TMI Blog2018 (5) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be set aside and that of the Assessing Officer be restored. 2. Brief facts of the case are that the assessee is a Company is tax resident of United States of America (USA), filed its return of income for Assessment Year 2012-13 on 27.09.2012 declaring total income of ₹ 1,65,33,247/-. The assessee has offered the income in the nature of Royalty taxable @ 10% as per India-USA Double Taxation Avoidance Agreement (DTAA). The assessee has offered the income from franchise fee and consultancy services provided to M/s Jubilant Food Works Limited (Jubilant) for opening of store. The Assessing Officer passed the Draft Assessment Order under section 143(3) r.w.s. 144C dated 27.03.2015. The Assessing Officer while passing the Draft Assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive (AR) of the assessee and perused the material available on record. The ld. DR for the Revenue supported the order of Draft Assessment passed by Assessing Officer. The ld. DR further submits that Jubilant is an agency PE of the assessee as per definition provided under India US DTAA means a fixed place of business through which business or enterprise is wholly or partly carried on. There is one exception to the general Rule i.e. under certain condition, a person is acting on behalf of enterprises and then enterprises can be deemed to have a PE in India though it does not have any fixed place of business. As per the provisions of Income-tax Act, the income arising by foreign enterprises through business connection in India would be taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 109 to 142 of PB). The ld. AR of the assessee further submits that M/s Jubilant does not act on behalf of assessee (clause-1.4 of the agreement provides irrevocable right to Jubilant to establish or appoint its commissionaire in India, for the purpose of supply of food ingredients and beverage product and other supply. Clause-10 of MFA (agreement) imposes obligation to Jubilant with the statutory obligation in India, without any intervention of assessee. Further Clause-11 of agreement provides the right to determine the price charged by assessee its store and sub-franchise in India. The assessee has no say in the matter, and can only place advisory role. No guidance offered by assessee which deemed or constitutes to impose any obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 23.02.2010 for Mumbai location (PB 109 to 142) and Jubilant Food Works Pvt. Ltd. and Travel Food Services Pvt. Ltd. for Delhi Location effective from 01.05.2010 (PB 143 to 172). We have also perused the various provisions of India-US DTAA. We have noted that the Assessing Officer while passing assessment order held that assessee constitute a dependent agency permanent establishment in India as per Article 5 of India-USA DTAA. The Assessing Officer took the view that Jubilant is totally dependent upon the assessee. Assessee has exclusive franchise right in India. Jubilant is not allowed any other activities other than activities prescribed in the agreement. Further, the quality of material and equipment used has to be approved by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he clause of MFA, the assessee is entitled to 3% of sale proceed and further entitled for store opening fees as well as sub-franchise fees. We have also noted that the profit and loss from the business belongs to Jubilant or sub-franchise. We have noted that certain clauses and the agreement entitles the assessee to examine the accounts, approve suppliers and allowing control over advertisement, however, 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. We have also perused Article-5 of India-USA DTAA and found that none of the condition prescribed under clause-(a) to clause-(l) of Article-5.2 are attracted. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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