TDS on Franchisee fees

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 November 2010 Hi All,

my client is a franchise of a Super MArket, he needs to pay the Franchise fees every month on total sales, i want to know whether TDS is applicable on the same & under which head ?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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15 November 2010 TDS deduction not required. Is it in the nature of commission if yes then TDS attracted u/s 194H. Rate 10%

taxindiaconnect

taxindiaconnect (Expert)
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15 November 2010 Agreed with Sanjay that TDS is deductible. However it is in the nature of royalty and TDS is deductible u/s 194J @ 10%

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Aditya Maheshwari

Aditya Maheshwari (Expert)
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15 November 2010 It seems that the payment is in the nature of royalty where brand of the supermarket is being used and hence TDS deductible u/s 194J only.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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15 November 2010 Royalty in most of the cases a fixed sum here it is paid on the basis of sales. So please clarify the nature of expenses and the benefit obtained from it.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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15 November 2010 Nature of royalty can be based on turnover also. There is no restriction on that. Though i agree with sanjay that full details of expenses are not known.

Querist : Anonymous

Querist : Anonymous (Querist)

15 November 2010 Dear Sanjay Gupta / Aditya M

thanks for the quick reply,
we are paying the Franchise fee for using the brand name of the company to run a super market eg." Nilgiri's / Food World ". the benefit we get only is the Brand, all other expenses are borne by us, does the nature comes u/s 194J ? kindly reply if there is change in your answers,

Aditya Maheshwari

Aditya Maheshwari (Expert)
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15 November 2010 It would come under 194J under royalty.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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15 November 2010 Now it is clear and as observed by Aditya Ji TDS to be deducted u/s 194J.