TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 507
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....rough its business franchisee network, i.e., District lead centres (DLCs), and I. T. Gyan Kendra (ITGK) through its programme support agency (PSA) and is running technical courses namely ; RS-CIT, a basic computer literacy course along with other courses like RS-CFA, RS- CEL, RS-CRM and RS-CBFSI. These agencies/centres have been entrusted with imparting computer training and these agencies and centres are being paid for their services/jobs by the respondent-company. According to the Assessing Officer (for short, "AO"), the IT Gyan Kendras collects Rs. 2,300, per student for the course and sends the full amount to the respondent- RKCL which in turn after keeping Rs. 850 with itself, sends back Rs. 1450 to I. T. Gyan Kendras as their share. Out of this amount of Rs. 850, the respondent M/s. RKCL pays Rs. 100 per student to programme support agencies and Rs. 75 per student to District lead centres (DLCs (on which the company is deducting tax at source. On verification of the records, it came to the notice of the Assessing Officer (Revenue) that the respondent- RKCL is not deducting tax at source on the amount of Rs. 1,450 paid to IT Gyan Kendras by it for each student and noticing cer....
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....r obligation to deduct tax at source on these technical work payments under different sections of the Income-tax Act, 1961. He further contended that these ITGKs also take their own separate activities of business such as ; computer basic typing work, photostat work, etc., etc., and the assessee-company has also not paid any salary to any members of these centres so, it can be held that these Gyan Kendras are not purely branches of the respondent-RKCL only and the respondent- RKCL has made payment to IT Gyan Kendras per held/person of technical education of these Kendras. He also contended that when tax is required to be deducted at source, then interest under section 201(1) and 201(1A) was also required to be levied, it being automatic. He thus contended that provisions of section 194J are squarely applicable and both the appellate authorities were unjustified in coming to the said finding which is perverse and substantial question of law arise out of the order of the Tribunal. 6. We have considered the arguments advanced by learned counsel for the Revenue, we have already noticed that the respondent was promoted by the State of Rajasthan to impart computer education program for ....
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....x on income comprised therein : . . . Explanation-For the purposes of this section,- (a) 'professional services' means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of section 44AA or of this section ; (b) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;" 8. On perusal of section 194J with facts of instant case, it shows that the amount paid in the instant case is neither in the nature of professional or technical services rendered by the respondent-assessee to the stakeholders/ collaborators or vice versa. It is merely sharing of the fee in the manner agreed to by and between them. Though we do not have the benefit of agreements, however, the appellate authority has taken into consideration the salient features of the agreements as under : "(i) The appellant i.e. RKCL has entered into agreements with PSAs (programme support agency), VMOU (Vardhman ....
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....the account of the respondent and then the fees collected was shared with the franchisees in accordance with the terms of the franchisees/licence agreement. To ensure that the franchisees delivered the services in accord ance with the methods and process provided by the respondent, it was essential that the respondent collected the fee and paid to the franchisees' share on milestone basis. In the aforesaid case, the claim of the Revenue was that the amount paid by the respondent to the franchisee was in the nature of rent and under section 194-I, it was liable to deduct tax at source on the said amount paid because according to the Revenue, the franchisees were using resources, building and other infrastructure provided by the respondent to the franchisee. However, the High Court, after noticing the agreements, held that the agreement was in fact a franchisee agreement and it cannot be said that by the agreement rent in fact was being paid by the respondent-assessee to the licensee. No doubt, the charges have been broken up under two heads, viz., marketing claim and infrastructure claim. However, the agreement is an agreement as a whole and such a composite agreement cannot be ....
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....nchisee was neither a contractor nor a sub-contractor for carrying out any work for the assessee. It further found that the preamble narrates that the assessee is engaged in the business of offering professional learning to the members of the public for becoming proficient in competitive entrance examinations, personality development related programmes as per norms and methods developed by it and that the assessee also owns or has access to various copyrighted material, preparatory information and substantial body of technical know- how relating to the location, design and operation of professional learning centres. It further observed that the assessee (licensor) has established a high position regarding quality of services available at the learning centres run by it and recognises the benefit to be run. The licensee or the franchisee, it is further stated in the preamble, "recognises the benefit to be derived from being identified with and licenses by the licensor and being able to utilise the trade names, designs and copyrighted material, which the licensor is in possession" and that the "licensor wishes to make its learning commercially available to the public at large". It fou....