA No.7290/Del/2019 ITA No. 202/Del/2020 PVR Ltd. Page | 3 p r ov i de r s o r de v el o p er / o wn e r , c on s t it ut e a p p r o x i m at e ly t h e sa m e p e r ce n ta g e o f re n t . ” 4. The similar issue involving deduction of TDS on rent and CAM charges stands adjudicated by the order of the Tribunal in the case of Yum Restaurants India (P.) Ltd. in ITA No. 1115/Del/2020 for A.Y. 2012-13 vide order dated 03.10.2022. 5. For the sake of ready reference and completeness, the ratio of the said case is reproduced as under: “3. The provisions of TDS on rent are governed by Section 194I and maintenance contract are governed by Section 194C of the Income Tax Act, 1961. In this backdrop of the provisions of the Act, the affairs of the assessee are examined. As per the lease deed entered by the assessee with M/s Gopalan Enterprises, Bangalore, the assessee obtained piece and parcel of the shop on lease of unit no. 121 on 1 st Floor with a carpet area of 1920 sq. ft. and shop no. 226 on 2 n d Floor with a carpet area of 1722 sq. ft. The assessee shall pay 7% of revenue share on net sales as monthly rent and also pay @Rs.12/- per sq. ft. for maintenance services. 4. The assessee has also submitted sample invoice for payment of CAM charges as entered into an agreement for common area maintenance with GVK Properties & Management Company Pvt. Ltd. for maintenance of the area at Rs.22/- per sq. ft. for a combined area of 4427 sq. ft. for which monthly maintenance of Rs.97,390/- has been paid. ITA No.7290/Del/2019 ITA No. 202/Del/2020 PVR Ltd. Page | 4 5. Thus, the issue before us narrows down to deductibility of the tax on the entire payment as rent or to be segregated into rent and CAM. On the this, the observation of the ld. CIT(A) is as under: “4 .3 G r o u n d s o f a p p e a l N o s . 2 (a ) , 2 ( b ) a n d 2 (c ) , t he A p p el l a n t h a s c h a l l e n g e d t h e a c t i o n o f A O i n t r e a t i n g CA M c h ar g e s a s p a r t o f r e nt l i a b l e f o r TDS u /s 1 9 4 1 . U nd i s p u t ed l y t h e r e i s s i n gl e l ea s e a g r e e m e n t f or p a y m e n t of r e n t a s w e l l a s C A M c ha r g e s . T h e A R h a s s u b m i t t e d t h a t p a y m e nt o f CA M c h a r g es i s n ot hi n g b ut r ei m b u r s em e n t o f c om m o n a r e a m a i n t e na n c e e x p e nses i nc u r r e d b y t h e l e s s o r o n g e n e r a l m a i nt e n a n c e , e l ect r i c , w a t e r a nd s ec u r i t y s er v i c e s e t c . F u r t h er i t h a s b e e n c l a im e d t ha t, t h e c o m m o n a r e a i s o u t s i d e t h e a r e a w hi c h i s l ea s e d o u t t o t h e a s s e s s e e. T h e s e a r g u m e n t s a r e n ot a c c e p t a b l e b e c a use t h e c o m m o n a r e a a n d ot h e r s e r v i c e s p r o v i d e d b y t h e l es so r a r e a l s o e nj o y ed b y t h e a p p el l a n t a l o n g wi t h t h e s p ec i f i ed ar e a . A s p e r t h e s a m e a g r e em e n t, t h e a p p el l a n t i s r e q ui r e d t o p ay l ea s e r e n t a s w e l l a s CA M c h a r g e s . It i s a l s o n o t i c ed t ha t t h er e i s n o d i s t i nc t i o n b et w e e n C A M c ha r g es a n d l ea s e r e n t p a y me n t s e xc ep t , f or r a i s i n g s e p a r a t e i n v oi c es . T h e E xp l a n a ti o n b e l o w s e c t i o n 1 9 4 1 w h i c h d e fi n e s " R e n t " t a k es i n t o i t s a mb i t a n y p a y m e n t, b y w h a t ev e r n a m e c a l l ed , u n d e r a n y l e a s e , s u b -l e a s e, t e n a n c y o r a n y o t h e r a g r e e m e nt o r a r r a n g e m e n t f o r th e us e o f ( ei t h e r s e p a r a t el y or t o g e t h er ) a n y (b ) b ui l d i n g or (c ) l a n d a p p u r t e n a n t , t o a b ui l d i n g (i nc l ud i n g f a c t or y b ui l di n g ) o r ( h ) fi t t i n gs , w h e t h e r or n o t a n y or a l l o f t h e a b ov e a re o w n e d b y t h e p a y e e a n d h e nc e i t i s c l e a r t h a t a n y p a y m e n t e ve n f or u s e o f a n y b ui l d i n g a nd l a nd a p p u r t e n a nt , t h e r e t o i nc lu d i n g f ur ni t ur e / f i t t i n g s i s p a r t o f r e n t . C B D T v i d e c i r c ul a r N o. 7 1 5 d a t e d 0 8 . 0 8 .1 9 9 5 (Q u e s t i o n N o . 2 4 ) h a s a l s o c l a r i fie d t h a t t h e r e i s c omp o s i t e a r r a n g e m e n t f o r us e o f p r e m i s es a n d p ro v i s i o n o f m a n p o w e r , s uc h a g r e em e n t i n es s e n c e i s f or t a k i n g pr em i s es o n r e n t a n d h e n c e p r ov i s i o ns o f s e c t i o n 1 9 4 1 a r e -a p p l ic a b l e . T hi s v i e w a l s o g e t s s u p p or t f r om t h e d e c i s i o n o f H o n ' b l e H i g h C o ur t i n t h e c a s e o f S u n i l K um a r G up t a V s A C IT (2 0 1 6 ) 3 8 9 I TR 3 8 (P & H ), i n w hi c h i t i s h el d t h a t w h e r e t h e a g r e e m e n t p r o v i d e s t ha t t h e o w n e r o f t h e p r em i s es s h a l l p a y f or c o m m o n fa c il i t i e s , t h e n i t i s r e a s o n a b l e t o p r es u m e t ha t t h e s a m e i s fa c t o re d i nt o t h e r e n t p a y a b l e b y t h e l es s e e . H o w e v er , i f m a i nt e n a n c e c h a r g e s et c . a r e s t i p ul a t e d t o b e p a y a b l e b y t h e l es s o r , i t m us t f o r m p a r t o f r e n t f or t h e p u r p os es o f c o mp u t i n g i nc o m e fr o m h o u s e p r op e r t y . I n t h e c a s e b e f or e h a n d , t h e C A M c ha r g es a r e p a i d b y ITA No.7290/Del/2019 ITA No. 202/Del/2020 PVR Ltd. Page | 5 t h e l e s s or a n d t h e a p p e l l a n t h a s n o c o n t r o l o n a c t ua l e xp e n d i t ur e t o b e i n c ur r ed b y t h e l es s o r . I n v i e w of a b ov e m e n t i o n e d f a c t u a l a nd l e g a l p o s i t i o n , t h us i t i s c lea r t ha t t h e C A M c h a r g e s p a i d b y t h e a p p el l a n t a r e p a r t of r e nt l i a b l e f o r TDS u / s 1 9 4 1 a n d a c c o r d i n gl y ot h e r d e c i s i o ns r e l i e d u p o n b y t h e A R a r e d i s t i n g ui s h a b l e o n f a c t s . T h e a p p e l l a nt ha s a l s o s t a t e d t ha t , t h e A O ha s i nc or r ec t l y h e l d t ha t t h e d e c i s i o n i n t h e c a s e of Ja p a n A i r l i n es C omp a n y L t d . V s C I T (2 0 1 5 ) 3 7 7 I T R 3 7 2 (S C ) i s n o t a p p l i c a b l e. I f i n d t h a t t hi s d e c i s i on i s r e l a t e d t o p a y m e nt o f l e a s e c h a r g es t o A A I f or l a n d i n g a n d t a k e o ff fa c i l i t i es i nc l ud i n g f o r p a r ki n g of t h e a i r c r a ft s . A s i s c l e a r fr o m t h e f a c t s o f t hi s ca s e , t h e l e a s e c h a r g e s w er e p a i d f o r ut i l i zi n g t h e s e r v es of a i r p or t a n d n o t of t h e p r em i s es i n e s s e n c e . A c c o r d i n g l y, I h o l d t h a t th e A O ha s r i g h t l y d i s t i n g ui s h e d t h e s a m e f r o m t h e f a c t s o f a pp e l l a nt . H e n c e, t h e g r o u n d s of a p p ea l a r e d i s m i s s e d . ” 6. The undisputable fact in this case is that while the lease rentals are paid based on a fixed percentage on the net revenue, the CAM charges are based on the per sq. ft. area. The observation of the ld. CIT(A) is that the rent by any name, lease, sub-lease, tenancy or the reliance on the judgment wherein the services are intrapolated into the rent stand on a different pedestal. In the instant case, the determination of the rent or CAM are separate and the CAM arrangements are not essential and an integral part for use of the premises. While there are no expenses incurred against the rent except for general building maintenance and municipal charges, the CAM involves employment of separate staff and separate operations involved on day to day basis. Hence, we hold that the provisions for rent are governed by Section 194I and CAM charges by Section 194C of the Act. The AO is directed to re-compute the CAM charges, taking into consideration the two sections mentioned above.” ITA No.7290/Del/2019 ITA No. 202/Del/2020 PVR Ltd. Page | 6 6. In the result, the appeals of the assessee are allowed for statistical purpose. Order Pronounced in the Open Court on 09/02/2023. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 09/02/2023 *Subodh Kukmar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR