The Supreme Court held that Section 194H of the Income Tax Act, for the case of Supplementary Commission amounts made via the travel agent, and hence the Airlines would obligate to deduct TDS on the same concern.
The bench consisting of Justices Surya Kant and MM Sundresh sustained the Delhi High Court judgment and overruled the Bombay High Court judgment in CIT v. Qatar Airways [2009 SCC OnLine Bom 2179] that had held otherwise.
What is TDS Section 194H
Wef 1.4.2000, section 194H of the IT act was being initiated via the Finance act 2001. The provision needs the deduction of the tax at sources (TDS) @10% including surcharge from the payments that come beneath the concern of “Commission” or “Brokerage” under the Section. The same elaboration furnishes, brokerage consists of any payment obtained, directly or indirectly via an individual who acts on the grounds of the other individual towards the services provided (not as professional services) or for any services for the buying or selling of the goods or in concern with any transactions of any asset, valuable article or thing, not being securities.
For the concern, the High Court of Delhi, the airline taxpayer needed to deduct Tax Deducted at Source under Section 194H on the Supplementary Commission accrued to travel agents entrusted Page 6 of 53 via the Appellants to sell airline tickets.
Different Issues Asked by the Appellant
The issues asked via appellant airlines were (i) The realized amount via travel agent on and above the net fare owed to the air carrier would be the income of its own, subjected to get paid via customer buying the ticket instead of the airline, (ii) The “Supplementary Commission” hence was the income made through the proceeds via the sale of the tickets and not the commissions obtained via the taxpayer airline, (iii) There is no method of revealing the cost by the airline itself on which the travel agent sold the tickets of the flights.
The revenue on the other side has opposed the language of section 194H which is inclusive and counts any direct or indirect tax payments to the agent. Thus there was no requirement for the direct payment to be incurred via the taxpayer to the travel agents for the same to count beneath the regime of “Commission” and be subject to TDS.
Sustaining the stand chosen via revenue, the bench sees that:
“Our conclusion in terms of the application of Section 194H of the IT Act to the Supplementary Commission amounts earned by the travel agent is unequivocally in favour of the Revenue. Section 194H is to be read with Section 182 of the Contract Act. If a relationship between two parties as culled out from their intentions as manifested in the terms of the contract between them indicates the existence of a principalÂagent relationship as defined under Section 182 of the Contract Act, then the definition of “Commission” under Section 194H of the IT Act stands attracted and the requirement to deduct TDS arises.”
Read Also: ITAT Delhi: Commission to Banks Not Applicable for TDS Provisions
Considering the consensus between the parties, travel agents, paid income tax on the Supplementary Commission, and court, no other shortfall recovery in TDS owned via taxpayer but any interest might be charged under Section 201(1A) of the IT Act.
