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2016 (4) TMI 819 - ITAT DELHITDS u/s 192 OR 194J - payment made to the retainers - Held that:- The contract of retainers are valid for one year from the date of effective commencement of the provision of services. The remuneration provided in the agreement is without any provision for provident fund, gratuity, etc. on cancellation of contract of retainer ship the lump-sum amount stands forfeited without any recourse even on a pro rata basis. If the assessee misses to cancel this contract. It will help to provide for 15 days’ notice period to the retainer. In case of absence in excess of specified number bay number of days in the month. A specified sum per day would be deducted from the payment to be made to the contract. There is no provision for change in the services by either party’s entered into by this agreement. Of course the contract of service of retainer ship also provide that the retainer would be required to meet the deliverables as required by the organization which would be subject to the rules and regulations of the organization is laid down in relation to conduct, discipline and other matters. Admittedly, there is such condition in the service contract. However, these conditions are necessary for the purpose of maintaining the standard of services of the organization to the outside customers. Therefore, this terms and conditions cannot say that it puts the retainer in the control of the assessee in the same manner as it puts on its employees. On reading of these 2 agreements, one of employment and another of retainer ship we are of the view that the retainer ship contracts are not employment contracts and employer, employee relationship does not subsist in case of retainer ship contracts. Therefore, we are of the view that payment made to the retainers is not subject to TDS u/s 192 of the act but u/s 194J of the Act. - Decided against revenue TDS on service tax component - Held that:- CBDT has issued a circular No. 1 2014 on 13/01/2014 wherein it has been provided that that wherever the service tax component comprising the amount payable to a resident is indicated separately the tag shall be deducted at source on the amount paid or payable without including such service tax component. The above circular has not laid down any condition, as per para No. 3 of that circular. In view of this, we hold that that no tax is required to be deducted on service tax component - Decided against revenue TDS u/s 194J - franchisee fees paid by the assessee - Held that:- The dominant object of the agreement is that the assessee’s trademark should be exploited for the mutual benefit of the parties and the technical know-how that is being owned by the assessee. The licensee are using it for their own benefit. Regarding the consideration also, it is flowing from franchisee to the assessing and not from assessee to the franchisee. Therefore, here. The provision of the services are dominantly provided by the assessee to the franchisee and for which the consideration is received. The provisions of section 194, J are applicable in case, when the assessee makes any payment to a resident assessee for the specified services. Here, in this case the payment is received by the assessee from franchisee owners. It is only in the modus operandi of the collection of the fees wherein assessee transfers the money to the franchisee. We confirm the finding of 1st appellate authority holding that provisions of section 194J do not apply to the franchisee fees paid by the assessee - Decided against revenue
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