Franchise agreement

Guest (Querist) 01 August 2013 This query is : Resolved
Ganga an Indian Company engaged in Hotel Industry desires to enter into a Franchise Agreement with a Foreign Company named XYZ Ltd. to sell their products in India under their (Franchiser’s) trade-name. As per the terms of the draft Agreement, the Franchisor shall be entitled to royally payment @ 3% of gross-sales and they are entitled to Gross-Payment without any deduction of Tax. It provides that if any tax is payable, it should be borne by the Franchisee. Subject to no restriction under Indian Laws, the Franchisee is agreeable with the above term. However, under the IT Act, while releasing payment to the Franchisor, it is the responsibility of the Franchisee to make TDS and deposit the same with the Taxation Authorities.
In view of the above, will the payment clause of the said Agreement be valid?
Will any approval of the RBI will be necessary to enter into the said Franchise Agreement?

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