Trademark use in sponsorship rights can create royalty exposure where the agreement grants substantive brand-use rights alongside advertising benefits.

Payment for global partnership and advertising rights was treated in part as royalty because the agreement granted not only advertising space but also a substantive right to use the ICC Mark and Event Mark in the licensed territory. The use of official status and related promotional rights supported characterisation under the Income-tax Act and the Indo-Singapore DTAA, and the attempt to describe trademark use as merely incidental was rejected. The apportioned split between advertisement value and trademark royalty was accepted, with withholding tax sustained on the royalty component.

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Issues: Whether the payment made for global partnership and advertising rights under the agreement could be treated in part as royalty for the right to use the ICC trademark, attracting withholding tax under the Income-tax Act and the Indo-Singapore DTAA.

Analysis: The agreement conferred not merely advertising space but also a substantive right to use the ICC Mark and Event Mark throughout the licensed territory in advertising material, along with official status and related promotional rights. The petitioner itself acknowledged an element of trademark use, and the attempt to treat it as merely incidental was rejected. The arrangement therefore fell within the statutory definition of royalty under Section 9(1)(vi) of the Income-tax Act, 1961 and the corresponding treaty article. The apportionment adopted by the revisional authority between advertisement value and trademark royalty was also found unobjectionable.

Conclusion: The payment was rightly treated in part as royalty, and the withholding of tax on the apportioned royalty component was upheld in favour of Revenue.

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