The assessee had rented premises and entered into a tripartite agreement, under which it was liable to pay the rental income to the owner of the premises and common area maintenance charges to the operation/maintenance service provider. It deducted tax at 10 percent for the rent paid u/s 194I and 2 percent for the maintenance charges u/s 194C. According to the AO, the maintenance charges were part of the agreement and essentially a part of rental activity, hence covered u/s 194I and not 194C. It treated the assessee in default u/s 201(1) & (1A) for short deduction and interest.

The Tribunal noted that the maintenance charges were not forming part of the rent paid to the owner of the premises, and payments were made to two separate parties for different services after deducting tax at the source. Thus the assessee cannot be treated in default u/s 201(1) & (1A).    (ITA No/2020 dt. 05.01.2021)  (AY. 2011-12)