Old TDS Dispute Settled: Delhi HC Limits Airline’s Liability to Interest Only

Old TDS Dispute Settled: Delhi HC Limits Airline’s Liability to Interest Only

The Revenue filed an appeal against Royal Jordanian Airlines on the issue of non-deduction of TDS on supplementary commission paid to travel agents. The Department argued that the issue stood conclusively settled in its favour by the High Court’s earlier ruling in CIT v. Singapore Airlines Ltd., affirmed by the Supreme Court in 2023.

The assessee resisted the appeal on the ground of low tax effect and CBDT circulars, and alternatively sought disposal strictly in line with the Supreme Court’s directions, highlighting the practical impossibility of tracing agent-level tax payments after more than a decade since operations in India had ceased.

Issue Before HC: Whether the airline could be saddled with tax demand for alleged failure to deduct TDS under Section 194H on supplementary commission paid to agents, or whether its liability was limited only to interest where agents had already paid tax.

HC Ruled: The HC disposed of the appeal by applying paragraphs 68 to 71 of the Supreme Court judgment in Singapore Airlines Ltd. While affirming that the legal issue on the applicability of Section 194H stood in favor of the Revenue, the court accepted that no further tax recovery could be made from the airline where agents had already discharged their tax liability.

The Court directed that the assessing officer shall raise demand only for interest under Section 201(1A). The AO was expressly restrained from reopening the question of whether agents had paid tax, leaving such verification to the agents’ jurisdictional officers. The interest demand, once raised, was directed to be paid within two months.

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