Representative receipt under a consortium arrangement was not taxable income and did not attract disallowance for onward distribution.

Amounts received in a representative capacity under a consortium travel commission arrangement did not constitute taxable income of the lead member, because it had no enforceable right to retain the sums and the income accrued to the constituent members who actually earned it. Disallowance under section 40(a)(ia) was also unwarranted where the assessee did not claim the distributed sums as its own expenditure but merely passed on amounts belonging to others. As the payment was not an expenditure debited by the assessee, non-deduction of tax at source on the onward distribution did not trigger the provision.

---

---

Issues: (i) Whether the amount received by the assessee from the travel commission arrangement, but distributed to consortium members under the agreement, constituted the assessee's income. (ii) Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was sustainable where the assessee did not claim the distributed amount as expenditure and had merely passed on amounts belonging to other members.

Issue (i): Whether the amount received by the assessee from the travel commission arrangement, but distributed to consortium members under the agreement, constituted the assessee's income.

Analysis: The assessee acted as the lead and collecting member under a consortium agreement. The arrangement showed that the assessee received the larger amount in a representative capacity for the constituent travel agents, while the actual services were rendered by those members. The assessee had no enforceable right to retain the distributed amount as its own income, and income accrued only to the members who earned it through the bookings.

Conclusion: The distributed amount did not constitute the assessee's income and was rightly treated as belonging to the consortium members.

Issue (ii): Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was sustainable where the assessee did not claim the distributed amount as expenditure and had merely passed on amounts belonging to other members.

Analysis: Section 40(a)(ia) applies where an amount is claimed as a deductible expenditure in computing business income. Here, the assessee did not debit the distributed amount to the profit and loss account as its own expenditure, but merely passed on money received on behalf of other members. Since the amount was not an expenditure of the assessee, failure to deduct tax at source on such distribution did not attract disallowance under that provision.

Conclusion: The disallowance under section 40(a)(ia) was not justified.

Final Conclusion: The addition made by the Assessing Officer was sustained by no legal basis, and the assessee's appeal before the Revenue failed.

Ratio Decidendi: Amounts received and passed on in a representative capacity, without any enforceable right of retention or claim as expenditure, do not form the assessee's taxable income and do not attract disallowance under section 40(a)(ia) merely because tax was not deducted on the onward distribution.

---