2009 (3) TMI 598 - HC - Income Tax

TDS - Section 194H Commission on Air Tickets - In order to deduct tax at source the income being paid out must necessarily be ascertainable in the hands of the assessee -The airlines would have no information about the exact rate at which the tickets were ultimately sold by their agents since the agents had been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price and it would be impracticable and unreasonable to expect the assessee to get a feed back from their numerous agents in respect of each ticket sold - The airlines have discretion to sell the tickets at the price lower than the published price then the permission granted to the agent to sell it at a lower price, according to us, can neither amount to commission nor brokerage at the hands of the agent - The appeal is dismissed

Summary

Issues:
- Interpretation of section 194H of the Income-tax Act 1961 regarding the nature of special commission in the difference between commercial price and published price.

Analysis:
The primary issue in this case revolves around the interpretation of section 194H of the Income-tax Act 1961 concerning whether the difference between the commercial price and the published price constitutes a special commission in the nature of commission or brokerage. The airlines had an agreement with their agents to sell tickets at a minimum fixed commercial price, which could be increased by the agent at their discretion up to the published price. The commission payable to the agent was 9% of the published price, and TDS had been deducted on this commission. The Revenue argued that the difference between the published price and the minimum fixed commercial price amounted to an additional special commission, thus subject to TDS under section 194H.

Upon examining the order of the Income-tax Appellate Tribunal and considering the arguments presented, the Court found that for section 194H to be applicable, the income paid out by the assessee must be in the nature of commission or brokerage. It was noted that the airlines would not have information about the exact rate at which tickets were sold by agents due to the discretion given to agents in pricing. The Court emphasized that for TDS to be deducted, the income being paid out must be ascertainable in the hands of the assessee. In this case, the permission granted to agents to sell tickets at a lower price than the published price did not amount to commission or brokerage. Any additional amount earned by the agent above the fixed minimum commercial price would be considered income taxable in the agent's hands.

Consequently, the Court dismissed the appeal, stating that there was no error in the impugned order. The Court concluded that the difference in pricing between the commercial and published prices did not constitute commission or brokerage, and therefore, the question of law as framed did not arise, leading to the dismissal of the appeal.