2018 (9) TMI 802 - HC - Income Tax

TDS u/s 194H - Disallowance u/s 40 a (ia) - non deduction of tds on commission paid - Tribunal was of the opinion that there was no relationship of principal and agent between the assessee and the travel agents, to whom such commission was paid - Held that - Before the Tribunal, assessee had pointed out that she was a member of International Air Transport Association as engaged in booking the air tickets for domestic and international air travels in various Airlines. Some of the travel agents booked air tickets by using the assessee s membership. Such travel agents made payment of tickets at a concessional rate and these were the consumers of the assessee and not the agents. AO has committed an error in treating such travel agents as her agents and consequently, the discounted rate at which the tickets were sold was construed as commission paid by her to these agents. The travel agents were not working for her as agents. They had simply booked the tickets in their independent capacity through her. For making the bulk purchases for the airlines, she was getting sizeable commission and in turn, she had offered trade discount to the agents. The Tribunal accepted such explanation, referring to the judgment of this Court in the case of Ahmedabad Stamp Vendors Association v. Union of India 2002 (6) TMI 32 - GUJARAT HIGH COURT in which the Court was of the opinion that the principal agent relationship was essential for applying Section 194 H of the Act. We are broadly in agreement with the view of the Tribunal. No question of law arises.

Summary

Issues:
1. Disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source on commission paid by the assessee.

Analysis:
The case involved an appeal by the Revenue against the Income Tax Appellate Tribunal's judgment regarding the disallowance made under Section 40(a)(ia) of the Income Tax Act, 1961. The Assessing Officer had added &8377; 82.63 lakhs to the assessee's income for non-deduction of tax at source on commissions paid. The assessee, engaged in air ticketing, had paid commissions to agents without deducting tax at source. The Assessing Officer contended that tax should have been deducted on the commission payments. The CIT(A) upheld the addition, leading the assessee to appeal before the Tribunal.

The Tribunal, relying on the judgment in the case of Ahmedabad Stamp Vendors' Association v. Union of India, held that there was no principal-agent relationship between the assessee and the travel agents to whom the commissions were paid. The assessee, a member of the International Air Transport Association, explained that the travel agents were consumers who booked tickets at a concessional rate through her membership, not agents working on her behalf. She argued that the discounted rates were not commissions but trade discounts offered to the agents. The Tribunal accepted this explanation, emphasizing the necessity of a principal-agent relationship for tax implications under Section 194H of the Act.

The High Court, concurring with the Tribunal's view, dismissed the Tax Appeal, stating that no question of law arose. The judgment highlighted the importance of establishing a principal-agent relationship for tax implications on commission payments. The decision emphasized the specific facts of the case and the nature of the relationship between the assessee and the travel agents in determining the tax treatment of the commission payments.