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TMI Blog2024 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... sequently, the assessee succeeds on ground No.1 to 6 of the appeal. - Shri Vikas Awasthy, Judicial Member And Shri Gagan Goyal Accountant Member For the Appellant : Shri Ketan Ved And Shri Abdulkadir Jawadwala For the Respondent : Shri Anil Sant ORDER PER VIKAS AWASTHY, JM: These three appeals by the assessee against the orders of Commissioner of Income Tax (Appeals)-XXXIII, Mumbai [in short the CIT(A) ] all dated 12/11/2007 arising out of proceeding u/s. 195(2) of the Income Tax Act, 1961 [in short the Act ] are taken up together, as the facts germane to all the appeals are identical. ITA No.987/Mum/2008 is taken as the lead appeal, hence, the same is taken up for adjudication first in seriatim. ITA NO.987/Mum/2008: 2. The facts of case in brief as emanating from records are: The assessee was appointed as official sponsor of International Cricket Council (ICC) Events. An Official Sponsor (Worldwide) Agreement dated 16/12/2004 was 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (International) Ltd.(IDI) and/or GCC owns or control strictly for advertising and promotional purposes only and to use the same during the term. He 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. Referring to the decision of Tribunal in the case of Hero MotorCorp Ltd. vs. Addl.CIT, 36 taxmann.com 103(Del-Trib), he pointed that similar agreement was entered into between the assessee therein , GCC -Singapore and WSN-Singapore. The Schedule-4 of the said agreement was similarly worded as in the case of assessee. The Tribunal after considering the terms and conditions of the Sponsorship Agreement came to the conclusion that the payments made by the assessee to GCC and WNS are not in the nature of Royalty as the payment was not for the use of trademark or brand name. Hence, there was no requirement to deduct tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it is not taxable since the payment is not done in India, is not acceptable, The limitation clause applies only to income earned from sources in India but the payment has been received by GCC from Singapore activities. This contention of the assessee is not acceptable because income in any state is taxable either because of source or by the residents. The GCC is not resident of India. The income received from IOCL is taxable in India because it has an access with India as well as under the domestic law it is deem to accrue or arise in India. The phrase from sources in India, should be interpreted as per the domestic law as provided in Article 3(2) of the treaty. On perusal of the agreement between IOCL and GCC mentioned above, it is also seen that IOCL is required to bear the tax liability, therefore, the tax portion is to be grossed up. The rate applicable in the case of royalty income is 20%, however, the fact that the income is to be grossed up since IOCL is bearing the tax burden, the effective rate for deduction of tax works out to 24%. In view of this, IMOC was issued to IOCL to remit the sum of US $ 5,95,000 subject to withholding of tax @ 24% + 2% EC The ld. Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with the terms of this Agreement, provided that: (a) the Sponsor shall not acquire any rights in any such footage other than the limited licence hereunder; (b) the Sponsor shall not distort, add to, delete from or interfere with any such footage? or any part thereof without the prior written consent of GCC; (c) the Sponsor shall not make such footage available for reception via the Internet or any other on-line form of delivery; (d) any single use of such footage shall be no longer than thirty (30) seconds in duration; and (e) the Sponsor may not use such footage in a manner which may express or imply (directly or indirectly) any endorsement of the Sponsor's products or services whether by any Team or Team member or otherwise save where the Sponsor has obtained all required approvals and consents (other than copyright related approvals and consents to be granted by IDI and/or GCC) for the use of such footage. For the avoidance of any doubt, the Sponsor shall be solely responsible for obtaining the consents and approvals required hereunder (including as to costs of obtaining the same). GCC shall use its reasonable endeavours where it does not act as Designated Bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly use footage and still Images incorporating a player's image or attributes in or on its Advertising Materials (including its promotional materials) and Premiums under this Agreement in accordance with: (a) prevailing general applicable law on personal endorsement or lawful and binding judicial order; and/or (b) any lawful and binding agreement or arrangement between the Sponsor and the applicable player. 4.4 Where GCC and or IDI/ICC do not own or control the footage or still images (as applicable) of the Events which the Sponsor wishes to incorporate in or on Advertising Materials and Premiums for use in accordance with this Agreement, the Sponsor shall be solely and unconditionally responsible for acquiring from any necessary source (including, without limitation, Teams and members of Teams) all copyright consents and/or other required approvals for the use of such footage or still images (as applicable) prior to such use provided always that the provisions of paragraphs 4.1 (b) to (e), 4.2(b) to (d) and 4.3 shall, as applicable, apply equally in respect of the use of such footage or still images of the Events. 8. A perusal of the aforesaid terms and conditions would show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial brochure. Web site of ICC etc., which is purely incurred for the promotions, advertisement and publicity of the assessee's brand name and products. If incidentally, the proprietary trade mark or logo of ICC is put alongside the assessee s logo it is only incidental to the main services obtained by the assessee. The ratio of the Judgment in the case of Sheraton International Inc. (supra), and the judgment of Sahara India Financial Corporation (supra), in our view squarely apply to the facts of the case. Thus the amount in question paid to Nimbus Sports International and GCC PTE Ltd., Singapore is not royalty as the payment was not for use of any trade mark, brand name. As both these organizations do not have any P/E in India the income is not taxable in India and consequently there is no requirement of deduction of tax at source. [Emphasized by us] Thus, the Tribunal came to the conclusion that since the payment made to GCC and Nimbus Sports International are not taxable in India, there is no need to deduct tax at source u/s. 195 on such payments. Consequently, no disallowance can be made u/s. 40(a)(ia) of the Act. 11. The Co-ordinate Bench in the case of Global Cricket ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Event as sponsors to advertise their products/services by reaching out to a broad target audience. The use of equipment, if any, was ancillary. 6.16. On behalf of the GCC reliance was placed on the decision of Delhi Bench of the Tribunal in the case of Hero Honda Motocorp Ltd. vs. Additional Commissioner of Income Tax: (2013) 156 TTJ (Del) 139 wherein the Tribunal was examining the issue of deductibility of payments made by sponsor to GCC for the sponsorship rights in respect of ICC-Events (namely, ICC Trophy 2006, India and ICC World Cup 2007, West Indies). The Tribunal allowed deduction claimed by the sponsor holding that the provisions of Section 195 of the Act were not attracted since the payments paid by the sponsor to GCC was purely for advertisement and publicity of brand name and products during the cricketing events and not payment of royalty in terms of Article 12(3) of DTAA. The relevant extract of the decision of the Tribunal rendered in identical facts and circumstances reads as under: 53.38 Applying the propositions laid down in these case laws to the facts of the case, we are of the considered view that the claim of the assessee that the payment was purely for advert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to IDI to be the Official Partner of ICC cannot be considered as royalty in the hands of the recipient under section 9(1)(vi) of the Act. 12. On the contrary the Department has placed reliance on the decision of SoktasTekstil Sanayi Ve Ticaret AS vs. ACIT (supra). We find that the facts in the case of SoktasTekstil Sanayi Ve Ticaret AS vs. ACIT are distinguishable. The Tribunal in the facts of the said case after examining the terms and conditions of the agreement came to the conclusion that the consideration received by the assessee for permitting the right to use brand name/ trade name under Trademark Licence Agreement is in the nature of Royalty defined u/s. 9(1)(vi) r.w. Article 12(3) of India Turkey Tax treaty. The ratio laid down in the said case does not apply to the facts in the instant case. 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. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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