LI Network
Published on: December 29, 2023 at 12:18 IST
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the sponsorship amount provided by the Indian Oil Corporation Limited (IOCL) to the Global Cricket Corporation (GCC) is not classified as royalty.
The bench, comprising Vikas Awasthy (Judicial Member) and Gagan Goyal (Accountant Member), observed that as the payments to GCC and Nimbus Sports International are not taxable in India, there is no requirement to deduct tax at source under Section 195 for such payments. Consequently, no disallowance can be imposed under Section 40(a)(ia) of the Income Tax Act.
IOCL, the appellant, had been appointed as the official sponsor for International Cricket Council (ICC) events. An Official Sponsor (Worldwide) Agreement was executed between Global Cricket Corporation PTE Ltd.-Singapore (GCC), World Sports Nimbus PTE Ltd.-Singapore (WSN), and IOCL.
The sponsorship agreement covered events from the ICC Champions Trophy 2004 to the ICC Cricket World Cup 2007.
GCC issued invoices for sponsorship, including signage display and associated benefits during ICC Champions Trophy 2004 and ICC Trophy 2005. IOCL applied for authorization to remit the amounts to GCC without tax deduction, citing that GCC-Singapore lacked a permanent establishment in India.
The Assessing Officer rejected IOCL’s application, deeming the amounts as “royalty” and directing a 24% tax deduction along with a 2% education cess.
Challenging this, IOCL appealed to the CIT (A), who upheld the Assessing Officer’s observation but provided partial relief, considering 50% of the payment as royalty under Article 12 of the Treaty for the use of trademarks, trade names, and copyrights.
IOCL argued that payments were made in accordance with the sponsorship agreement’s terms for non-exclusive rights to use event marks, footage, and still images strictly for advertising and promotional purposes. The ITAT concluded that these payments are not royalty under the Income Tax Act or the India-Singapore DTAA.
Case Title: M/s. Indian Oil Corporation Ltd. Versus DCIT
