{"id":27661,"date":"2024-10-18T16:17:14","date_gmt":"2024-10-18T10:47:14","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=27661"},"modified":"2024-10-19T12:20:46","modified_gmt":"2024-10-19T06:50:46","slug":"revenue-shared-with-franchise-doesnt-attract-tds-liability-u-s-194i","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/revenue-shared-with-franchise-doesnt-attract-tds-liability-u-s-194i\/","title":{"rendered":"Revenue shared with franchise doesn&#8217;t attract TDS liability"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ebf2cc9f9fa\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ebf2cc9f9fa\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/revenue-shared-with-franchise-doesnt-attract-tds-liability-u-s-194i\/#Revenue_shared_with_franchise_doesnt_attract_TDS_liability_US_194I_if_no_actual_services_were_rendered\" title=\"Revenue shared with franchise doesn&#8217;t attract TDS liability U\/S 194I if no actual services were rendered:\">Revenue shared with franchise doesn&#8217;t attract TDS liability U\/S 194I if no actual services were rendered:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/revenue-shared-with-franchise-doesnt-attract-tds-liability-u-s-194i\/#Facts_of_the_Case_in_the_matter_Addl_CIT_Vs_VLCC_Health_Care_Ltd\" title=\"Facts of the Case in the matter Addl CIT Vs. VLCC Health Care Ltd:\">Facts of the Case in the matter Addl CIT Vs. VLCC Health Care Ltd:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/revenue-shared-with-franchise-doesnt-attract-tds-liability-u-s-194i\/#Income_Tax_Appellate_Tribunal_Delhis_Decision_in_the_matter_of_Addl_CIT_Vs_VLCC_Health_Care_Ltd\" title=\"Income Tax Appellate Tribunal Delhi\u2019s Decision in the matter of Addl CIT Vs. VLCC Health Care Ltd :\">Income Tax Appellate Tribunal Delhi\u2019s Decision in the matter of Addl CIT Vs. VLCC Health Care Ltd :<\/a><\/li><\/ul><\/nav><\/div>\n<h3><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-27665\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2024\/10\/ITAT.png\" alt=\"ITAT delhi \" width=\"933\" height=\"497\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2024\/10\/ITAT.png 933w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2024\/10\/ITAT-300x160.png 300w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2024\/10\/ITAT-768x409.png 768w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2024\/10\/ITAT-800x426.png 800w\" sizes=\"(max-width: 933px) 100vw, 933px\" \/><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"Revenue_shared_with_franchise_doesnt_attract_TDS_liability_US_194I_if_no_actual_services_were_rendered\"><\/span><span style=\"color: #000080;\"><strong>Revenue shared with franchise doesn&#8217;t attract TDS liability U\/S 194I if no actual services were rendered:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The case of Addl CIT Vs. VLCC Health Care Ltd. (ITA No. 4414\/DEL\/2017) decided by the Delhi Income Tax Appellate Tribunal addresses the issue of whether revenue shared with collaborators or franchisees under a Joint Venture Partnership model attracts a TDS liability u\/s 194I of the Income Tax Act.<\/p>\n<p>The Delhi Income Tax Appellate Tribunal concluded that revenue shared under a Joint Venture model where the assessee bears all expenses and shares only the surplus is not liable to Tax Deducted at Source u\/s 194I, since no services or premises were hired from the collaborators. This ruling clarifies that pure revenue-sharing models without actual service provision or rental arrangements fall outside the ambit of Section 194I\u2019s Tax Deducted at Source provisions.<strong>\u00a0<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Facts_of_the_Case_in_the_matter_Addl_CIT_Vs_VLCC_Health_Care_Ltd\"><\/span><span style=\"color: #000080;\"><strong>Facts of the Case in the matter Addl CIT Vs. VLCC Health Care Ltd:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Assessee, VLCC Health Care Ltd., is engaged in the business of slimming and beauty services. It did not disclose any income apart from this business during the year.<\/li>\n<li>During the assessment, the Assessing Officer noted that the assessee had claimed expenses of INR 2,39,80,342\/- under head \u2018Share of profits of collaborators.\u2019<\/li>\n<li>Under the Joint Venture Partnership model, the fees generated from operating healthcare centers were collected by the assessee and recorded in its books. The collaborator&#8217;s share was disbursed after covering expenses. Profits or losses from the center were shared between the assessee and the collaborator as per a pre-agreed ratio.<\/li>\n<li>The Revenue\u2019s argument was that payments made to the collaborators could be viewed as expenses for services or premises usage, thus subject to Tax Deducted at Source provisions, especially Section 194I, which pertains to rent.<\/li>\n<li>Since no formal partnership firm was formed between assessee and the collaborators, the Revenue contended that the payments could not be treated as a share of profits, thereby making them liable for Tax Deducted at Source deduction.<\/li>\n<\/ol>\n<h3><span class=\"ez-toc-section\" id=\"Income_Tax_Appellate_Tribunal_Delhis_Decision_in_the_matter_of_Addl_CIT_Vs_VLCC_Health_Care_Ltd\"><\/span><span style=\"color: #000080;\">Income Tax Appellate Tribunal Delhi\u2019s Decision in the matter of Addl CIT Vs. VLCC Health Care Ltd <strong>:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ol>\n<li>Income Tax Appellate Tribunal held that the assessee followed joint venture model where it bore the expenses and shared only the profits with the franchisees or collaborators. All the operations and facilities at the healthcare centers were controlled and managed by the assessee.<\/li>\n<li>Primary purpose of Agreement between assessee &amp; franchisees was revenue sharing, not renting or hiring premises or services from the collaborators.<\/li>\n<li>Given this nature of the arrangement, the Income Tax Appellate Tribunal ruled that the payments were not subject to Tax Deducted at Source u\/s 194I, as they did not involve any rent or service-related payments requiring tax deduction at source.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Revenue shared with franchise doesn&#8217;t attract TDS liability U\/S 194I if no actual services were rendered: The case of Addl CIT Vs. VLCC Health Care Ltd. (ITA No. 4414\/DEL\/2017) decided by the Delhi Income Tax Appellate Tribunal addresses the issue of whether revenue shared with collaborators or franchisees under a Joint Venture Partnership model attracts &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27661"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=27661"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27661\/revisions"}],"predecessor-version":[{"id":27667,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/27661\/revisions\/27667"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=27661"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=27661"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=27661"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}