Applicability of tds on franchise share

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.