SINGAPORE AIRLINES LTD Vs. C.I.T., DELHI

JUDGEMENT

(1.) The question that arises for our consideration pertains to the interpretation of Sec. 194H of the Income Tax Act, 1961 ("IT Act") as introduced by the Finance Act, 2001, with effect from 1/4/2000. The provision requires deduction of tax at source ("TDS") at 10% plus surcharge from payments falling under the definition of "Commission" or "Brokerage" under the Sec. .

(2.) Within the aviation industry during the relevant period, the base fare ("Base Fare") for air tickets was set by the International Air Transport Association ("IATA") with discretion provided to airlines to sell their tickets for a net fare lower than the Base Fare, but not higher ("Net Fare"). In essence, the IATA set the ceiling price for how much airlines may charge their customers. This formed part of the IATA's overall responsibility of overseeing the functioning of the industry.

(3.) The air carriers were also required to provide a fare list to the Director General of Civil Aviation ("DGCA") for approval. The prices that were rubber stamped by the DGCA may be equivalent to or lower than the Base Fare set by the IATA. Alongside setting the standard pecuniary amount for tickets, the IATA would provide blank tickets to the travel agents acting on behalf of the airlines to market and sell the travel documents. The arrangement between the airlines and the travel agents would be governed by Passenger Sales Agency Agreements ("PSA"). The draft templates for these contracts are drawn up by the IATA and entered into by various travel agents operating in the sector, with the IATA which signs on behalf of the air carriers. The PSAs set the conditions under which the travel agents carry out the aforementioned sale of flight tickets, along with other ancillary services, and the remuneration they are entitled to for these activities.