Singapore Airlines Limited v. CIT, Delhi

Case snapshot

Sections / provisions: 194H of Income-tax Act; 1961

Questions before the Court / Tribunal

• 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…
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

Base Fare Net Fare Actual Standard Supplementar for (Set by Fare Commissio y Commission Singapore­ the (Set by n (Actual Fare – Delhi (Set Airline) the (7% of the Net Fare) by the Travel Base Fare) IATA) Agent) Rs. 1 Lakh Rs. Rs. 7% of Rs. 1 Rs. 80,000­ 60,000 80,000 Lakh = Rs. 60,000 = Rs. 7,000 20,000 Ceiling Income Rs. Income of Additional Price of the 20,000 the travel Income of the Assessee left after agent travel agent payment of Net

the Assessee airlines and the Revenue in this case lies in the

that Appellants/Assessees were required to deduct TDS under

by the Appellants to sell airline tickets. As a consequence of the

Assessees’ failure to carry out the subtraction of the requisite

Appellant / assessee submissions

11. The Revenue contended that the travel agents operating on

Learned Counsel appearing for the Assessee in CA No. 6968 of

General, as well as learned Counsel, Mr. Rupesh Kumar. They

28. On the contrary, Mr. Kumar, learned Counsel for the

Revenue / respondent submissions

42. Learned Counsel for the Revenue has rebutted this by

by learned Counsel for the Revenue, and accepted by learned

count. Learned Counsel for the Revenue, Mr. Kumar, admitted

Court / Tribunal analysis and reasoning

49. In the facts before us, we find that Sections 215 and 216 of

9. Be that as it may, the circular No. 275/201/95­ IT(B) dated 29.1.1997 issued by the Central Board of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualized under Section 201(1) of the Income­ tax Act should be enforced after the tax deductor has satisfied the officer­in­charge of TDS, that taxes due have been paid by the deducted­assessee. However, this will not alter the liability to charge interest under Section 201(1A) of the Act till the date of payment of taxes by the deducted­assessee or the liability for penalty under Section 271C of the Income­tax Act."

94…Section 273B states that notwithstanding anything contained in Section 271C, no penalty shall be imposed on the person or the assessee for failure to deduct tax at source if such person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. 95. In each of the 104 cases before us, we find that non­deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under Section 192 was a nascent issue… The tax­deductor­assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the

Operative decision and relief

of the Assessee and set aside the Assessment Order passed

been given discretion to sell the tickets at any rate between the fixed minimum commercial price and the published price and it would be impracticable and unreasonable to expect the Assessee to get a feed back from their numerous agents in respect of each ticket sold. Further, if the airlines have discretion to sell the tickets at the price lower than the published price then the permission granted to the agent to sell it at a lower price, according to us, can neither amount to commission nor brokerage at the hands of the agent. We hasten to add any amount which the agent may earn over and above the fixed minimum commercial price would naturally be income in the hands of the agent and will be taxable as such in his hands. In this view of the matter, according to us, there is no error in the impugned order and the question of law as framed does not arise. The appeal is therefore, dismissed in limini.

Thus, we deem it appropriate to remand the matter back to the

Ratio and legal principle

• The packaged judgment addresses 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…. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with 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… Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 194H of Income-tax Act - apply the exact version considered in the judgment.
• 1961 - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• Pr. CIT v. Tata Power Company Ltd. - Bombay High Court
• Merchant Association v. ITO - ITAT Pune
• M D Sons & Ors. v. ITO (Special Bench) - ITAT Bangalore Special Bench

Different outcome / possible distinction

• Pr. CIT v. Persistent Systems Pvt. Ltd. - Dismissed
• CIT(E) v. Hyderabad Cricket Association - Operative order controls

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