CA AJAY KUMAR AGRAWAL
Nehru Place, New Delhi
Case Reference – 0004 | Date: 31/12/2025
For Professional Circulation
Delhi High Court | Judgment dated 24 December 2025
W.P.(C) 15181/2004
LG Electronics India Pvt. Ltd. & Anr.
Versus
Director of Income Tax (International Taxation) & Anr.
Core Issue:
The core issue before the Delhi High Court was whether a part of the sponsorship and advertising consideration paid by LG Electronics India Pvt. Ltd. to a Singapore-based entity, Global Cricket Corporation Pvt. Ltd., for association with ICC cricket events could be re-characterised as “royalty” for the right to use ICC trademarks and event marks, thereby attracting withholding tax under section 195 of the Income-tax Act, 1961, read with section 9(1)(vi) and Article 12 of the Indo-Singapore Double Taxation Avoidance Agreement.
Facts of the Case:
Global Cricket Corporation Pvt. Ltd., incorporated in Singapore, had obtained commercial and marketing rights in respect of cricketing events organised under the aegis of the International Cricket Council. In exercise of such rights, GCC entered into a Global Partnership Agreement dated 28 June 2002 with LG group entities, including LG Electronics India Pvt. Ltd., under which LG was appointed as a Global Partner for specified ICC events.
Under the agreement, LG acquired extensive sponsorship and advertising rights, including on-ground visibility through perimeter advertising boards, electronic screens, tickets, official event publications and websites. In addition, the agreement expressly granted LG a non-exclusive right to use ICC marks and event marks on advertising material throughout the licensed territory, defined as the entire world. The total consideration under the arrangement was USD 27.5 million, out of which USD 11 million was borne by LG Electronics India Pvt. Ltd.
Prior to remitting the amount to GCC, LG Electronics India applied under section 195 seeking permission to remit the payment without deduction of tax at source. The Assessing Officer rejected the application, holding that the payment constituted royalty. In revision under section 264, the Director of Income Tax partly accepted the assessee’s contention and held that the consideration was composite in nature, comprising two elements. Two-thirds of the amount was attributed to pure advertising and booking of space, while one-third was attributed to the right to use ICC trademarks and event marks, taxable as royalty at the rate of fifteen per cent under the Indo-Singapore DTAA.
Statutory Provisions Involved:
Section 195 of the Income-tax Act mandates deduction of tax at source on payments to non-residents which are chargeable to tax in India. The chargeability of the income was examined with reference to section 9(1)(vi). Explanation 2 to section 9(1)(vi) defines royalty to include consideration for the transfer of all or any rights, including the granting of a licence, in respect of a trademark.
Article 12 of the Indo-Singapore DTAA defines royalties to mean payments received as consideration for the use of, or the right to use, any trademark or similar property, permitting taxation in the source State at a maximum rate of fifteen per cent.
Brief Arguments:
The assessee contended that the dominant purpose of the agreement was advertising and sponsorship, and trademark use was merely incidental. The Revenue argued that substantive and commercially exploitable trademark rights were granted, squarely falling within the definition of royalty.
Findings of the High Court:
The High Court upheld the Revenue’s stand and held that the right to use ICC and event marks was a substantive commercial right. The global licensed territory and extensive permitted usage demonstrated independent commercial value. The apportionment of consideration was held to be reasonable.
Decision:
The writ petition was dismissed. One-third of the amount of USD 11 million was held to be royalty, chargeable to tax in India and liable to withholding tax at fifteen per cent under section 195 read with section 9(1)(vi) and Article 12 of the Indo-Singapore DTAA.
Disclaimer:
This article is intended for academic discussion and professional reference. Application of the ratio depends on facts of each case and prevailing law.
[N.B: All statements, opinions, and analysis presented in this article represent the independent personal views of the author and do not necessarily reflect the views of publication or its editorial team.]
See Article: TDS u/s 195 on Sponsorship & Trademark Rights – Indo-Singapore DTAA
