Singapore Airlines Limited Vs CIT, Delhi (Supreme Court)
Date-14th November,2022
Sub-Whether an airline is responsible for deducting tax at source in respect of supplementary commission which an agent is paid on the difference between the actual fare and the net fare- Section 194H of Income-tax Act, 1961 analysed including whether liability to deduct when the tax can be fastened when admittedly the deductee has discharged the tax liability.

The Supreme Court in this case was dealing with a case where the department saddled the airline with liability to deduct tax at source in respect of the amount which was over and above the actual fare which was charged to the consumer by the agent and the net fare which was the fare set by the airline for the travel agent. The airline was already deducting tax on the commission paid on the net fare. What was disputed by the airline was the commission that was kept by the travel agent when he sold the ticket at a higher price over and above the net fare. It was argued that there was no liability to deduct tax on such difference since this portion of the payment was from the consumer to the agent and not from airline to the agent. The Supreme Court dealt with at length the principles of contract act in relation to the agent and principal and accepting the arguments of revenue that the ticket remained the property of the airline although and the lack of control that the airlines have over the Actual Fare charged by the travel agents over and above the Net Fare, cannot form the legal basis for the Assessees to avoid their liability. The accretion of the Supplementary Commission to the travel agents is an accessory to the actual principal­ agent relationship under the PSA and thus the airline was liable to deduct tds.

However, as a matter of relief to the agents, the court relying on the decision in the case of Hindustan Coca Cola Beverage Pvt. Ltd. v. Commissioner of Income Tax held that as the agents have already discharged the tax liability, they should not be saddled with fresh tds liability and can be asked to pay only interest. Moreover, penalty was also held to not leviable in view of reasonable cause u/s 273B.

This judgement will have ramifications in respect of tax deductions u/s 194H in other industry also.

Ramesh Patodia
15-11-2022