ITAT rules CAM charges are not rent and attract TDS under Section 194C, dismissing Revenue appeals against Biba Apparels.

May 29, 2026 : The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed three appeals filed by the Income Tax Department against Biba Apparels Pvt. Ltd., holding that Common Area Maintenance (CAM) charges paid by the retailer are contractual payments for services and not rent. Consequently, tax deducted at source (TDS) on such payments was correctly deducted under Section 194C of the Income Tax Act, 1961, and not under Section 194I as contended by the Revenue.

The ruling was delivered by a Bench comprising Judicial Member Raj Kumar Chauhan and Accountant Member Renu Jauhri in appeals relating to Assessment Years 2013-14, 2014-15 and 2015-16. The Tribunal upheld the orders passed by the Commissioner of Income Tax (Appeals), which had granted relief to Biba Apparels and deleted demands raised for alleged short deduction of TDS.

The dispute arose from proceedings initiated after a survey conducted under Section 133A of the Income Tax Act in relation to Ambience Group, which operates Ambience Mall in Gurugram and Ambience Mall in Vasant Kunj, New Delhi. During the survey, the department noticed that tenants and occupants of the malls were paying CAM charges and deducting TDS at the rate of 2% under Section 194C. The Revenue took the view that these payments formed an integral part of rental arrangements and therefore attracted TDS at 10% under Section 194I, which governs rent payments.

Based on this interpretation, proceedings under Sections 201(1) and 201(1A) were initiated against Biba Apparels, treating it as an assessee in default for short deduction of tax. For Assessment Year 2013-14 alone, the department raised a demand of more than ₹40.58 lakh. Similar issues arose for the subsequent assessment years.

Biba Apparels, which operates retail outlets under the well-known brands “Biba” and “Rangriti,” argued that CAM charges are paid separately for maintenance and operational services provided in shopping malls, including upkeep of common facilities, utilities, cleanliness and maintenance. According to the company, these payments were not consideration for the use of land or buildings and therefore fell squarely within the scope of contractual payments covered under Section 194C.

The Commissioner (Appeals) accepted the company’s contention and relied heavily on recent judicial developments, particularly the judgment of the Delhi High Court in Commissioner of Income Tax (TDS) v. Liberty Retail Revolutions Ltd. The High Court had held that CAM charges cannot be equated with rent and are fundamentally payments towards maintenance services and common facilities.

While affirming the appellate authority’s findings, the ITAT noted that the controversy was no longer res integra and had already been addressed in several decisions involving similar facts. The Tribunal referred to earlier coordinate bench rulings, including those concerning tenants of Ambience Mall, where it was consistently held that CAM charges are distinct from rent and represent consideration for maintenance services rendered under contractual arrangements.

The Tribunal emphasized that rent under Section 194I covers payments for the use of land, buildings, machinery, plant, equipment, furniture or fittings. CAM charges, however, are collected for maintaining common areas and shared facilities and therefore do not satisfy the statutory definition of rent. Referring to judicial precedents, the Tribunal observed that such charges are “completely dependent and separate from rental payments” and are “fundamentally for availing common area maintenance services.”

In a significant observation, the Tribunal endorsed the Delhi High Court’s reasoning that “CAM charges are essentially maintenance charges paid by a unit for proper maintenance of the common area” and that such charges “cannot, by any stretch, be construed as payment of rent for occupying the premises in question.” The High Court had further observed that the assumption that CAM charges are lease rentals or licence fees is fundamentally erroneous.

The Bench also noted that in Biba Apparels’ own cases for earlier assessment years, coordinate benches of the Tribunal had already accepted the company’s stand. The agreements on record demonstrated that CAM charges were governed by separate arrangements and did not form part of the rent payable to landlords. Since tax had been deducted under Section 194C on payments made to service providers responsible for maintaining common areas, the Tribunal found no legal basis to treat the assessee as being in default.

Rejecting the Revenue’s reliance on the Delhi High Court decision in Apeejay Surrendra Park Hotels Ltd. v. Union of India, the Tribunal concluded that the facts of the present case were distinguishable because the payments in question were not for occupation or use of premises but for maintenance services. Accordingly, the demand raised under Sections 201(1) and 201(1A) for alleged short deduction of TDS was held to be unsustainable.

The ruling carries significant implications for retailers, commercial establishments, mall operators and businesses occupying leased premises across India. It reinforces the judicial distinction between rental payments and service-related maintenance charges and provides clarity on the correct TDS treatment of CAM charges. The decision is likely to reduce litigation on the issue and offers certainty to taxpayers who separately account for maintenance expenses and deduct TDS under Section 194C.

With this judgment, the ITAT dismissed all three appeals filed by the Revenue for Assessment Years 2013-14, 2014-15 and 2015-16, affirming that CAM charges are contractual service payments and not rent under the Income Tax Act.

Case Title: Deputy Commissioner of Income Tax v. Biba Apparels Pvt. Ltd., ITA Nos. 7689/Del/2025, 7684/Del/2025 & 7687/Del/2025.