2003 (10) TMI 20 - HC - Income Tax

Recovery of the TDS on that supplementary commission had been challenged by the concerned airlines - appellants are agents for several airlines - prayer in the writ petition filed by the appellants before us is for a declaration that tax shall be deducted at source under section 194H of the Act only in respect of commission actually paid or payable by respondents Nos. 4 to 21 to the petitioners on the face value of the tickets and no tax can be deducted in respect of discount or rebate on the price of the tickets allowed by the airlines to the customers against lesser price of the tickets - We do not find any justification whatsoever for interfering with the order of the learned single judge vacating the interim injunction.

Summary

Issues:
Interpretation of section 194H of the Income-tax Act, 1961 regarding tax deduction on supplementary commission paid by airlines to agents.

Analysis:
The appellants, acting as agents for airlines, receive commission on tickets sold to passengers. The airlines label the difference between the air fare set by IATA and the selling price to agents as "supplementary commission," leading to tax liability under section 194H. The appellants challenge the tax deduction, arguing it should only apply to actual commission paid, not discounts to customers. The Revenue has initiated proceedings for TDS recovery on the supplementary commission, which the airlines have contested unsuccessfully, appealing to the Income-tax Appellate Tribunal in Delhi.

The appellants sought a writ declaring tax deduction under section 194H should only apply to commission paid, not discounts. An interim order was initially granted but later revoked at the airline's opposition. The airlines maintain that the supplementary commission, labeled as such in their books, is not a discount but an additional payment above the standard commission. The Revenue considers this amount taxable under section 194H as commission.

Section 194H of the Act specifically mentions commission, making it obligatory to deduct tax on such payments. The court notes that the appellants' perception of the payment does not alter the statutory provision's content, and the airlines are liable to deduct tax on the supplementary commission paid to agents. The appellants did not present the payment scheme in court, while the airlines assert that agents can use the supplementary commission as they see fit, either passing it on to passengers or retaining a portion.

The court dismisses the writ appeal, upholding the decision to vacate the interim injunction. The judgment emphasizes the statutory obligation to deduct tax on commission payments, regardless of how the parties label the additional amounts paid.