2015 (11) TMI 800 - HC - Income Tax

Franchise fee - whether the assessee/respondent was only receiving USD 22,500 from the Joint Venture Companies and not USD 45,000, as contended by the Revenue? - Held that - The finding is that the assessee has received only USD 22,500 and not USD 45,000 during the period in question. Apart from this, it is also noted in paragraph 7 of the impugned order that assessee could not remit even this amount of USD 22,500 to the parent Company because of an embargo placed by the Government. Therefore, there is no factual basis for the submission made by the learned counsel for the Revenue that the assessee was, on the one hand, receiving USD 22,500 from the Joint Venture Companies and, on the other hand, was remitting USD 45,000 to its parent Company. No perversity has been pointed out in the findings of fact returned by the CIT (A) as also the Income Tax Appellate Tribunal - Decided against revenue.

Summary

Issues:
Appeal against ITAT order regarding franchise fee for Assessment Year 2003-04.

Analysis:
The Revenue appealed against the ITAT order concerning the franchise fee collected by the assessee from Joint Venture Companies. The Revenue contended that the assessee was showing a discrepancy in income by remitting USD 45,000 to its parent company while collecting only USD 22,500 from the Joint Venture Companies. However, the respondent argued that due to a government embargo, no remittances were made to the parent company, and the actual amount received from Joint Venture Companies was USD 22,500 as per findings by the Tribunal and CIT (A).

The High Court examined the orders of the CIT (A) and the Assessing Officer and noted the clear finding by the Tribunal that the assessee was entitled to receive only USD 22,500, not USD 45,000. The Tribunal highlighted that there was no novation of contract, only a change in the payment of fees, and confirmed that no real income accrued to the assessee, hence no addition was warranted. The Court upheld the lower authorities' findings, emphasizing that no factual basis existed for the Revenue's claim that the assessee was remitting USD 45,000 while receiving USD 22,500.

The Court found no perversity in the factual findings of the lower authorities and concluded that no legal question, let alone a substantial one, arose for consideration. Consequently, the appeal by the Revenue was dismissed, affirming the position that the assessee received USD 22,500 from Joint Venture Companies and did not remit USD 45,000 to its parent company during the relevant period due to a government embargo.