ITAT Delhi: 2% TDS Deduction on Payment for Maintenance Charges

2% TDS is deductible on common area maintenance charges, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) stated.

The two-member bench of C.M. Garg (Judicial Member) and Pradip Kumar Khedia (Accountant Member) revealed that the common area maintenance charges were not counted under the actual rent filed to the owner through the taxpayer company. Before various entities or companies, the payment of rent and the common area maintenance levy would be made, hence the council specified below was not true in making the liability that is levied to get paid via the taxpayer firm.

The petitioner provides the agreement copy for taking possession of the rented premises and contended, the agreement specifies that there would be a separate clause for the payment of rent and payment of common area maintenance charges. As a result, mixing these payments would make them subject to TDS rules.

According to the assessee’s submission, the TDS costs are applied at a rate of 0.5% rather than 10%, and the assessee has deducted 2% TDS, which is sufficient to comply with the Act’s requirements. No additional disallowance or addition is thus permissible.

In the assessment order, the AO noted that Ambience Group’s payments are divided between two businesses that are part of the same group under a single contract, one for rent and the other for maintenance fees. The AO claimed that the agreement was created in order to avoid the increased TDS deduction rate that was in effect.

The panel ruled that payments for maintenance charges must be issued after 2% TDS and not 10% where the recipients of rent and maintenance fees are separate and distinct, and the nature of the payment is also separate and unique.