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TMI Blog2016 (7) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... merits after considering the existing structure of the assessee company and the fresh agreements entered into with various entities in the light of provisions of the Act and DTAA entered into between USA and India . Needless to say that the assessee company be provided with proper and adequate opportunity of being heard by the AO in accordance with the principles of natural justice in accordance with law. The assessee company will be allowed to submit relevant additional evidences , material and explanations in support of its contentions in its defense, which shall be admitted by the AO and adjudicated on merits. - Decided in favour of assessee for statistical purpose. - I .T.A. No.1376/Mum/2015 - - - Dated:- 15-7-2016 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Girish Dave and Miss Kadambari Dave For The Revenue : Shri Yeshwant G. Chavan, DR ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee company, being ITA No. 1376/Mum/2015, is directed against the assessment order dated 23-01-2015 passed by the Assessing Officer (hereinafter called the AO ) u/s 144C(13) r.w.s. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout prejudice to the above, a. The learned DCIT has erred in restricting the allowance of expenses to 5% of the royalty fees without any basis; b. The learned CIT erred in not allowing a deduction for depreciation on the trademark of the appellant. 1. 7. The learned DCIT erred in levying interest of ₹ 2,12,264 under section 234D of the Act on the amount of refund which has not been received by the assessee. 1.8. The learned AO erred in levying interest of ₹ 17,35,846 under section 234B of the Act. The appellant craves leave to add to, alter, amend, vary, omit or substitute the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing of the appeal as it may be advised. 3. The Brief facts of the case are that Baskin Robbins Franchising LLC (in short BRF ) , the assessee company is a company incorporated in Canton Massachusetts, USA on 15-03-2006 with its holding company as Dunkin Brands , Inc. , and it has entered into a franchises agreement with Gravis Foods Private Limited (in short GFPL ) in India. The BRF earns royalty income from GFPL. The assessee company is engaged in the business of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Development agreement 8.1 In the Manufacturing License Agreement, the assessee has given right to the GFPL right to use the Brand name of 'Baskin Robins', the trade name 31 ICE CREAM, Trade Secrets, System (techniques for the distribution, sale and marketing of the products) and License to manufacture the Baskin Robins's products in the territory. 8.2 In the Franchise Agreement, the assessee grants to the franchisee an exclusive right and license to use and operate the Franchised Business in the territories. By virtue of this agreement the business of existing business of BR in India was given to the GFPL. It is pertinent to mentioned here that the Baskin Robins business was managed and control by the entities called Baskin Robins Franchisee Company Private Limited. The structure of this entities was as a South Asian Ice Cream Company ( SAIC) USA, a joint venture between Baskin Robins Franchising LLC USA( 40%) and a NRI Mr. A.Malhotra (60%) established a franchisee company in India again a joint venture with an Indian entities GL Ice-cream. This franchisee company, Baskin Robins Franchisee Company Private Limited was joint venture of SAlC (40%) and GL Ice-cream ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment year. The appeal was taken up for hearing by your Honours on 20 April 2016 and in the course of hearing your honours were kind enough to instruct that the facts which were explained leading to the filing of additional evidence be provided in the form of a written note. 2. It is submitted that both the lower authorities, that is, learned Assessing Officer (A.O) and learned Members of the Dispute Resolution Panel (DRP) proceeded on a wrong footing that the agreements entered into by between the appellant and Graviss Foods Pvt Ltd were nothing but extension or continuation of similar agreements which the appellant entered into, with the erstwhile Indian entity. This resulted into complete misappreciation of the facts as both the entities in 2007 were different than the entities which were parties to the earlier agreements. 3. In this connection, we humbly submit the following; a) At the outset, the learned DCIT has erroneously proceeded on the basis that the appellant (Baskin-Robbins Franchising LLC) was a party to the previous joint venture (JV) agreement (referred in Para 4 below) and hence concluded that the same arrangement is being continued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g arrangement with a completely independent third party namely Graviss Foods Private Limited (100% owned and controlled by Ghai family) which bears the entire risks and rewards of the Indian territory; Sd/- (GIRISH DAVE) Counsel It was submitted that the authorities below have not considered the current structure of the organization whereby the assessee company was incorporated on 15-03-2006 (certificate of incorporation placed in paper book carrying additional evidences at page 25-27) and the fresh agreements were entered into by the parties post restructuring as set-out above, and hence the entire orders of the authorities below are perverse and in the interest of justice, the matter should go back to the file of the A.O. for de-novo determination of the issues on merits after considering the existing structure of the assessee company and the fresh agreements , which are placed in paper book page B- 33 to B222 entered into with various entities instead of relying upon the old structure of the erstwhile company of the group of which the assessee company was part of and which agreements were already terminated on 30th July, 2007, copy of which are placed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le the assessee company is a new entity incorporated on 15-03-2006 and the old agreements were terminated on 30- 07-2007 after new structure of arrangement came into existence and hence new arrangements and agreements were entered into, thus, keeping in view the present structure, these agreements has to be evaluated keeping in view the provisions of the Act and DTAA between India and USA. The assessee company s counsel has submitted letter to the effect highlighting the errors which have crept in the orders of the authorities below which is reproduced in the preceding para s of this order. We would like to highlight the relevant para from the order of the DRP to that effect to reflect the fundamental error creeping in the orders of the authorities below which goes to the root of the matter as under: Para 7.4 of DRP directions dated 26.12.2014 passed u/s 144C(5) of the Act 7.4 Discussions and Directions : We have considered the submissions of the assessee, the order passed by the AO as well as the documents produced before us including the three agreements between the assessee and Graviss Foods Private Limited . Before deciding the issue at hand , certain factual aspec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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