Airlines required to deduct tax at source (TDS) u/s 194H on supplementary commission of travel agents – Supreme Court
ABCAUS Case Law Citation
ABCAUS 3617 (2022) (11) SC
Important Case Laws relied upon by parties
Hindustan Coca Cola Beverages Pvt. Ltd. v.Commissioner of Income Tax
Ahmedabad Stamp Vendors Ass.v. Union of India
Director, Prasar Bharati v. CIT
CIT v. Qatar Airways
Lakshminarayan Ram Gopal and SonsLtd. vs. The Government of Hyderabad
The main dispute between the airlines and the Revenue in this case was the true characterization of the supplementary commission income earned by the travel agent besides the Standard Commission of 7% and whether this additional portion would be subject to TDS requirements under Section 194H of the Income Tax Act, 1961 (the Act)?
In the instant case, the High Court of Delhi whereby the High Court allowed the appeal by the Revenue and held that Airline were required to deduct TDS under Section 194H on the Supplementary Commission. Whereas, there were contradictory pronouncements by different High Courts in the ensuing years.
Hon’ble Supreme Court concluded that 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 indicate the existence of a principal agent relationship as defined under Section 182 of the Contract Act, then the definition of “Commission” under Section 194H of the Act stands attracted and the requirement to deduct TDS arises.
The Hon’ble Supreme Court further opined that it was practical and feasible for the Airlines to utilize the information provided by the BSP and the payment machinery employed by the IATA to make a consolidated deduction of TDS from the Supplementary Commission to satisfy their mandatory duties under Chapter XVIIB of the Act.
The Hon’ble Supreme Court further stated that since as agreed by the parties, the travel agents had already paid income tax on the Supplementary Commission, there can be no further recovery of the shortfall in TDS owed by the Airlines. However, interest may be levied under Section 201(1A) of the IT Act.
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