ICC Cricket sponsorship payments to Singapore entity not taxable as royalty under Section 9(1)(vi)

The ITAT Mumbai held that payments made under a sponsorship agreement for ICC Cricket Events to a Singapore entity were not taxable as royalty under Section 9(1)(vi) of the Income Tax Act or Article 12 of the India-Singapore DTAA. Following the coordinate bench decision in Global Cricket Corporation and Hero MotorCorp precedent, the tribunal determined that sponsorship fees for event marks and signages do not constitute royalty payments, ruling in favor of the assessee on grounds 1-6 of the appeal.

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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.

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