TaxTMI 
TaxTMI 
2017 (6) TMI 719
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....entary Agreement was entered into between the same parties on the same date. As per this agreement, in the event, the showroom premises is less than what is stated in the franchise agreement, that is 54730 sq. ft. (which is the carpet area + 10%), then the commission payable would be pro rata depending on the exact floor space which is made use by the appellant for its franchise operations. It was also stipulated that M/s. PRIL shall pay to appellant Franchise Commission @ 5% of net sales subject to a guaranteed monthly commission of Rs. 18,47,500/- which is to be escalated at the rate of 10% after every 36 months on renewal of franchise agreement. In addition to the guaranteed commission, appellants are also entitled for reimbursement of common area or maintenance amounting to Rs. 1,95,600/- per month. A third agreement was entered between the parties on 24.11.2006 wherein, M/s. PRIL is described as principal and appellant is shown as agent. It is stated in this agreement that appellant approached M/s. PRIL and represented that they are in possession of property in Chennai city for operation of retail business and offered to market products of M/s. PRIL as its agent on a non-exclu....
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....th interest and imposed equal penalty under section 78 of the Finance Act, 1994 with an option of reduced penalty. A further penalty of Rs. 5,000/- under section 77 was also imposed. Being aggrieved, the appellant is before the Tribunal. 3. The appeal though of the year 2012 was taken out of turn on the representation made by the learned counsel for appellant that the issue in the appeal is covered by the judgment of the Tribunal in favour of the assessee. For reasons following, we find in the negative. 4. Arguments on behalf of the appellant by learned counsel Shri Joseph Prabhakar:- 4.1 Though the agreement is named as Franchise Agreement, it is in fact an agreement for renting of immovable property. The building belonging to appellant was let out to M/s. PRIL for conduct of Big Bazaar shop. The appellant was receiving only monthly rent of Rs. 18,47,500/- calculated at Rs. 34/- per sq. ft. of 54,330 sq.ft. Though in the agreement it is stated that the appellant is required to put up and manage showroom for sale of products of M/s. PRIL and that the appellant is eligible for commission @ 5% of net sales, the appellant has not received any sum based on sales. The appellant....
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....sub-clause and therefore the show cause notice is flawed. 4.6 Out of the demand of Rs. 1,10,51,235/-, an amount of Rs. 29,36,933/- pertains to reimbursement of electricity charges and Rs. 5,52,553/- pertains to reimbursement of diesel expenses. These amounts have been reimbursed and therefore are not liable to be taxed as laid in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India - 2013 (29) STR 9 (Del.) and also in the case of ICC Reality (India) Pvt. Ltd. Vs. Commissioner of Central Excise, Pune II - 2013 (32) STR 427 (Tri. Mumbai). 4.7 The demand on parking income and shooting income is also not sustainable. 4.8 The entire demand is beyond normal period. The appellant has rendered only Renting of Immovable Property services. The issue whether renting of immovable property would be liable to service tax stands unresolved as the matter is before the Hon'ble Supreme Court. Further, the decision by Hon'ble Delhi High Court in the case of Home Solutions held the services not liable to service tax. In such circumstances, the appellant cannot be alleged to have suppressed facts and the extended period cannot be invoked. Cleary the issue is an....
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....mis-representation and the show cause notice issued invoking the extended period of limitation is correct and proper. 6. We have carefully considered the rival submissions made before us. 6.1 The issue for consideration is whether the services provided by the appellants are Business Auxiliary Services as alleged in the show cause notice or renting of immovable property service as contended by the appellant. 6.2 Admittedly, the nomenclature of the agreement is Franchise Agreement. Another agreement called Supplementary Agreement is also entered into between the same parties. The bone of the contention raised by appellant is that though the agreement is named as franchise agreement, what has been done/acted by the appellant under the agreement is renting of immovable property. That the appellant is in no way connected with the sales or business of M/s. PRIL then be necessary to look into the relevant terms and conditions of the agreement which are reproduced as under:- 1. FRANCHISE AGREEMENT WHEREAS: PRIL is engaged among other things, in the marketing of various consumer and other products inter alia under the brand name "Pantaloons" etc. All such....
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.... account specified by PRIL. Franchisee shall be entitled to the franchisee commission @5% of the Net sales where "Net Sales" shall mean the sales price after taxes, discounts and all sales returns in respect of all sales made from the showroom premises. Such commission payment to be made to franchisee on or before the 10th day of each succeeding month. The service taxes, if any in this regard shall be borne by the Franchisees. The Franchisee shall maintain proper books of account as directed by PRIL and preserve them for at least eight years after the end of the relevant financial year. Such books of accounts shall include all supporting documents and correspondence relating to the Products which shall be made available to PRIL and any person authorized by it at such times and place as PRIL may reasonably require for the purposes of inspecting the same. TERMINATION Notwithstanding anything contained herein, in the event the Franchisees commit default in depositing the sales proceeds of sales as mentioned hereinabove or sell the product of any other competing brand without prior written consent of PRIL then this Agreement shall stand ipso-facto terminated ....
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....ission inclusive of all taxes for which franchisee will be entitled to irrespective of the higher sales subject however to the deduction of applicable TDS. The Monthly Guaranteed commission shall be escalated @ 10% after every thirty-six months on renewal of franchisee agreement. 6.3 Apart from the franchise agreement and supplementary agreement executed on 3.5.2006, the parties have executed another agreement called Agency Agreement on 24.11.2006. In this agreement, M/s. PRIL is described as' Principal' and appellant is described as 'Agent'. The relevant terms and conditions of the 'Agency Agreementis' as under:- 3. AGENCY AGREEMENT M/s. Pantaloon Retail India Ltd., a company incorporated under the Companies Act, 1956 having its registered office at Knowledge House, Shyam Nagar Off Jogeshwari-Vikhroli Link Road, Jogeshwari (E) Mumbai - 400 060 and the Zonal Office at No.18/1, Pasadena, 10th Main, Ashoka Pillar Road, Jayanagar 1st Block, Bangalore - 560 011 represented by its Authorised Signatory Mr. Vishnu Prasad hereinafter called the Principal which term shall where the context so permits mean and include successors in interest ....
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....greements that there is nothing to show that there is a transfer of right in the property either by way of lease, sub-lease or license. In fact, it is specifically stipulated that nothing in the Franchise Agreement shall be construed as creating any right, title, interest or easement tenancy or sub-tenancy in favour of M/s. PRIL in or over the said showroom premises for transferring any interest in favour of M/s. PRIL other than entitling PRILs products being put up for sale from the said showroom premises through the franchisee. On such score, the contention of the appellant that the agreement is a lease agreement deserves to be rejected in toto. 6.5 The learned counsel has vehemently argued to apply the decisions in the cases of Shakeel Afzal Ladak (supra) and Heera Laxmi Amusement Pvt. Ltd. (supra). The said judgments do not bring out the entire set of facts of the case or the particulars of the franchise agreement mentioned therein. Whereas, in the case on hand, the document clearly show that it is a not an agreement for renting of immovable property. Hence the said decisions are of no assistance to the appellant. 6.6 All the more it has to be mentioned that appellant has....