The writ petition was filed by LG Electronics India (P) Ltd. challenging the order passed under Section 264 of the Income-tax Act, 1961, whereby permission sought under Section 195 for remittance of payments to Global Cricket Corporation (GCC), Singapore, without deduction of tax at source was denied.

The petitioner entered into a global partnership and sponsorship agreement with GCC for advertising and promotional rights in connection with ICC cricket events. Under the agreement, the petitioner was granted rights to display its brand at event venues and was also permitted to use ICC marks and event marks on advertising and promotional material across the licensed territory. The total consideration payable by the petitioner was USD 11 million.

The Assessing Officer treated the payments as royalty and directed withholding of tax under Section 195. In revision proceedings, the revisional authority apportioned the consideration, attributing two-thirds towards advertisement and one-third towards the right to use ICC trademarks, and held that tax at 15% was deductible on the royalty portion in terms of Section 9(1)(vi) of the Act read with Article 12 of the India-Singapore DTAA.

Before the High Court, the assessee contended that the dominant purpose of the agreement was advertisement and that the use of ICC marks was merely incidental. The Revenue argued that the agreement conferred substantive rights to use ICC trademarks worldwide and that such consideration squarely fell within the definition of royalty.

The Delhi High Court, after examining the contractual provisions, statutory framework, and treaty provisions, held that the definition of royalty under Section 9(1)(vi) of the Act and Article 12 of the DTAA expressly includes consideration for the right to use a trademark. The Court noted that the assessee had itself acknowledged, in its letter dated 19 March 2004, that there was an element of use of ICC marks under the agreement.

The Court rejected the assessee’s contention that such usage was merely incidental, holding that the agreement created a substantive and enforceable right to use ICC marks, which could not be downplayed. The Court further observed that no substantive challenge had been raised to the apportionment of the consideration into advertisement and royalty, nor to the rate of tax applied.

The High Court distinguished the decisions in Formula One World Championship Ltd. v. CIT (International Taxation) and Director of Income Tax v. Sheraton International Inc., holding that those cases were rendered in materially different factual contexts where trademark usage was truly incidental.

Accordingly, the writ petition was dismissed, and the orders of the Assessing Officer and revisional authority were upheld.

Outcome: Decision in favour of Revenue
Case: LG Electronics India (P) Ltd. & Anr. v. Director of Income Tax (International Taxation) & Anr.
Citation: [TS-1715-HC-2025 (Del.) | Judgment dated 24.12.2025]

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