Singapore Airlines Ltd. v. CIT (2022) 449 ITR 203 / 329 CTR 553 / 220 DTR 1/((2023) 290 Taxman 139 (SC) KLM Royal Dutch Airlines v. CIT (2022) 449 ITR 203 / 329 CTR 553 / 220 DTR 1 (SC) British Airways PLC v. CIT (TDS) (2022) 449 ITR 203 / 329 CTR 553 / 220 DTR 1 (SC)

S. 271C : Penalty-Failure to deduct at source-Reasonable cause-Supplementary commission-Airline-Different views High Courts-Levy of penalty is quashed. [S. 194H, 273B, Contract Act, 1872, S. 182, 215, 216]

Held that the liability of an airline to deduct tax at source on supplementary commission had admittedly not been adjudicated upon by the court when the controversy first arose in assessment year 2001-02. While one set of air carriers acted under the assumption that the supplementary commission would come within the ambit of the provisions of the Act, another set held the opposite view. There were contradictory pronouncements by different High Courts which clearly highlighted the genuine and bona fide legal conundrum that was raised by the prospect of section 194H being applied to the supplementary commission.  provision must be read with section 273B which excuses an otherwise defaulting assessee from levy of penalties under certain circumstances. There was clearly an arguable and “nascent” legal issue that required resolution by the Supreme Court and, hence, there was “reasonable cause” for the air carriers not to have deducted tax at source at the relevant period. Accordingly the  penalty proceedings against the airlines under section 271C of the Act was   quashed. (AY.2001-02)