Section 194H – Whether difference between commercial price and published price can be classified as commission or not?

CIT Vs. Qatar Airways (332 ITR 253) (Bombay HC)  –In an appeal preferred by the Revenue, the following question was raised:

Whether on the facts and in the circumstances of the case and in law, the difference in amount between commercial price and published price is special commission in the nature of commission or brokerage within the meaning of Explanation (i) to section 194H of the Income-tax Act, 1961?

Facts: Airlines had an agreement with agents to sell tickets at the minimum fixed commercial price which was lower than the published price.  However, agents could sell at a higher price subject to a maximum of published price at their discretion. As per IATA rules, agents were entitled to commission at 9% on the published price. Airlines deducted tax on the payment of this 9% commission. However, Revenue contended that the difference between commercial price and published price was also in the nature of commission and liable to TDS

Decision:

• The agents of the assessee (airline) were entitled to sell tickets at any price between the fixed commercial price and the published price. As a result the assessee would have no information regarding the final rates at which tickets were sold
• It would be impracticable and unreasonable to accept the assessee to collect feedback from its numerous agents on the prices at which tickets are sold.
• Thus, it was held that the difference between the commercial price and the published price could neither be considered as commission or brokerage in the hands of the agents and hence was not liable to TDS.
• The permission granted to the agents to sell the tickets at a lower price could neither amount to commission, nor brokerage in the hands of the agents.

NF