Royalty Or Lease Rent - Req. opinion

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This query is : Resolved

kamal (Querist)

15 September 2010 Dear Sir,

We have a Registered Brand Name and working at different location. We provide all the furniture & infrastructure at every letout at initially.

In our one location some other person( relative ) want to take over the business of particular location but he will work under our brand name.

Our Company is agree and hand over all the furniture & infrastructure & business to him at without consideration and charges lumsum amount on monthly basis.

My Question is Whether we charge Royalty
on monthly basis and pay Capital gain on transfer of Fixed assets ?

Or

We make a lease agreement of fixed assets and received lease rent

the party is agree with both the conditions

Please advice what will we do.
For Lease agreement we safe the capital gain and enjoy the benefit of Depreciation.
on other side if we charge royalty we need to pay capital gain and get registered ourself into service tax act also.

Waiting for Reply

CA Apurav Agawal

CA Apurav Agawal (Expert)

18 September 2010 I think your party shall make two contracts seperatly one for lease of the fixed asset and other for royalty on trade name.

There will be one disadvantage for your company as you will be able to claim the depreciation on furniture leased.

Also your control over trade name will be not be loosed.

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