The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) observed that the sponsorship amount paid by M/s. Indian Oil Corporation Ltd (IOCL) to Global Cricket Corporation is not royalty.
The assessee was appointed as official sponsor of International Cricket Council (ICC) Events. An Official Sponsor (Worldwide) Agreement dated 16/12/2004was entered between the Global Cricket Corporation PTE Ltd. -Singapore (GCC), World Sports Nimbus PTE Ltd-Singapore (WSN) and the assessee.
The aforesaid sponsorship agreement was in respect of sponsorship of the ICC Cricket Events commencing from the ICC Champions Trophy -2004 scheduled in England to ICC Cricket World Cup 2007 to be held in West Indies. The GCC had raised three invoices towards sponsorship including display of signage and other associated benefits during ICC Champions Trophy 2004 held in England and the ICC Trophy 2005 at Ireland.
It was categorically mentioned in the application that GCC-Singapore does not have a Permanent Establishment (PE) in India and that display of signage is done outside India. Therefore, as per Article-7(1) of India- Singapore Tax Treaty the said payment is not liable to tax in India in the absence of PE in India.
The Assessing Officer rejected the application of assessee and held that the aforesaid amounts are in the nature of “Royalty” and directed the assessee to deduct tax @24% (grossed up rate as per section 195A of the Act) and education cess @ 2%. The Assessing Officer also passed the order dated 27/10/2006 u/s. 195(2) of the Act on similar lines rejecting contentions of the assessee.
The counsel for the assessee submitted that he payments are primarily for non-exclusive right to use, reproduce and publish the “Event Marks” and non-exclusive right to use “Footage and still images” relating to the Events and/or ICC Matches which ICC Development (International) Ltd (IDI) and/or GCC owns or control strictly for advertising and promotional purposes only and to use the same during the term.
The counsel further submitted that the ‘term’ is defined in the agreement to mean, from the date of execution of agreement till expiry of 90th day after the date of final match of the ICC World Cup 2007 is officially concluded. He pointed that the payments made by the assessee for use of photographs, footage, Event Marks which are in the nature of official title, music, trademarks, logos, mascot, etc. are not in the nature of Royalty.
A Two-Member Bench comprising Gagan Goyal, Accountant Member and Vikas Aswathy, Judicial Member observed that “Whereas, the facts in case of present assessee are identical to the facts in the case of Hero MotorCrop (supra). Thus, in light of decision of the Co-ordinate Bench as referred above, we have no hesitation in holding that the payments made by the assessee to GCC are not in the nature of Royalty as defined under the provisions of the Act or Article-12(3) of India- Singapore DTAA. Consequently, the assessee succeeds on ground No.1 to 6 of the appeal.”
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