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2018 (3) TMI 709 - AT - Service TaxFranchise service - Appellants had entered into Franchisee Agreement with IMA Mental Arithmetic Academy, Malaysia. They had also entered into Franchisee Agreement with various franchisees appointed by them in India - Department took the view that the gross amounts collected by the appellant including admission fee, course instructor fee, tuition fee etc. would be eligible for service tax under the category of Franchisee Service under section 65(47) of the Finance Act, 1994. Held that: - As per the definition, the payment to be made by the franchisee to the franchisor is only for the right to sell or manufacture goods or to provide service or undertake any process identified by the franchisor etc. The payment required to be paid for use of the IMA Mental Arithmetic course have been indicated as 25% of the gross fees collected. As per section 65(105)(zze), the taxable service is that given to a franchisee by the franchisor in relation to franchise . This being so, only those amounts directly relatable to the representational right granted by the franchisor to the franchisee and the royalty/franchisee fee towards that right would alone be part of taxable for the purpose of levy under this category. The tax liability for the appellant in respect of franchisee appointed by them within India will not include the amounts relatable to admission fee, tuition fee, competition fee and course instructor fee - appeal allowed in part.
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