2024 (1) TMI 20 - AT - Income Tax

Income taxable in India - Royalty u/s. 9 and/or under Article- 12 of India - payments made in terms of Sponsorship Agreement - sponsorship of the ICC Cricket Events - Singapore, DTAA - HELD THAT - The Co-ordinate Bench in the case of Global Cricket Corporation PTE Ltd 2023 (1) TMI 161 - ITAT MUMBAI while considering the issue of taxability of the amounts received from the sponsors for use of Event marks, signages, etc. held that such payments cannot be considered as royalty in the hands of recipient u/s. 9(1)(vi) of the Act. We find that while adjudicating taxability of amount received as Sponsorship Fee in hands of the recipient, the Tribunal referred to the decision in the case of Hero MotorCorp Ltd 2013 (8) TMI 57 - ITAT DELHI . Thus 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.

Summary

Issues Involved:

1. Whether the payments made by the assessee under the Sponsorship Agreement fall within the meaning of "Royalty" under Section 9 of the Income Tax Act, 1961, and/or under Article 12 of the India-Singapore DTAA.
2. Claim for refund of excess tax paid in respect of remittances made to GCC.

Summary:

Issue 1: Nature of Payments under Sponsorship Agreement

The assessee, appointed as the official sponsor of ICC Events, entered into a Sponsorship Agreement with GCC and WSN. The payments were primarily for the non-exclusive right to use, reproduce, and publish "Event Marks" and footage related to ICC Events for advertising and promotional purposes. The Assessing Officer classified these payments as "Royalty" under Section 9 of the Income Tax Act and directed the assessee to deduct tax at source. The CIT(A) upheld this view but granted partial relief by holding that 50% of the payment was for the use of trademarks, trade names, and copyrights, thus taxable as "Royalty" under Article 12 of the India-Singapore DTAA.

The Tribunal, however, found that the payments were not for the use of trademarks or brand names but were purely for advertisement and publicity of the assessee's brand during ICC events. Citing similar cases, the Tribunal concluded that these payments do not constitute "Royalty" under either Section 9 of the Act or Article 12 of the DTAA. Consequently, there was no requirement to deduct tax at source on these payments.

Issue 2: Claim for Refund of Excess Tax Paid

The assessee claimed a refund of the excess tax paid as TDS on the remittances made to GCC. The Tribunal held that since the payments were not in the nature of "Royalty," any tax paid by the assessee in the form of TDS could be claimed as a refund in accordance with the law.

Conclusion

The appeals of the assessee were allowed, with the Tribunal ruling that the payments made under the Sponsorship Agreement were not taxable as "Royalty" and that the assessee is entitled to claim a refund of the excess tax paid.