2009 (4) TMI 7 - HC - Income Tax

Whether supplementary commission received by travel agents of assessee-airlines is a commission within the meaning of Section 194H - Held, yes thus assessee-airlines were obliged to deduct tax at source - assessee-airline having not deducted the tax at source, they are liable to pay interest u/s 201(1A) held that difference between the full value of the ticket and tickets issued by assessee to travel agents at a concessional price for their personal use is not an income u/s 194H

Summary

Issues Involved:
1. Whether supplementary commission received by travel agents of assessee-airlines is a "commission" within the meaning of Section 194H of the Income Tax Act, 1961.
2. Whether certificates issued under Section 197 of the Act permitting deduction of tax at source at a lower rate or "nil" rate cover the supplementary commission.
3. Whether tickets issued by assessee-airlines to travel agents at a concessional price fall under Section 194H of the Act.

Issue-wise Detailed Analysis:

1. Supplementary Commission as "Commission" under Section 194H:

The primary issue is whether the supplementary commission retained by travel agents qualifies as "commission" under Section 194H. The court examined the relationship between the assessee-airlines and travel agents, confirming it as one of principal and agent. It was established that the supplementary commission is the difference between the published fare and the net fare, retained by the travel agent. The court noted that the travel agent does not acquire proprietary rights over the tickets, which remain the property of the airline. The court concluded that the supplementary commission is indeed a commission within the meaning of Section 194H, as it is a payment received by the travel agent for services rendered on behalf of the airline. The court also dismissed the argument that the supplementary commission is a discount, emphasizing that it is intrinsically linked to the sale of airline tickets, thus qualifying as commission.

2. Certificates under Section 197:

The second issue pertains to whether certificates issued under Section 197, allowing for lower or nil deduction of tax at source, extend to supplementary commissions. The court found that these certificates were issued based on applications mentioning only the standard commission, not the supplementary commission. Consequently, the court held that the Section 197 certificates do not cover supplementary commissions, and airlines cannot claim exemption from TDS on supplementary commissions based on these certificates.

3. Concessional Tickets and Section 194H:

The third issue involves the issuance of tickets at concessional prices to travel agents and whether this falls under Section 194H. The court concluded that the difference between the full value of the ticket and the concessional price is not "commission" within the meaning of Section 194H. The transaction is considered a principal-to-principal transaction once the travel agent purchases the ticket at a concessional price. The court emphasized that the difference in price is a discount, not commission, and thus does not attract the provisions of Section 194H. The court dismissed the Revenue's appeal in this regard, affirming that no TDS is required on the difference between the full and concessional ticket prices.

Conclusion:

The court allowed the Revenue's appeals concerning supplementary commissions, holding that such commissions are subject to TDS under Section 194H. The matter was remanded to the Tribunal to examine other aspects and consequences. However, the court dismissed the Revenue's appeal regarding concessional tickets, affirming that the difference in price is a discount and not subject to TDS under Section 194H.