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TMI Blog2018 (8) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... nchisees but the assessee is entitled to only royalty and store opening fees from sub-franchisees also. Approval of the sub-franchisee agreement is only for the limited purpose of protecting assessee's brand image and business interests. Considering the fact that the master franchisee is an independent business enterprise and restrictions placed on it by the assessee are only to safeguard its brand value and ensure proper receipt of royalty income, we are of the opinion that jubilant does not constitute a permanent establishment or agency PE of the assessee. However, the Dispute Resolution Panel noted that since the department had not accepted the decision and filed an appeal before the ITAT, to keep the issue alive and protect the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Learned Assessing Officer/ Dispute Resolution Panel ('DRP') has erred in: 1. Holding that DPIFI has a Dependent Agent Permanent Establishment in India (Jubilant Foodworks Limited) under Article 5 of the India-USA Double Tax Avoidance Agreement ('DTAA'). Accordingly, the Learned Assessing Officer levied tax on the total income of DPIFI (after allowing a deduction of 5% of income for expenses) at the rate of 40% {plus applicable surcharge and cess) visa- vis a rate of 15% on gross basis as per Article 12 of the India-USA DTAA pertaining to Royalty and Fees for Included Services. 2. Without prejudice to the first objection, the Learned Assessing Officer erred in determining that five percent of the total income shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n gross basis as per Article 12 of the India-USA Double Tax Avoidance Agreement ('DTAA'). The Assessing Officer, however, held that the assessee has a Dependent Agent Permanent Establishment in India (Jubilant Food works Limited) under Article 5 of the India-USA Double Tax Avoidance Agreement ('DTAA') and he proceeded to determine the business income of assessee from such DAPE in India. 4. Upon the assessee s objection, the Dispute Resolution Panel noted that the same issue was decided in favour of the assessee by the Dispute Resolution Panel for the assessment year 2012-13 by observing as under: We have considered the facts of the case and the submission made by the assessee. Examination of Master Franchise Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DA of the IT Act is set aside 5. However, the Dispute Resolution Panel noted that since the department had not accepted the decision and filed an appeal before the ITAT, to keep the issue alive and protect the interest of the department, it upheld the Assessing Officer s action. 6. Against this order, the assessee is in appeal before us. 7. We have heard both the counsel and perused the records. It transpires that for assessment year 2012-13 in ITA No. 1447/Mum/2016, this ITAT in assessee s own case has decided the issue in favour of the assessee. We may gainfully refer to the decision of the ITAT in this regard as under: 5. We have considered the rival submission of the parties and have gone through the orders of authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent agent for the purpose of determining a PE. The Assessing Officer treated the receipt from operations in India as a business receipt taxable @ 40% along with statutory cess. 6. Before DRP, the assessee urged the similar contention as urged before us. In addition to the submission, the assessee contended that during the proceeding before DRP, there was mistake in submission of fact that assessee has sole right to lay down the term and condition with some franchise and that all contract and subfranchise are concluded and signed only by assessee. The correct fact that the subfranchise agreement is executed between Jubilant and sub-franchise and not between the assessee and sub-franchise. We have verified these facts from the copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the assessee. Therefore, considering the contents of the MFA and SFA, the Master franchise are independent business entity, the restriction provided in MFA and SFA are only to safeguard the brand value and to ensure the correct receipt of royalty income as concluded by ld. DRP. Hence, we do not find any infirmity or illegality in the assessment order passed in pursuance of direction of DRP. The case law relied by ld. DR in Formula One World Championship Ltd. is not helpful to the Revenue. As the fact of the said case are at variance. In the said case physical control of the circuit was with Formula One World Championship Ltd. (FOWC) and its affiliates from the inception. However, in the present case, there is no physical control on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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