Law:

Section:

Section 194-I of the Income-tax Act, 1961 - Deduction of tax at source - Rent - Assessment years 1998-99 to 2001-02 - Assessee-company was engaged in business of providing computer education and training - It entered into agreements with franchisees for running education centres at various metro cities - Under said agreements, franchisees were providing NIIT courses under license from assessee - Franchisees were to bring their resources for purpose of providing computer education to students and they were further required to provide infrastructure facilities like classroom facility, equipment, furniture, fixture, administrative set-up, etc. - Fees collected from students was deposited in assessee's account and then same was shared with franchisees in accordance with terms of franchisees/licence agreement - Assessee, for purpose of its convenience, had categorized said fees shared as marketing claim and infrastructure claim - Assessing Officer treated infrastructure claim paid to franchisees as rent paid and held that assessee was liable to deduct tax therefrom under section 194-I - Whether, on facts, agreement between parties was a franchisee agreement and not a lease agreement and it could not be said that rent was being paid by assessee to franchisees - Held, yes - Whether, therefore, assessee was not liable to deduct tax under section 194-I in respect of amount shared by it and remitted to franchisees for infrastructure claims - Held, yes FACTS The assessee-company was engaged in the business of providing computer education and training. It entered into agreements with the franchisees for running the education centres at various metro cities. Under the said agreements, the franchisees were providing NIIT courses under the license from the assessee. The franchisees were to bring their resources for the purpose of providing computer education to the students. The assessee was required to provide the franchisees the relevant courseware and its expertise for providing computer education. The franchisees were required to provide the infrastructure facilities like classroom facility, equipment, furniture, fixture, administrative set-up, etc. The fees collected…

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