TaxTMI 
TaxTMI 
2009 (9) TMI 42
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....t/revenue has proposed the following question of law: (a) Whether in the facts and circumstances of the case, the Ld. ITAT erred in holding that the assessee was not liable to deduct tax u/s 194I of the Act in respect of the payments made to the Franchisee under the head "Infrastructural Claims"? 2. The facts of the case are that the respondent is a public limited company, inter alia, engaged in the business of providing computer education and training. During the relevant assessment year it was providing computer education and training through its own centres and also through franchisees who, are providing NIIT courses under a license from respondent. One of the models being adopted by the respondent to run its business mainly in big ci....
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....he students was deposited in the account of the respondent and then the fees collected was shared with the Franchisees in accordance with the terms of the Franchisees/License agreement. To ensure that the Franchisees delivered the services in accordance with the methods and process provided by the respondent it was essential that the respondent collected the fee and pay the Franchisees share on milestone basis. The fees shared by the respondent with the Franchisees, was for the purpose of convenience in the following nomenclature viz. (1) Marketing Claim (2) Infrastructure Claim. 4. Before us, the counsel for the Revenue has very strenuously canvassed with reference to the definition of rent as contained under Section 194 I, that the ....
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.... payee is a person other than an individual or a Hindu undivided family:]]...... . Explanation. - For the purpose of this section,- (i) "rent" means any payment , by whatever name called, under any lease, sub-lease tenancy or any other agreement or arrangement for the use of (either separately or together) any,- (a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h) fittings, whether or not any or all of the above are owned by the payee;]... . 5. The counsel for the respondent/assessee has on the other hand strongly relied upon the terms of the Franchisees agreement which i....
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....territory the use of it's confidential technical knowhow contained in its manuals and any improvements and developments to such know how. The licensee was given the right to operate the education centre in relation to marketing of NIIT courses specified in the agreement. Various other terms and directions could be issued by the licensor to protect its technical knowhow and its trademark/trade name. The agreement further provided for sharing of the fees received from the students. The charges which were payable to the assessee company by the licensee were not fixed and were variable as per the number of students. The assessee company instead of giving a deposit which it would have done if it was a tenant in fact receives a security deposit f....
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....es. The fees was shared between the assessee and the Franchisee as per the clauses of the agreement. The details of provisions regarding conduct of the business were stipulated in the franchisee. The dominant intention of the parties of the agreement was to conduct the business not mere letting out of the building, furniture and fixture. The amount to be shared with the Franchisee was variable and it was not fixed. There was no minimum guarantee amount which the assessee was to make. The composite arrangement in the essence of the agreement for conducting the business. The essence of agreement is to conduct the business of running education centre jointly. Mere certain rights of the assessee to protect the business interest stipulated in th....