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2018 (5) TMI 1263 - ITAT MUMBAIIncome from franchise fee and consultancy services - Nature of Royalty - whether taxable @ 10% as per India-USA Double Taxation Avoidance Agreement (DTAA) - P.E. in India - physical control on the business of franchise and sub-franchise - taxability as royalty income or income u/s 44DA - Held that:- the Jubilant or sub-franchise are not storing any goods on behalf of assessee. From the sub-franchise, the assessee is entitled only royalty and store opening fees. The assessee has no authority to maintain in the first mentioned state its stock or goods or merchandise from which he regularly deliver goods or merchandise on behalf of the assessee. No activities are carried out by the by Jubilant on behalf of the assessee. In our view, none of the clause either (a), (b) or (c) of Article-5.4 are applicable on the assessee. 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 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 DR in Formula One World Championship Ltd. [2017 (4) TMI 1109 - SUPREME COURT OF INDIA] 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 business of franchise and sub-franchise by the assessee. - Decided against revenue
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