TDS on Franchisee fees

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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)

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)

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%

Aditya Maheshwari

Aditya Maheshwari (Expert)

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)

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)

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)

15 November 2010 It would come under 194J under royalty.

Message likes : 1 times

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)

15 November 2010 Now it is clear and as observed by Aditya Ji TDS to be deducted u/s 194J.

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