Delhi High Court Holds ICC Trademark Rights Under LG Sponsorship Agreement Attract Royalty TDS

The Delhi High Court has dismissed a writ petition filed by LG Electronics India Pvt. Ltd., upholding the Income Tax Department's decision to treat a portion of sponsorship payments made for ICC cricket events as taxable royalty.

A Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar refused to interfere with an order passed under Section 264 of the Income Tax Act, which had held that one-third of the USD 11 million paid by LG to Global Cricket Corporation (GCC), Singapore, was attributable to the “right to use” ICC trademarks and logos, and therefore liable to tax as royalty at 15% under Section 9(1)(vi) read with the India–Singapore DTAA.

The Delhi High Court held that LG's own admissions and the terms of the Global Partnership Agreement clearly established a substantive right to use ICC trademarks, and not merely an incidental permission.

The case at hand arose after the assessee, LG Electronics India Pvt. Ltd entered into a Global Partnership Agreement for ICC cricket events, under which it obtained extensive advertising and promotional rights, including display of its logo at stadiums and association with ICC marks. The assessee sought permission to remit the amount without deduction of tax, contending that the payment was purely for advertising space and that use of ICC trademarks was merely incidental.

Rejecting this argument, the High Court noted that the agreement granted the assessee a substantive and worldwide licence to use ICC and Event Marks on advertising materials, packaging, websites and other media, going beyond mere on-ground advertising at stadiums. The Court also relied on the assessee's own admission before the tax authorities that there was an element of trademark use, even though the company attempted to characterize it as minimal.

The Bench held that the tax authorities were justified in apportioning the consideration, attributing two-thirds to advertisement services and one-third to royalty for trademark usage, and clarified that no perversity or jurisdictional error was made in the Section 264 order warranting interference under Article 226 of the Constitution.

The Bench noted that the agreement expressly granted the assessee licence to use and reproduce the ICC and Event Marks across the licensed territory defined as the “world”, including on all forms of advertising material, irrespective of any particular venue. It further observed that since on-ground advertising and signage were under GCC's control, the trademark licence operated independently and formed part of the overall consideration. The Bench concluded that the payment was rightly bifurcated, with the portion attributable to trademark usage liable to tax as royalty.

Distinguishing earlier rulings such as Formula One World Championship Vs. Commissioner of Income-Tax, (International Taxation)-3, Delhi 2017 390 ITR 199 and Director of Income Tax Vs. Sheraton International (2009) 313 ITR 267, the Bench observed that in the case in hand, the right to use ICC trademarks was not merely incidental but an independent and valuable commercial right forming part of the consideration.

In view of the above, the Bench dismissed the writ petition, affirming that withholding tax at 15% on the royalty portion of the payment was lawful.

Case Title: M/S LG Electronics India P.Ltd & Anr. Vs. Director of Income Tax(International Taxation) & Anr.

Case No.: W.P.(C) No. 15181/2004

Appearance for the Petitioner: Mr. Deepak Chopra, Mr. Ankul Goyal and Mr. Adwiteya Grover

Appearance for the Respondents: Mr. Indruj Singh Rai, SSC Mr. Sanjeev Menon, Mr. Rahul Singh, JSCs and Mr. Gaurav Kumar

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