https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=768459 https://www.taxtmi.com/caselaws?id=768459 Levy of service tax - franchise services or not - agreement between the respondent and Microsoft constitutes a "franchise" under Section 65(47) of the Finance Act, 1994 - reverse charge mechanism - HELD THAT:- After perusal of various clauses of the agreement which clearly state that the agreement is non-exclusive between the parties and Microsoft makes software and hardware available to the respondent on a non-exclusive basis. Further it is found that the there is not a single word of franchises/franchisor/franchisee used in the agreement between the respondent and Microsoft and Microsoft has not given any representational rights to the respondent's company and the respondent have only right to sell the goods which does not fall within the ambit of a franchise. In this regard, it is pertinent to refer the decision of the Tribunal in the case of Tata Consultancy Services Ltd [2019 (6) TMI 109 - CESTAT MUMBAI] wherein it has been held that 'In this case the so called Sub Certifying authorities and Sub CA Administrators (Sub CAA), Registering Authorities and RA-Administration appointed by appellants have any authority to issue DSC certificates, representing them to be issued by appellant. Such transfer of right granted to appellant, by the certifying authority in terms of IT Act, 2000, is also not permissible. It is only the Appellants who could have issued the Digital Signature Certificate and this could not have been done by any other person or agency appointed by appellant. Hence mere act of collecting the applications and verification of the same for onward submission to the appellant cannot be termed as "grant of representational rights".' Further, in terms of the agreement, the purchase price of Microsoft OEM pack was bifurcated into two components i.e. hardware price and software price. The cost of hardware purchase was paid as per the prevailing 'royalty and price list' and was to be paid to the authorized replicators - The agreement between the respondent and Microsoft was on principal to principal basis and the said agreement was executed purely on commercial and as trading transaction and it does not grant any representational right to the respondent so as to fall under the ambit of franchise service. In fact, the relationship between the respondent and Microsoft was that of a buyer and a seller and not of a franchisee and a franchisor. The learned Commissioner has analyzed the terms & conditions of the agreement and has rightly come to the conclusion that the agreement between the respondent and Microsoft does not create franchise service. Conclusion - The respondent is not liable for service tax on the payments made to Microsoft under the reverse charge mechanism. There are no infirmity in the impugned order - appeal of Revenue dismissed. Case-Laws Service Tax Mon, 07 Apr 2025 00:00:00 +0530