9911796707
TMI Blog2016 (7) TMI 1043X X X X Extracts X X X X X X X X Extracts X X X X ..... o the order dated 23 January 2015 (received on 3 February 2015) passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (''the Act') by the learned Deputy Commissioner of Income-tax (International-taxation) - 1(2)(1) ('DCIT'). The said order was passed pursuant to the directions dated 26 December 2014 issued by Dispute Resolution Panel- I, Mumbai '(DRP'), on the following amongst other grounds: Each of the following grounds of appeal is without prejudice to the other.- On the facts and in the circumstances of the case and in law, 1.1. The learned DCIT erred in holding that Graviss Foods Private Limited (GFPL) was a dependent agent Permanent Establishment of the appellant. 1.2. The learned DCIT erred in not appreciating the fact that GFPL was an independent entity and there was no legal or economic dependence on the appellant. He erred in not considering his own observation that transfer pricing provisions were not applicable. 1.3. The learned DCIT erred in observing that the appellant had a joint venture in India since 1991. He erred in not appreciating the fact that the appellant was incorporated only on 15 March 2006 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee company submitted that it receives royalty income pursuant to the provisions of the agreement and also that the assessee company has no office or any place of business in India. It was submitted that GFPL is an independent and unrelated entity, part of Graviss group founded in 1945 engaged in hospitality and foods business in India and GFPL has its own manufacturing and cold storage facility for manufacturing and storing Baskin Robbins products in India. The manufacture and sale of assessee company's products are being carried out by the franchisee-GFPL and/or sub-franchisees appointed by GLFL on their own account and the assessee company merely receives royalty. Under the above arrangements, the assessee company has received the following income as royalty during the relevant previous year to the assessment year 2011-12: Particulars Amount (Rs) Initial Franchisee fees (4th installment 38,80,000 Royalty payment on store opening 33,14,881/- Royalty payment on sales and access fees 1,26,62,421/- Total 1,98,57,302 The assessee company submitted that it has no Permanent Establishment (PE) in India and the royalty income received in India was offered to tax un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (BSF)." Thus, the authorities below after detailed study , information available on public domain and information obtained u/s 133(6) of the Act from GFPL came to the conclusion that the assessee company has PE in India i.e. GFPL being a dependent agent and the income derived was brought to tax under the head "profit and gains of business" u/s 44DA of the Act whereby draft assessment order was proposed vide order dated 31st March, 2014 u/s 144C(1) r.w.s. 143(3) of the Act , which was confirmed by the DRP vide their directions dated 26th December, 2014 u/s 144C(5) of the Act. Thereafter, the assessment orders was passed by the AO vide orders dated 23-01-2015 u/s. 144C(13) r.w.s. 143(3) of the Act . 4. Aggrieved by the assessment orders passed by the AO vide orders dated 23- 01-2015 u/s. 144C(13) r.w.s. 143(3) of the Act, the assessee company is in appeal before the Tribunal. 5. The main contention of the ld. Counsel for the assessee company is that the authorities below have proceeded on wrong assumptions and has considered the agreement entered into by the erstwhile entity by submitting as under:- "21st April, 2016. Hon'ble Members, "L" Bench, Income Tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant company entered into franchising agreement, manufacturing license agreement and development agreement with Graviss Foods Private Limited (the franchisee) which is a totally independent entity and is controlled by Ghai family and not only by two brothers, namely S/Shri Ravi & Gaurav Ghai who were partners in a firm which had 60% stake in the Indian franchisee-Company, namely, Baskin Robins Franchising Company Pvt Ltd. f) The franchisee structure post-2007 is depicted hereunder: g) The structure of the group prior to 2007 and from 2007 onwards has also been included at Page 374 and 375 of the Paper book compilation filed by the appellant. h) Based on the above, your honour will appreciate that the structure included at Page 8 of the Directions given by the Dispute Resolution Panel (DRP) is incorrect as the same shows the appellant as a party to the previous joint venture arrangement and thus learned Members of the DRP have also grossly erred on facts leading to an erroneous conclusion. 4. Under the circumstances, it is submitted that the learned DCIT has passed the order ignoring the correct structure submitted vide letter dated 11 March 2014 and without apprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the A.O. with directions to determine the issue de-novo on merits after considering the correct existing structure of the assessee company and the fresh agreements entered into with various entities by the assessee company on merits. 7. We have considered the rival contentions and also perused the material available on record. We have observed that there is a substantial change in the existing structure , whereby the assessee company was incorporated only on 15th March, 2006 and the fresh agreements have been entered into by the assessee company with GLFL, while the old agreements which were existing were terminated on 30-07-2007 which are placed in paper book page 1-24 of additional evidences filed before the Tribunal which goes to the root of the matter and we direct admission of additional evidences in the interest of justice. The assessee company has also submitted details of the old agreements and fresh agreements and details of restructuring before the authorities below which are placed in paper book filed with Tribunal vide replies filed before the AO dated 30-09-2013, 17-12-2013,20-12-2013 and 18-02-2014 which are placed in paper book pages B-33-B222,B226,B227- B244 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assumption that the assessee company is the same entity which has entered into agreements in 1991 and is continuing whereas the fact of the matter is the assessee company is incorporated only on 15-03-2006 for which certificate of incorporation is placed on record by the assessee company at page 25-27 of paper book containing additional evidences. Thus, the fundamental premise on which the authorities proceeded in the matter has crept with an error which goes to the root of the matter and the orders of the authorities below cannot be sustained under these circumstances. In our considered view and in the interest of justice, the issues' arising from these appeals needs to be set aside and restored to the file of the A.O. for denovo determination of all the issues on merits . As such, we set aside the matter back to the file of the A.O. with a direction to re-determine the issue de-novo on 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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