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TMI Blog2018 (9) TMI 1657X X X X Extracts X X X X X X X X Extracts X X X X ..... llant (formerly Bharatmatrimony.com) is referred as a franchisor and the associate member with whom the agreement is entered is referred to as the franchisee - it is not an agreement for mere transfer of intellectual property. In fact, the franchise agreement stipulates for payment of franchise fee charged by the franchisor upon the franchisee. The argument of the ld. counsel that it involves only transfer of intellectual property cannot be accepted for the reason that the agreement involves conditions wherein the manner of functioning and operation of the associate center is laid down. Thus the franchisor has a right to dictate or direct how the franchisee has to carry on the business. There is also a condition for the franchisee to attend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of audit by the departmental officers, it was noticed that during 2005 - 06, appellant had outsourced their matrimony activity to other associate centers and had entered into franchise agreement with these associate centers. These associate centers are identified by the trademark 'Bharatmatrimony.com'. The appellant had given representational right as well as right to use trademark to these associate centers. They collect license fee from these franchisee as per the agreement. Such collection includes non-refundable deposit and subsequent collection of royalties. According to department, the said activity was classifiable under 'franchise service' which is brought into service tax net with effect from1.7.2003. The appellants were not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice. It can be seen that promotional materials are to be supplied by franchisor and training facilities has to be arranged by franchisor which go beyond the scope of franchise service as amended from16.6.2005. So also clause 6 of the agreement stipulates service obligations on the part of franchisee. Clause 45 stipulates obligations on the part of franchisor. These obligations are beyond the scope of definition of franchise service and thus the activities cannot fall within the definition. He submitted that the essentials of franchise agreement is not fulfilled in the instant case and does not make the activity a taxable service under this category. He placed reliance in Ashok Enterprises reported in 2007 (5) STR 153 (Commr. Appl.) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verted to the various conditions in the agreement and argued that the agreement falls within the definition of franchise service as amended with effect from 16.6.2005. Merely because the appellants have given the right to use the logo/symbol, which is Bharatmatrimony.com, it cannot be said that the agreement is for transfer of intellectual property. The agreement shows that the franchisor agreed to the franchisee to establish and administer bharatmatrimony.com center for providing a matrimony service in the name of franchisor. Further, there is a fee charged by the franchisor in the name of royalty upon the franchisee for continuous use of the name together with the past and present goodwill of the franchisor along with minimum support serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with reference to the development, opening and operating of various BharatMatrimony Centers throughout the country. The FRANCHISEE acknowledges that he does not presently know the special skills, techniques or business policies, nor does the FRANCHISEE have business forms or access to the FRANCHISOR'S body of knowledge" 7. The above would show that it is not an agreement for mere transfer of intellectual property. In fact, the franchise agreement stipulates for payment of franchise fee charged by the franchisor upon the franchisee. The argument of the ld. counsel that it involves only transfer of intellectual property cannot be accepted for the reason that the agreement involves conditions wherein the manner of functioning and operation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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