Use Of ICC Mark As Trademark As Per Agreement Must Be Read In Conjunction With Other Definitions: Delhi High Court Rejects Plea Against Revenue
The Delhi High Court said that the fact finding by the ITAT was in the peculiar set of facts of revenue sharing and it is for this reason, the Court did not find any substantial question of law.
Justice V. Kameswar Rao, Justice Vinod Kumar, Delhi High Court
The Delhi High Court has dismissed the Writ Petition of M/s LG Electronics India P.Ltd. against the Director of Income Tax (International Taxation).
The Petition sought a Writ of Certiorari quashing the Order under Section 264 of the Income Tax Act, 1961 (ITA).
A Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar observed, “The use of the ICC Mark as a trademark as per the agreement must be read in conjunction with the other definitions, more specifically Clause 3.1, which states that the GCC grants global partnership to the petitioner to use the Mark in the licensed territory during the term in the light of the agreement.”
Advocate Deepak Chopra appeared for the Petitioners, while SSC Indruj Singh Rai appeared for the Respondents.
Factual Background
The Petitioner was challenging the Order passed by the Respondents under Section 264 of ITA wherein they decided the payment made by the Petitioner to Global Cricket Corporation Pvt. Ltd. (GCC) as the elements for the booking of space and for the right of use of trademark of the International Cricket Council (ICC). Resultantly, the Respondents apportioned 2/3rd of the total payment made by the Petitioner to GCC towards advertisement by way of booking of space and the balance 1/3rd towards the right to use the trademark of ICC transferred by GCC to the Petitioner and as such, treated the payment as royalty within the meaning of Section 9(1)(vi) Explanation 2(i) of the Act, in conformity with the Singapore-India Double Taxation Avoidance Agreement (DTAA). The Assessing Officer (AO) was accordingly directed to modify the Order under Section 195 of the Act taking 1/3rd of the payment made to GCC by the Petitioner towards royalty of which 15% shall be taken as tax.
Reasoning
The High Court in view of the above facts, said, “Having heard the learned counsel for the parties, the short issue which arises for consideration of this Court in this petition is whether the respondents are justified in considering 1/3rd of the USD 11 million paid by the petitioner to GCC towards royalty payment on which 15% shall be taken as tax.”
The Court noted that there is an element of use of the ICC Mark by the Petitioner as defined in Schedule 3.1, 3(2)(m) and 3(3) of the agreement between the two parties.
“When the petitioner itself conceded the use of the ICC Mark, the attempt to downplay such use as incidental is not convincing. In fact, the reliance placed by the petitioner on the letter of the GCC addressed to the petitioner, dated 12.05.2003, justifying the attribution of USD 1000 to use the ICC Mark out of the total consideration of USD 11 million shows the usage of the Mark as a trademark”, it added.
The Court further observed that the AO has held that the payment as per the application is fully covered within the meaning of royalty and accordingly subjected it to withholding rate @10% of the gross payment.
Conclusion
“The revisional authority has varied that order to hold that 2/3rd of the total payment of USD 11 million is attributed to advertisement and 1/3rd towards the right to use the trademark of ICC and directed that 1/3rd payment be apportioned towards royalty and 15% be taken as tax. No substantial challenge has been made to the apportionment of the total payment into 1/3rd and 2/3rd. It is also not the case of the petitioner that the apportionment of the amount into royalty has to be at a lower rate. In any case, in view of our conclusion above, the said order cannot be faulted with”, it remarked.
The Court, therefore, concluded that the fact finding by the ITAT was in the peculiar set of facts of revenue sharing and it is for this reason, the Court did not find any substantial question of law arising in the said Appeal.
Accordingly, the High Court dismissed the Petition.
Cause Title- M/s LG Electronics India P.Ltd. & Anr. v. Director of Income Tax (International Taxation) & Anr. (Neutral Citation: 2025:DHC:11784-DB)
Appearance:
Petitioners: Advocates Deepak Chopra, Ankul Goyal, and Adwiteya Grover.
Respondents: SSC Indruj Singh Rai, JSCs Sanjeev Menon, Rahul Singh, and Advocate Gaurav Kumar.
