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Delhi High Court: In a writ petition centred around the controversy on whether consideration paid by petitioner – LG Electronics India Pvt. Ltd. (“LGEIL”) to Global Cricket Corporation Pvt. Ltd., Singapore, for global partnership and advertising rights could, in part, be characterised as “royalty” on account of the right to use the ICC trademark, thereby withholding tax under Section 195 read with Section 9(1)(vi) of the Income-tax Act, 1961 (the Act) and Article 12 of the India—Singapore Double Taxation Avoidance Agreement (DTAA), a Division Bench of V. Kameswar Rao* and Vinod Kumar, JJ., affirmed the apportionment of 1/3rd of the ICC Sponsorship Payments as taxable Royalty in India and upheld that the revisional order.
Brief Facts
The International Cricket Council (“ICC”), which organises international cricketing events including the Cricket World Cup, had assigned its commercial rights to ICC Development (International) Ltd., which in turn transferred such rights to GCC. By virtue of an agreement dated 28-06-2002, GCC appointed LG group entities, including the petitioner, as “Global Partners” for ICC events.
Under the Global Partnership Agreement, LG acquired extensive advertising and promotional rights at ICC cricket events, including display of its brand on perimeter boards, outfield mats, electronic screens, tickets, official websites, and other event-related media. The agreement also permitted the non-exclusive use of ICC Marks and Event Marks in advertising material during the term of the agreement.
For the grant of these rights, the LG Group agreed to pay USD 27.5 million to GCC, of which USD 11 million was borne by the petitioner. Prior to remittance, the petitioner sought a certificate under Section 195 permitting remittance without deduction of tax. This application was rejected on the ground that the payment constituted royalty.
Proceedings Before Tax Authorities
The Deputy Director of Income Tax, vide order dated 12-11-2002, held that the payment was in the nature of royalty. It was held that the petitioner had acquired rights to exploit the commercial potential of ICC events and to derive benefit from the goodwill and reputation of ICC. Tax deduction at source at 10% was accordingly directed.
Aggrieved, the petitioner invoked revisional jurisdiction under Section 264 of the Act, The Director of Income Tax granted partial relief by apportioning the payment. It was stated that the consideration comprised two elements, booking of advertising space and the right to use ICC trademarks. It was held 2/3rd of the payment was attributed to advertising, the balance 1/3rd of the ICC Sponsorship Payments as taxable Royalty within the meaning of Section 9(1)(vi) of the Act read with Article 12 of the India—Singapore DTAA, thereby attracting withholding tax at 15%.
Aggrieved, the petitioner filed the present writ petition challenging the order dated 27-04-2004 passed by the Director of Income Tax (International Taxation).
Moot Point
Whether the respondents were justified in treating 1/3rd of the ICC Sponsorship Payments as taxable Royalty in India?
Court’s Analysis
The Court examined the terms of the Global Partnership Agreement in detail, particularly Schedule 3, which expressly granted the petitioner a non-exclusive right to “use, reproduce and publish” the ICC Marks and Event Marks throughout the licensed territory in or on advertising material.
The Court noted that “advertising material” no necessary nexus to on-ground advertising at stadiums alone. The Court found the definitions of “licensed territory” and “advertising material” to be extremely wide, extending beyond the physical confines of the stadium and encompassing use across the world and across media.
The Court noted that LG India had, in its own representation during the Section 264 proceedings, admitted that “there is an element of use trademark by LGEIL of the ICC”, though it sought to characterise such use as incidental. The Court found the “attempt to downplay such use as incidental is not convincing.”
The Coury held that the right to use the ICC trademark was not merely incidental to on-ground advertising. The agreement created a substantive and enforceable right in favour of LG India to use ICC Marks and Event Marks on advertising material globally. Such right squarely fell within Explanation 2 to Section 9(1)(vi) of the Act, which defines royalty to include consideration for the transfer of all or any rights in respect of a trademark.
The Court upheld the approach of the revisional authority in bifurcating the consideration into two components, advertising space and trademark usage, and found no perversity in attributing one-third of the payment towards royalty. The Court found the rate of withholding at 15% to be in consonance with Article 12 of the India—Singapore DTAA.
The Court asserted that the precedents relied upon by the petitioner were distinguished on facts. The Court found that the in Formula One World Championship Ltd. v. CIT, (2017) 15 SCC 602, the use of trademark was strictly limited and incidental to promotion of the event by the host, whereas in the present case, the petitioner was granted an independent right to use ICC Marks across media and geographies. Similarly, in DIT v. Sheraton International Inc., 2009 SCC OnLine Del 4231, was based on revenue-sharing arrangement and peculiar facts are not applicable to the present case.
Court’s Decision
The Court held that the payment made by the petitioner to GCC was rightly apportioned by the Director of Income Tax, and constituted the portion of ICC Sponsorship Payments as taxable royalty in India under Section 9(1)(vi) of the Act read with Article 12 of the India—Singapore DTAA on account of right to use ICC trademarks. The Court upheld the apportionment of 1/3rd of the payment as royalty and the direction to deduct tax at source at 15%
[LG Electronics India (P) Ltd. v. DIT, W.P.(C) No. 15181 of 2004, Decided on 24-11-2025]
*Judgment by Justice V. Kameswar Rao
Advocates who appeared in this case:
Mr. Deepak Chopra, Mr. Ankul Goyal and Mr. Adwiteya Grover, Counsel for the Petitioner
Mr. Indruj Singh Rai, SSC, Mr. Sanjeev Menon, Mr. Rahul Singh, JSCs and Mr. Gaurav Kumar, Counsel for the Respondents