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TDS Will Have To Be Paid On IATA Commission, Says ITAT
Anindita Chattopadhyay - New Delhi
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Balbir Mayal
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The difference is not a commission, says ITAT and hence
TDS should not be charged on the amount
It is official now. The travel agents will pay TDS (tax deducted at source)
on the seven per cent IATA commission earned and not on the market discounts
paid to agents by airlines.
An order to this effect was passed on October 19, 2004, by ITAT (Income Tax
Appellate Tribunal). In the case of Singapore Airlines versus Income Tax department,
ITAT has set aside the order passed by the Assessing Officer (AO) of Income
Tax treating the assessee Singapore Airlines as a defaulter towards right collection
of TDS and levying interest/penalties thereof. The controversy was kicked off
when during the financial year 2001-02, the ministry of finance had introduced
TDS on IATA commission received by agents and the Income Tax department came
down heavily on airlines for not deducting TDS on both IATA commissions and
the market discounts paid to agents. Subsequently, a few airlines started deducting
TDS on both the amounts, which meant agents were being asked to pay tax twice
- once to the Income Tax department vide their income tax return and other to
the airlines. Travel agents protested that tax should not be levied on the amount
of difference between gross fare and the net-net fare because such discounts
are market-driven depending on availability of seats, volume of sales, demand-supply
equation and marketing strategy of airlines. "The agents demanded that
TDS should be on the seven per cent IATA commission. And the rest of the amount,
if at all, not forwarded to clients in part or in full gets reflected in our
profit and loss statement, which are filed with the IT department and the tax
thereon is paid to the department," explained Kavi Kohli, treasurer, TAAI.
"The ITAT order vindicates our position.The difference is not a commission,
says ITAT and hence TDS should not be charged on the amount," said Balbir
Mayal, president, TAAI. TAAI has already informed its members and written to
airlines and BAR India that with immediate effect TDS should only be deducted
on IATA commissions. Significantly, TAAI also intends to demand any excess amount
so collected by airlines over and above the TDS applicable on IATA commission.
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