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7.2 Based on the aforesaid the Assessing Officer while holding the assessee-airline as assessee in default directed calculation of interest under Section 201(1A) of the Act to the extent of Rs 21,13,224/-. The Assessing Officer of other airlines and Commissioner of Income Tax, Delhi passed orders under Section 201(1) and 201(1A) of the Act in the case of other airlines.

8. Aggrieved by the same, 12 airlines preferred appeals to the Commissioner of Income Tax (Appeals) - XXX, New Delhi [hereinafter referred to as the „CIT(A)‟]. A reference to the airlines which preferred appeal to the CIT(A) is made in paragraph 2 of his order. The CIT(A) in his order also notes the fact that the Pakistan Airlines has not contested the issue of treatment of supplementary commission being in th nature of commission as held by the Assesing Officer. He notes that the main ground taken by the Pakistan Airlines is that the tax ought to be recovered from the payee and not from the payer.

vii. The transaction prior to 1.6.01 will be excluded for applying section 194H to the supplementary commission.

17. The main ground relating to applicability of provisions of Section 194H to supplementary commission (or incentive or discount) fails. However, appellants would get relief in respect of certificates u/s 197 given to some agents and transaction prior to 1.6.2001."

9. The assessee-airline, being aggrieved, preferred an appeal to the Tribunal. The Tribunal reversed the decision of the CIT(A) and held that the provisions of Section 194H were not attracted in the instant case. Briefly, the Tribunal came to this conclusion by holding that the assessee-airline only receives the net fare. The assessee-airline does not have any means of knowing the price at which the travel agent has ultimately sold the ticket to the customer. The travel agent is required to pay the net fare to the assessee-airline even though he may end up selling the ticket at a price which is less than the net fare. The price which the travel agent obtains over and above the net fare is due to the travel agent‟s own efforts in respect of which it does not render any service to the assessee-company. It is entirely open to the travel agent to make endeavours to obtain and realize the best price. The price that the travel agent obtains over and above the net fare does not emanate from the assessee-airline . The excess fare that is the price over the net fare which the travel agent earns may have been earned by virtue of the agency with the assessee-airline. The excess remuneration earned, however, could not be regarded as one which the travel agent realized on account of any services rendered by the travel agent to the assessee- airline. The fact that the assessee-airline comes to know the price at which the travel agent ultimately sold the ticket by referring to the BSP billing analysis statement is of no consequences in view of the fact that the assessee-airline comes to know of this state of affairs only when the statement is received from BSP and not at the time when the tickets are sold and the price is realized by the travel agent.

22. A reading of the provisions of the aforesaid clauses would clearly establish that the travel agent acts on behalf of the assessee-airline whereby a legal relationship is established between the assessee-airline and the third party, that is, the passenger. By entering into such a legal relationship on behalf of the principal, that is, the assessee-airline by issuing the traffic documents to a third party, that is, the passenger, the travel agent makes the assessee-airline liable to a legal action by the passengers, that is, the third party. Similarly by virtue of such a transaction, that is, issuance of traffic documents by the travel agent to the passenger it enables the principal, that is, the assessee-airline to sue the third party which is the passenger. The travel agent by virtue of the provisions of the PSA agreement is empowered to create, modify and terminate contractual relationship on behalf of the principal, that is, the assessee-airline. In this context see the provisions of clause 3.1 to 3.6 and clause 8 of the PSA agreement. Furthermore as is evident from a reading of clause 6, in particular, clause 6.1 of the PSA agreement the traffic document at any given point in time remain the property of the assessee-airline. As a matter of fact since the traffic documents, that is, the air tickets are issued by the travel agent on behalf of the assessee- airline who is the provider of the air transportation and other ancillary services it holds the travel agent harmless and is obliged to indemnify the travel agent for any loss caused on account of failure to provide such air transportation or other ancillary services contracted for by the travel agent on behalf of the assessee-airline. This situation obtains even where the air tickets are issued by the travel agent on behalf of the assessee-airline through an automated system. Similarly any negligence on behalf of the agent in issuing the traffic documents/air tickets would render him liable to the assessee-airline/the carrier. 22.1 The provisions in the PSA agreement leaves us in no doubt whatsoever that the relationship between the travel agent and the assessee-airline is that of a principal and agent, which is why perhaps none of the airline except Thai Airways and Belair Airways have submitted that their relationship is one which is of a nature of principal to principal as against principal and agent.

24. The submission of the some of the learned counsel for the assessee-airline that the monies retained in the form of supplementary commission are really in the nature of discount rather than commission is not tenable. The fact that this is a payment which the travel agent receives from the passenger by virtue of the sale of the Traffic Documents/Air Tickets of which the assessee is the proprietor at a point till the transaction is made would clearly establish that it is a commission as against the discount. The word „discount‟ is normally used to describe a deduction from the full amount or value of something, especially a price (see Black‟s Law Dictionary VIIth Edition page 477) whereas a commission is defined in Explanation (1) to Section 194H as any payment received or receivable, directly or indirectly by an agent for services rendered acting on behalf of the assessee-airline. In view of the fact that the payment retained by the travel agent is inextricably linked to the sale of the traffic document/air ticket, it cannot but lead to a conclusion that the payment retained which is the supplementary commission, is a commission within the meaning of Section 194H of the Act. This is especially so, as indicated above, at no point in time the travel agent obtains proprietary rights to the Traffic Documents/Air Tickets. There is no value or price paid by him on which the travel agent gets a deduction. The price or value is received by the assessee-airline through the medium of the travel agent from the passenger which is also one of the facets of the services offered by the travel agent. The price or value of the Traffic Document received by the travel agent for and on behalf of the assessee-airline is held in trust. Thus the money retained by the travel agent is commission (supplementary commission) within the meaning of Section 194H of the Act. Therefore, for the assessee-airline to contend, as discussed hereinabove, that in so far as the first leg of the transaction is concerned whereby they pay standard commission to the travel agent on which assessee-airline deduct tax at source, the relationship between the assessee-airline and the travel agent is that of principal and agent, whereas the money or monies which the travel agent retains over and above the net fare is not commission since the relationship transforms - from one which commences as a principal and agent relationship and ends up into that of a principal to principal relationship; is completely untenable as there are no two transactions in point of fact. The transaction is a singular transaction which is executed between the travel agent while acting on behalf of the principal airline in selling the traffic documents/ air tickets to a third party which is the passenger and thereby creating a legal relationship between the principal that is, the assessee-airline and the third party, which is the passenger. For any enforcement of rights emanating therefrom the principal would have the right to sue the passenger and similarly the passenger would have the right to sue the principal, that is, the assessee-airline.