Case Law Details
DCIT Vs Jetair Private Limited (ITAT Mumbai)
ITAT Mumbai held that addition towards lower commission charged by Jetair Pvt. Ltd. to Jet Airways (India) Ltd. on account of Online Reservation Commission by applying arm’s length price not sustained as the transaction was neither international transaction nor a specified domestic transaction and hence transfer pricing (TP) provisions doesn’t apply.
Facts- Assessee Company is engaged in business as General Sales Agent for international and domestic airlines offering marketing, sales and accounting services. A survey u/s. 133A was conducted in the case of the assessee. During the course of survey proceedings, statement of Smt. Vidyagauri Samant, General Manager (Finance) of the assessee company was recorded u/s. 131 in which she stated that, Jet Airways (India) Ltd had paid ORC commission to other entities at a higher rate than what was received to the assessee company, a group concern.
AO in the show-cause notice to the assessee asked the assessee as to why charging less commission rate from group concern should not be added as compared to the commission paid from other entities. He noted that in respect of Online Reservation Commission for passengers 0.2% to 0.99% for the related party Jet Airways / Jet Air averaging about 0.6% while for other unrelated airlines it averaged to around 2.5%
AO further deduced that, since both Jet Airways (India) Ltd. and Jetair Pvt. Ltd. are private parties in charge of lower rate of commission are indicative of a mechanism deliberately employed to lower the payment of commission without any ostensible reasons which is in violation of arm’s length principle.
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