Saturday, September 13, 2008


on Saturday, September 13, 2008

query before us is
"whether tds should be deducted u/s 194C for payment made to travel agent for booking of airline tickets by a company for its employee(s)"?

The following general conditions should be satisfied for a payment to qualify for deduction of tax u/s 194C

1.Payee:The contract should be entered by the following specific person
  • Central government
  • state govt or Local authority
  • Cent or State Corp. covered estb. under Cent./state act
  • Any co-operative society
  • Any company
  • Any authority constituted In India under or b the law for town planning and other specific work as defined
  • any society
  • any Trust
  • any firm
  • any University with specific conditions
  • Societies register under the specific acts
  • any firm
  • any HUF?individual if turnover exceeding 40lacs or profession receipt exceeds 10lakh in immediate preceding year
  • from 01.06.2008 any AOP /BOI
  • Resident contractor
  • payment to subcontractor by resident contractor
  • contract between payer and payee for "carrying out any work"
  • Including supply of labour for carrying out any work.
So in general three basic genral condition should be fulfilled to make a payment eligible for deduction of tax at source u/s 194C.if any one of three content/condition is missing ,then section 194C will not be applicable.

so where the contract is between contractor and Huf or individual for personal purpose it will not be covered under section 194C and tax will not be deductible.

In this case of payment to travel agent for booking of airline tickets ,the contract is between individual and airline company though payment is made by the company so tds is not deductible.

CBDT Clarificatary circulaor:

CBDT has issued a detailed circular no 715 on tds u/s 194C,194I and 194J dated 8.8.1995 ,In which 34 question has been dealt .In this circular question number 6 relates to payment made to travel agent/airline for booking of tickets ,It has been clarified in the circular that notwithstanding the payment has been made by the payee list mentioned as above ,but the contract of purchasing the ticket is between individual passenger and the airline/travel agent ,so tax should not be deducted.

the relevant part of the circular is reproduced here under for your ready reference

"Question 6 : Whether payment under a contract for carriage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a ticket or payment made to a clearing and forwarding agent for carriage of goods ?

Answer : The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provision of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C of the Act. As regards payments made to clearing and forwarding agent for carriage of goods, the same shall be subjected to tax deduction at source under section 194C of the Act.

hence the No tax should be deducted u/s 194C on payment made to travel agent/airline for booking of tickets.This rule is also applicable on other transport medium like rail booking also.

One point is raised by Mr Vikas ,that wether TDS on commission payable to airline travel agent is deductible under section 194H?

Ans:After carefully going through your point ,I note following
  1. Travel agent is working for commission
  2. Travel agent work as agent between airline company and passenger
  3. Travel agent either retain commission and transfer balance money to airline company or transfer full amount and get commission from airline.
Now as per section 194 H
  1. section provides for deduction of tax at source on any income by way of commission or brokerage by the payer to payee
  2. The meaning of payer here is in my opinion is principle and payee agent
  3. while purchasing the air ticket the payer is airline company and payee is travel agent and person who is purchasing ticket is not payer as he is not paying any commission as such to the airline ticket
  4. so u/s 194 H in my opinion ,airline company is liable to deduct tax from the travel agent as they falls under the definition of payer and paying commission to the agent.
  5. circular no 619 dated 04.12.1991,para no -6(this relevant because the section 194H has been reintroduced again in 2001 but existed earlier also)says the following                                                                                                                " 6. A question may raise whether there would be deduction of tax at source under section 194H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/principal, deduction of tax at source is required to be made from the amount of commission. Therefore, the consignor/principal will have to deposit the tax deductible on the amount of commission income to the credit of the Central Government....................."
  6. so even the travel agent used to retain their commission from gross payment its airline responsibility to deduct and deposit  tds from the commission
so from the above ,it can be concluded or in my opinion the airline company is responsible for deducting tax u/s194H not the person who is purchasing the ticket as the commission is being paid by the airline company to travel agent not by the passenger.

if you have different views then me ,let me know/add in comment section.


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