Infrastructure claims paid to franchisees vs. Rent u/s 194I

CIT vs. NIIT Ltd. (184 Taxman 472) (Del.)

Facts:

•        The assessee company is engaged in the business of providing computer education and training and for that purpose, it had entered into various agreements with the franchisees for running the education centres at various metro cities. The assessee company for the purpose of convenience, had categorised the fees shared (i) as marketing claim and (ii) as infrastructure claim

•        AO treated the infrastructure claims paid to the franchisees as “rent paid” and held that the assessee company was liable to deduct tax u/s 194I

Decision:

•        Held that the agreement was in fact a franchisee agreement and it could not be said that the rent was being paid by the assessee company to the licensee franchisee. There was no payment of rent by the assessee company to the licensees/franchisees and hence the provisions of section 194I cannot be made applicable

CIT vs. NIIT Ltd. (184 Taxman 472) (Del.)

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