In Brief
Airlines must deduct tax at source (TDS) under Section 194H on "Supplementary Commission" earned by travel agents—amounts charged above the airline's set fare. The Supreme Court held that the airline-travel agent relationship is a single principal-agent arrangement under the Contract Act, covering both ticket supply and customer sales. Discretion in pricing does not break this relationship. Although travel agents have already paid tax on these amounts (making recovery revenue-neutral), airlines remain liable for interest on the deduction delay. Penalties are waived as the legal issue was genuinely disputed when the default occurred. The Court partly allowed airlines' appeals, quashing demand recovery and penalties while directing interest calculation."
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