according to agreement fees collected from client/customer is divided between franchisee and frenchiser in tha ratio of 50 : 50. in this case whether frenchiser is liable to made TDS on payment received by the frnchisee.
deepak acharya (PARTNER) (30 Points)
22 December 2011according to agreement fees collected from client/customer is divided between franchisee and frenchiser in tha ratio of 50 : 50. in this case whether frenchiser is liable to made TDS on payment received by the frnchisee.
Sunil
(Internal Auditor)
(334 Points)
Replied 28 December 2011
In your case client pays fees to the Franchisee and Franchisee pays 50% of fee collected to the Franchiser. Even though there is an agreement of sharing the fee it will not constitute profit sharing. It will attract the character of Commission payment which will attract TDS under 194H because the Franchiser here indirectly pays the commission to Franchisee.
The same can be analysed in the light of some court decisions also.
In the case of CIT vs Idea Cellular Ltd , the defendant claimed that they are paying discount to the distributors of prepaid SIM cards instead of remuneration. Court observed that in reality it is in the nature of Commission Payment.
In the Case of CIT vs Director, Prasar Bharathi , Agent collected advertising charges from customers and remitted 85% to Doordharshan after retaining 15% as per agreement. Court observed that the amount retained clearly constitute commission and Doordharshan has to pay TDS u/s 194 H.
Live Course on Invoice Management System (IMS) - 2nd Batch(With Recording)
CAclubindia
