AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 193
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....ly, the air travel industry comprises of the following five (5) key players: i. The airlines, which provide air transport services to passengers. The airlines discharge their service tax liability in terms of Section 65(3b) read with Section 65(105) (zzzo) of the Act; ii. Travel agents which have been accredited by the International Air Transport Association (IATA). These IATA agents are authorized to sell the air travel services provided by airlines customers/sub-agents the airline. iii. CRS Companies, who provide an online portal for booking of tickets offered by various airlines and other service providers in the travel industry. The CRS companies enter into agreements with airlines for rendering 'online information data access and retrieval services' ('OIDAR services') wherein they collate data such as ticket availability, price, duration of journey, etc. The airlines compensate the CRS companies for such services. This database maintained by CRS companies is made available to IATA agents through subscriber agreements. The IATA Agents are permitted to use the database for booking of airline tickets for passengers /sub-agents. iv. Sub-agents, who purchase airline t....
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....so incentivize IATA agents by paying target-based incentives, which are linked to guaranteed booking of a minimum number of airline tickets. In certain cases, sub-agents also book airline tickets through IATA agents. In a situation where a sub-agent achieves a pre-determined target of bookings through a particular IATA agent, the IATA agent pays an incentive to the sub-agent. 4. The CRS Companies provide OIDAR services to airlines. In lieu of these services, the airlines pay consideration to the CRS Companies in the form of 'charges/commission'. The CRS Companies also allow IATA agents to subscribe to their portals for booking tickets for the passengers/sub-agents. Earlier, the IATA agents were charged by the CRS Companies for access to the portals. However, due to increasing competition in the market, the CRS Companies stopped charging the agents for booking through the portal and instead, in order to increase the flow of business, the CRS Companies started to part with a portion of their consideration (charges/commission) and paid the same to the IATA agents when the agents achieve a minimum quantum of bookings through the concerned CRS portal. This incentive is normally termed....
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....re promoting the business of the airlines and in consideration of such services the airlines were paying commission to the air travel agents. It was also the contention that the commission received from the airlines had nothing to do with the services offered by the air travel agents to the passengers. The Madras High Court did not accept this contention advanced on behalf of the assessee and it was held that the air travel agents were rendering services to the passengers. The High Court, therefore, held that the commission paid to the air travel agents had a direct nexus to the "air travel agent" services rendered to the passengers, even if it indirectly benefited the business of the airlines. The High Court, therefore, held that "air travel agent" were not promoting or marketing the business of the airlines. The relevant portion of the judgment is reproduced below :- "14. In the first place, it will have to be seen as to whether the argument regarding the factual position involved is correct. The Learned Senior Counsel appearing on behalf of the petitioners argues that the commission that the air travel agents earn from the airlines is not on account of the services that they g....
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....gent has a direct nexus with the booking that he makes for the air-travellers. If, in the process, the airlines is benefited and offers some commission that would not change the nature of the service provided by the air travel agent and it cannot be said that the service is provided only to the airlines and not to the air traveller. On the other hand, we may say that it is because the air travel agent gives services to the air-traveller that the airlines is benefited, the tax is intended and in reality is imposed as against the service provided by the air travel agent to the customer in the absence of which, there would be no question of any commission. The contention of the Learned Counsel that because of Section 67(k), the nature of the tax itself changes is incorrect." (emphasis supplied) 58. Thus, by rendering of services connected to travel by air, a travel agent would render "air travel agent" services, which services cannot be said to be for 'promotion or marketing' for the airlines. Whether the air travel agent is promoting the business of CRS companies 59. As noticed above, the CRS Companies provide online portal through which the travel agents book the tick....
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.... target, the air travel agent also receives an additional amount in the form of incentives/commission from the airlines or the CRS Companies. The receipt of incentives/commission would not change the nature of the services rendered by the travel agent. 71. This apart, the definition of BAS would also reveal that the service provider must promote or market the service of a client. As noticed above, it is not a case where the air travel agent is promoting the service of airlines/CRS Companies. The air travel agent is, by sale of airlines ticket, ensuring the promotion of its own business even though this may lead to incidental promotion of the business of the airlines/CRS Companies. Thus, in terms of the provision of Section 65A(2)(a) of the Finance Act, the classification of the service would fall under "air travel agent" services and not BAS. Whether incentives paid for achieving targets are taxable? 72. The contention advanced by Learned Counsel of the interveners is that incentives cannot be construed as "consideration" and if it is so, no service tax can be levied on this amount because under Section 67 of the Finance Act, service tax is leviable on "consideration", which ....