Dependent agent permanent establishment not established where franchise restrictions protected brand value, not contract authority.

The franchisee and sub-franchise arrangements were analysed under Article 5 of the India-USA DTAA to determine whether they created a dependent agent permanent establishment in India. The Indian entity was treated as carrying on an independent business, while the assessee's receipts were limited to royalty and store-opening fees. Contractual restrictions were held to protect brand value and secure royalty flows, not to authorise the Indian entity to act on behalf of the assessee or conclude contracts for it. The conditions for a dependent agent permanent establishment were therefore not satisfied, and the Revenue's challenge failed.

---

---

Issues: Whether the franchisee arrangement created a dependent agent permanent establishment in India under Article 5 of the India-USA DTAA.

Analysis: The agreement and sub-franchise arrangements showed that the Indian entity operated as an independent business enterprise and that the assessee received royalty and store-opening fees. The restrictions in the agreements were found to safeguard brand value and ensure receipt of royalty, not to confer authority on the Indian entity to act on behalf of the assessee or to conclude contracts for it. The conditions for a dependent agent permanent establishment under Article 5 were held not to be satisfied.

Conclusion: The existence of a dependent agent permanent establishment in India was not established, and the Revenue's challenge failed.

---