TOTAL SPORTS & ENTERTAINMENT PVT. LTD., MUMBAI V. ITO (IT) TDS-2, MUMBAI

ITA 6129/MUM/2016

AI Insights

The case involves cross-appeals by the Income Tax Officer and Total Sports & Entertainment India P. Ltd. concerning the taxability of payments made for advertising rights associated with the Sri Lanka and West Indies cricket teams. The core issue was whether these payments should be classified as 'royalty' under Indian tax law and the India-Malaysia Double Taxation Avoidance Agreement (DTAA). The Tribunal examined the nature of the agreements and the roles of the entities involved, ultimately deciding that the payments were not royalty and thus not taxable under the provisions of the DTAA.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299584 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 26-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 13-10-2016
• Other Referred Cases: DIT vs Total Sports & Entertainment India P. Ltd. Sahara India Financial Corporation Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transfer pricing; Double taxation relief; International transaction; Wholly owned subsidiary; TDS
• Section: 201(1); 195; 250; 201; 2(A); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA no.5717/Mum./2016 (Assessment Year : 2014–15) Income Tax Officer International Transaction TDS–4(1)(2), Mumbai ................ Appellant v/s Total Sports & Entertainment India P. Ltd. The Capital, Plot no.C–70, G–Block Bandra Kurla Complex, Bandra (East) Mumbai 400 051 PAN – AACCT0590R ................Respondent ITA no.6129/Mum./2016 (Assessment Year : 2014–15) Total Sports & Entertainment India P. Ltd. The Capital, Plot no.C–70, G–Block Bandra Kurla Complex, Bandra (East) Mumbai 400 051 PAN – AACCT0590R ................ Appellant v/s Income Tax Officer International Transaction TDS–2, Mumbai ................ Respondent Assessee by : None Revenue by : Shri Soumendu Kumar Dash Date of Hearing – 27/02/2023 Date of Order – 27/03/2023 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present cross–appeals have been filed challenging the impugned order dated 03/06/2016, passed under section 250 of the Income Tax Act, Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 2 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–58, Mumbai, [“learned CIT(A)”], for the assessment year 2014–15. 2. When the present cross–appeals were called for hearing neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. From the perusal of record, we find that even on previous occasions, apart from appearances on initial hearings, no one appeared on behalf of the assessee since November 2020. We find that on 02/01/2023, the Registry as well as the Department was directed to serve the notice on the new address of the assessee. In this regard, the office of the Income Tax Officer has filed a letter dated 02/02/2023, intimating that upon physical service of the notice of hearing on the assessee‟s new address, it was found that the office of the assessee does not exist at the given address and assessee‟s agreement regarding the virtual office at the said address was also expired on 14/05/2019. Therefore, in view of the above, we proceed to dispose off the present cross-appeals ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned DR”) and based on the material available on record. 3. In the larger interest of justice, the slight delay of 16 days in filing the appeal by the assessee is condoned. During the hearing, the learned DR also did not raise any objection against the condonation of the aforesaid delay. 4. In its appeal, the Revenue has raised the following grounds:– “1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the activities falling under category "A", viz display of logo on the sporting apparel/attire of the players and the rights to Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 3 complimentary tickets were separable and independent from the other activities under category "B", viz Advertising privileges and Promotional activities rights ignoring the fact that the entire activities together only constituted the essence of the agreement and the payments by assessee were not separately bifurcated under the agreement to for each activity. 2. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in holding that the payments in relation to the activities falling under category "A", viz display of logo on the sporting apparel/attire of the players and the rights to complimentary tickets were not in the nature of Royalty. He failed to appreciate that a particular Cricket team itself represents a unique brand or trademark or goodwill and payments made by assessee to use this team brand for display of the logo of its client on the sports attire of team members clearly qualifies for use of the brand/trademark of the team for which the rights were obtained. 3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in holding that the payments in relation to the activities falling under category "A", viz display of logo on the sporting apparel/attire of the players and the rights to complimentary tickets were not in the nature of Royalty when he had already held the other activities under category "B", viz Advertising privileges and Promotional activities rights under the same agreement as Royalty. He failed to appreciate that all the four activities were inextricately linked and intended for the common purpose of exploiting the brand/trademark/goodwill of a cricket team and under the agreement also they were not bifurcation of price separately for each activity. 4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) therefore, after having accepted that the agreement was a composite one without any separation of price for each activity, ought to have held that the entire payment been was taxable as Royalty. 5. Whether on the facts and in the circumstances of the case and in law, without prejudice to the above arguments, the Ld CIT(A) erred in attributing only 40% of the payments towards Royalty. He failed to appreciate that most of the revenues would accrue to assessee by exploitation of rights mentioned under category "B" because CIT(A) himself held that there was no exploitation of any user right of any brand/trademark in relation to the activity "A". 6. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in holding that provisions of article 28 of the DTAA between India and Malaysia are unwarranted without appreciating that the agreements between TSA, Cayman Island and TSA, Malaysia lacked economic substance and that in substance the transaction was between TSA, Cayman Island and its Indian group company i.e. the assessee. The entire arrangement was to take benefit of DTAA for beneficial rate of taxation under the treaty. 7. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) therefore, after having accepted that assessee has failed to explain as to why and how the agreement between TSA, Malaysia and assessee dated 23/5/2013 could precede the agreement dated 23/7/2013 between West Indies team and TSA, Cayman Island and then agreement dated 5/3/2014 between TSA, Cayman Island and TSA, Malaysia, ought to have held that there was no Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 4 economic substance in the agreement between TSA, Cayman Island and TSA, Malaysia and that entire arrangement was a sham for availing the benefit of DTAA with Malaysia. He erred in concluding that these discrepancies were not fatal to the claim of economic substance and genuineness as per the impugned agreements. 8. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) failed to appreciate that on facts and circumstances of the case, the recipient of Royalty i.e. TSA, Malaysia was not the beneficial owner and as such on this ground also it was not entitled for the beneficial rate of taxation under the DTAA and liable to be taxed as per the rates prescribed. 9. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 5. While the assessee has raised the following grounds in its appeal:– “1. The Order of the learned Commissioner of Income tax (Appeals)-58, Mumbai, is bad in law and contrary to the facts of the case and evidence on record. 2. The learned Commissioner of Income tax (Appeals) erred in holding that out of Rs.2,70,16,654 remitted by the Appellant to Malaysia in respect of Advertising Package during the cricket matches held in Sri Lanka & England, 40% of the amount represents payment in the nature of royalty liable to tax in India. 3. The learned Commissioner of Income tax (Appeals) erred in not looking at the entire transaction holistically, but adopting a dissecting approach, in spite of a clear mandate against such approach by the Hon'ble Supreme Court. 4. The learned Commissioner of Income tax (Appeals) erred in dividing the Advertising Package into two groups illogically and assigning value of 60% and 40% to the groups without any basis. 5. The learned Commissioner of Income tax (Appeals) erred in separating out of the Advertising Package artificially, a few components which are minor and inseparable from the rest of the Advertising Package. 6. The learned Commissioner of Income tax (Appeals) erred in failing to appreciate that even if the payment in appeal is by way of royalty, the same is in respect of rights or services utilized for the purposes of a business carried on outside India, by way of Advertisements during or connected with cricket matches played in Sri Lanka and England and thus outside the scope of Section 9(1)(vi)(b). 7. The Appellant craves leave to add, alter or amend all or any of the Grounds of Appeal.” Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 5 6. The brief facts of the case are that the assessee is a company registered and incorporated in India. The assessee is engaged in the business of seeking and endorsing sponsorship deals for athletes and carrying on the business of rights sponsorships for any sports and entertainment-related accessories, including jerseys, and arranging sports and entertainment-related tours in India and abroad. The assessee is a wholly owned subsidiary of Total Sports Asia Ltd, Cayman Island (“TSA Cayman Islands”). TSA Cayman Islands is a holding company having 11 subsidiaries around the world including the assessee and Total Sports Asia, SDN, BHD (“TSA Malaysia”). As per the assessee, TSA Malaysia is the company through which the holding company, TSA Cayman Islands distributes the advertising and other rights acquired by them. TSA Malaysia has entered into the following 2 agreements with the assessee:- (a) Agreement dated 24/09/2012 sub-licensing to the assessee the advertising package/rights of Sri Lanka National Cricket Team. These rights had been acquired by TSA Malaysia from TSA Cayman Islands, who in turn had acquired it from Sri Lanka Cricket; and (b) Agreement dated 23/05/2013 sub-licensing to the assessee the advertising package/rights of West Indies Senior Men‟s National Cricket Team. These rights had been acquired by TSA Malaysia from TSA Cayman Islands, who in turn had acquired it from West Indies Cricket Board Inc. 7. In respect of both the agreements under consideration, the advertising package/rights refer to are (a) Logo Rights, (b) Advertising Privileges, (c) Promotion Activities Rights, and (d) Rights to Complimentary Tickets. In respect of the Sri Lanka National Cricket Team, the assessee ultimately entered into a contract with Homestead Infrastructure Development Pvt. Ltd. Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 6 While, in respect of the West Indies Senior Men‟s National Cricket Team, the assessee entered into a contract with Confident Projects (India) Pvt. Ltd. As per the agreement, the assessee was required to bear the burden of tax and the non-resident was to receive the amount specified in the agreement in full. In terms of these agreements, the assessee made a remittance totalling Rs.2,70,16,645, during the year under consideration, to TSA Malaysia. While remitting the above amount to TSA Malaysia, the assessee did not deduct any tax under section 195(1) of the Act. The assessee also did not seek any certificate under section 195(2) of the Act. As per the assessee, the income of the non-resident, being income arising from the events held outside India, has accrued outside India and not in India. 8. The Assessing Officer (“AO-TDS”) vide order dated 09/06/2014 passed under section 201(1) & 201(1A) r/w section 195 of the Act did not agree with the submissions of the assessee and held that the assessee has made payment to TSA Malaysia, which is a non-resident, for the use or right to use of the advertisement rights, which are in the nature of the intellectual property and therefore the consideration paid by the assessee falls under the category of Royalty as per clause (iii) to Explanation-2 of section 9(1)(vi) of the Act. It was further held that the advertising package/rights were sub-leased by TSA Cayman Island to the assessee through TSA Malaysia only to avail the benefit of the India-Malaysia Double Taxation Avoidance Agreement (“DTAA”) since there is no DTAA between India and Cayman Islands. It was also held that the consideration for use of rights has been paid by the assessee to TSA Malaysia, which has no role in the active or actual exploitation of rights and thus TSA Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 7 Malaysia is just a conduit 100% subsidiary company. Since the affairs were managed in such a manner only to take benefit of the DTAA between India and Malaysia, therefore, Article 28 which provides for the limitation of benefits is applicable to the present case. The AO-TDS also referred to the date of execution of the agreement in respect of advertising rights from West Indies Cricket Board Inc and held that the rights were granted to the assessee prior to granting of such rights by the West Indies Cricket Board Inc. and thus the same is a colourable device. It was also held that even if it is accepted that the TSA group is mainly operating through Malaysia and the control and management of the business are through its office and infrastructure in Malaysia, therefore, there is no commercial sense for routing the transaction through Cayman Island company. It was further held that there is no physical presence of substantial activity in Cayman Island except for acquiring rights. It was held that the only purpose of forming a Cayman Island company by the group is to avail exemption without any physical presence of substantial activity in Cayman Island. Accordingly, the assessee was denied the benefit of tax exemption claimed under India-Malaysia DTAA on payments made to TSA Malaysia. Since the assessee failed to deduct tax at source under section 195 of the Act in respect of payment made to TSA Malaysia for the use of or right to use of patent, design, trademark, and similar property of Sri Lanka and West Indies Cricket Team, the assessee was treated as „assessee in default‟ under section 201 and accordingly, tax of Rs.86,11,558 and interest of Rs.5,71,032 under section 201(1A) of the Act was computed. Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 8 9. The learned CIT(A) after considering the submissions of the assessee held that invocation of Article 28 of India-Malaysia DTAA is not warranted in the present case. As regards the characterisation of the payment made by the assessee, the learned CIT(A) bifurcated the payment into 2 categories and held that in category A, the payment in respect of the display of logo on the apparel of the cricket team members, display of content on the billboards provided at the arena and advertising of the products of the clients of the assessee would not fall within the ambit of Royalty either under section 9(1)(vi) or under the provisions of the DTAA. However, in category B, the payment made for use of the name “Official Partners” or “Official Advertisers” in respect of the teams, providing links on the website of the assessee and use of various items (which include photographs, etc.) of the teams for promoting products related to the assessee‟s clients fall within the ambit of “copyright of literary work” and “trademark” as contemplated under the treaty as well as “rights in respect of trademark or similar property” as contemplated under the Act. The learned CIT(A) bifurcated the payment in the ratio of 60:40, with respect to category A and B. Being aggrieved, both the assessee and Revenue are in appeal before us. 10. We have considered the submissions of the learned DR and perused the material available on record. Thus, broadly on one hand, the assessee is aggrieved against the addition of 40% of the payment as Royalty in respect of advertising package of Sri Lanka and West Indies Cricket Teams. While on the other hand, the Revenue is aggrieved against the findings of the learned CIT(A), whereby Article 28 of India-Malaysia DTAA was held to be not Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 9 applicable in the present case and 60% of the payment made in respect of advertising package of Sri Lanka and West Indies Cricket Teams was held not to be Royalty and thus not taxable. 11. In the present case, TSA Cayman Island entered into a contract with Sri Lanka Cricket for sponsorship rights of the Sri Lanka National Cricket Team comprising such players as announced by Sri Lanka Cricket from time to time including coach(es), and others in respect of International Cricket Council (“ICC”) World T20, 2012 taken place in Sri Lanka and World T20, 2014 taken place in Bangladesh. Under the aforesaid agreement, TSA Cayman Island was granted rights, such as logo rights, advertising rights, promotional activities rights, and rights to complimentary tickets, which are collectively referred to as “sponsorship rights”. Sri Lanka Cricket further agreed that sponsorship rights can be sub-licensed by TSA Cayman Island to its clients. Under the agreement, it was also agreed that the intellectual property right of TSA Cayman Island and Sri Lanka Cricket shall remain their own and this agreement shall not affect their ownership in any way unless mutually agreed upon. Further, Sri Lanka Cricket is the owner of the patent, copyright, trade secrets, trademark, and any other intellectual property rights which subsist in sporting apparel. Vide another agreement, TSA Cayman Island sub-licensed these rights to TSA Malaysia. These rights were further sub-licensed to the assessee vide agreement entered into between TSA Malaysia and the assessee. Finally, vide a separate agreement, the assessee granted these rights to Homestead Infrastructure Development Pvt. Ltd., a company Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 10 registered in India under the provisions of the Companies Act and having a corporate office in India. 12. Similarly, TSA Cayman Island entered into an agreement with West Indies Cricket Board Inc for sponsorship rights of the West Indies Cricket Team in respect of the ICC Champions Trophy, 2013, and ICC World T20, 2014. Under this agreement, TSA Cayman Island was granted rights, such as logo rights, advertising rights, promotional activities rights, rights to complimentary tickets, and branding rights (right to branding on the players‟ sporting apparel for the event every year, as per the ICC regulation). Similar to the agreement with Sri Lanka Cricket, TSA Cayman Island was authorised to sub-license these rights. Accordingly, an agreement was entered into between TSA Cayman Island and TSA Malaysia, which was further sub-licensed to the assessee. Ultimately, the assessee vide separate agreement granted these advertising rights to Confident Projects (India) Private Ltd. From the perusal of all the aforesaid agreements, forming part of the paper book, it is evident that the licensee agreed to pay consideration to the licensor as per the agreement for the advertising package in respect of Sri Lanka National Cricket Team and West Indies Cricket Team. The learned CIT(A) has summarised the aforesaid rights in its order as under:- “5.1 The appellant has entered into an agreement with TSASB in respect of Shri Lanka Cricket team and West Indies Cricket Team for Advertising Rights, which interalia include; (a) Logo Rights; (b) Advertising Privileges; (c) Promotional Activities Rights; and (d) Rights to Complimentary Tickets Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 11 Logo rights represent branding rights given to TSEIPL (appellant) to display logo of its clients at certain specified places, specifically the sporting attire of the team members. Advertising privileges represent rights with the appellant to claim itself as "Official advertiser" and "Official Partners" for the teams with which agreements have been entered into, display words to a similar effect in its communications, advertising, publicity material, website or any other media relating to the events, provide a link to the web site of the teams on its own website etc, right to ground signage of two regular size boards and web banner on the website of the national team with which agreements have been undertaken. In Promotional activity rights, the appellant gets a right to organise promotional events for its products (its clients) in which the team members will be attending, organise photography sessions with the team members with right to use these material for its own advertising in its promotional activities / advertisements during the period of agreement. Right to complementary Tickets are access to a fixed number of tickets to the tournaments.” 13. As per the Revenue, there is no commercial expediency in introducing TSA Malaysia between TSA Cayman Island and the assessee, when the advertising rights were required to be transferred to the assessee and thus TSA Malaysia is only a conduit to claim the benefit of India Malaysia DTAA. Further, there is no business rationale for introducing a Malaysian entity while assigning the rights to the assessee, since there was no economic exploitation of the rights transferred to TSA Malaysia. Accordingly, the Revenue has placed reliance upon Article 28 of the India-Malaysia DTAA to deny the benefit of the treaty to the assessee. In respect of the agreement with West Indies Cricket Board Inc., the Revenue has also noted that the rights are granted to the assessee prior to the same being granted to TSA Cayman Island by the West Indies Cricket Board Inc. 14. From the perusal of the statement of facts filed before the learned CIT(A), we find that the assessee submitted that the Malaysian Office is the Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 12 head office where all the senior management team members are located. The rights obtained by TSA Cayman Island as the parent company or other companies in the group are generally sub-licensed to/routed through TSA Malaysia as the head office entity, in view of the fact that the Malaysian office is well equipped, with sufficient teams of staff, and is run effectively under the direction of Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. Thereafter, TSA Malaysia entered into a sub-license agreement with different other subsidiaries of the TSA Group worldwide, taking into consideration the nature/type of sports/event popular or of interest in the country concerned. It is also submitted that while rights acquired by TSA Cayman Islands are sublicensed to TSA Malaysia, however, all sublicense agreements entered into by TSA Malaysia are not necessarily only with the client in India, which has been the practice for the last many years. The assessee also submitted the details of the turnover of TSA Malaysia and submitted that the revenues are much higher than the revenue earned by TSA Malaysia out of the remittance made by the assessee, which goes on to prove that the assessee, as well as others in TSA group, have bona fide business activities and the transaction giving rise to remittance is in the normal course of the business. The assessee also filed a chart of the date of incorporation of all the group entities. From the same, it is evident that TSA Malaysia was incorporated on 22/11/1999. While TSA Cayman Island was incorporated subsequently on 10/07/2000. The assessee in the present case was incorporated on 07/07/2004. After considering the aforesaid submissions, the learned CIT(A) vide impugned order held that Article 28 of the India-Malaysia DTAA cannot be invoked in the present case by observing as under:- Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 13 “5.6 In spite of the anomaly pointed out by the AO, the fact remains that there is substance in the appellant's contention that bulk of the functions are being performed in Malaysia and that there is a valid reason for having a setup at Malaysia. It cannot be the case of the AO that no activity is being carried out in Malaysia. It is also seen that the turnover of the Malaysian company is significantly higher than that of the transaction value in the present case and the non-resident is dealing with many other similar contracts with other countries. Hence, the activities of the Malaysian company cannot be held to be country or treaty specific. The appellant has also submitted documents to evidence that all the entities were in existence much prior to the entering into of the agreement under appeal. In fact, the contentions of the A.O. as well as the submission of the appellant reveal that no functions appear to have been performed in Cayman Islands. Hence, invocation of Article 28 in this case is not found to be warranted.” 15. We also find a letter dated 09/05/2013 by West Indies Cricket Board Inc to the VP Sales and Marketing of TSA Cayman Island in the paper book. From the perusal of the said letter, it is evident that West Indies Cricket Board Inc has confirmed that they intend to contract with the TSA Cayman Island for sponsorship rights to West Indies Men‟s National Cricket Team in respect of the ICC Champions Trophy 2013 tournament and ICC T20 World Cup 2014 tournament. We also find that in the said letter it has been clarified that until there is an agreement on a contract is executed the rights cannot be passed on by TSA to its sponsor. In the present case, due to the execution of the agreement between TSA Malaysia and the assessee prior to the execution of the agreement between TSA Cayman Island and West Indies Cricket Board Inc, the AO-TDS alleged that it is a device to evade taxes by claiming tax exemption benefits under India-Malaysia DTAA and the same is a colourable device. From the facts as noted above and submitted before the learned CIT(A) and findings of the learned CIT(A) in that regard, it cannot be said that TSA Cayman Island, TSA Malaysia, and the assessee company were incorporated only for the purpose of entering into a contract with West Indies Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 14 Cricket Board Inc. Further, in view of the setup of TSA Malaysia and scale of Revenue earned by the TSA Malaysia, it cannot also be said that TSA Malaysia had no role to play in the entire setup. Even despite the granting of the rights to the assessee prior to the granting of same by West Indies Cricket Board to the TSA Cayman Island, it is pertinent to note that all the parties including West Indies Cricket Board Inc and the sponsor honoured all the agreements. No evidence contrary to the above has been brought on record. Thus, in our considered view, the aforesaid reason cannot be the basis to invoke Article 28 of the India-Malaysia DTAA. It is also pertinent to note that the AO-TDS in order to invoke the provisions of Article 28 of India-Malaysia DTAA has not placed sole reliance on this anomaly and rather also alleged that Malaysian entity was a mere conduit in the entire transaction. Thus, when TSA Malaysia has been found to be existing much prior to TSA Cayman Island and the assessee, and its revenue and setup have not been disputed by the Revenue, we are of the considered opinion that it would be wrong to allege that TSA Malaysia to be mere conduit and paper company existing merely to avail the benefit of India-Malaysia DTAA. The conclusion could have been different if the entire setup would have been in Cayman Island and the Malaysian entity would have been a mere name lender in this set of transactions with no role to play. However, such being not the facts, therefore, we find no infirmity in the order of the learned CIT(A) in quashing the invocation of Article 28 of India-Malaysia DTAA in the present case. 16. Now it is to be examined whether the payment made by the assessee to TSA Malaysia in respect of the advertising package/rights, which includes (a) Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 15 Logo Rights, (b) Advertising Privileges, (c) Promotion Activities Rights, and (d) Rights to Complimentary Tickets constitutes Royalty for being taxed in India. We find that the definition of the term “Royalty” in Article 12 of India-Malaysia DTAA is more restrictive than the definition of the same provided under section 9(1)(vi) of the Act. Article 12(3) of India-Malaysia DTAA defines the term “Royalty” as under:- “3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or films or tapes used for television or radio broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information (know-how) concerning industrial, commercial or scientific experience.” 17. Therefore, in order to be covered under the definition of term “Royalty” under the provisions of article 12(3) of the India-Malaysia DTAA, the payment needs to be the consideration for the following:- (a) use of or right to use any copyright of literary, artistic or scientific work including cinematograph films or films of tapes used for television or radio broadcasting; (b) any patent, trademark, design or model, plan, secret formula or process; (c) for the use of or the right to use industrial, commercial or scientific equipment, or for information (no-how) concerning industrial, commercial scientific experience. 18. From the perusal of details of each right in the advertising package/rights licensed by the assessee in respect of Sri Lanka and West Indies Cricket Team, we find that the same is only for publicity of the sponsor either by displaying the corporate/brand logo or trademark of the sponsor or displaying sponsor‟s name as “official sponsor”, or attending the sponsor‟s promotional activities. We find that the Hon‟ble Delhi High Court in DIT vs Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 16 Sahara India Financial Corporation Ltd, [2010] 321 ITR 459 (Delhi), decided the issue of whether similar rights constitute Royalty under the India-Canada DTAA in favour of the taxpayer, by observing as under:- “2. The revenue is aggrieved by the finding of the Tribunal that the payment of US$ 9,24,500 by the assessee, as per the agreement dated 10-7-1996 to IMG Canada through IMC India, did not amount to a royalty payment under article 13(3)(c) of the Double Taxation Avoidance Agreement entered into between India and Canada (hereinafter referred to as „the said DTAA‟). 3. The respondent/assessee had entered into an agreement as, aforesaid, on 10-7-1996 with IMG. As per clause 2(a) of the said agreement, IMG was to provide to the assessee "the benefits" for the tournaments, subject to ICC regulations, in connection with the protected categories. The expression "benefits" has been defined in clause 1(i) of the said agreement to mean the title sponsorship benefits in connection with the tournament set out in the Schedule. The word "tournament", in turn, was defined in Clause 1(vi) to mean, inter alia, the Friendship Cup, to be known as "the Sahara Cup", which would consist of a series of five one day international cricket matches to be played in Canada between the full Indian and Pakistan national cricket teams, as selected by the cricket authorities of their respective countries. The matches were to be recognized by the ICC as having full one day international cricket status. 4. The Schedule to the said agreement specifies the details of the Title Sponsor Package, which included the right that all the matches and the tournaments would be referred to as "Sahara Cup". It also provided for incorporation of the Sahara name and logo as the official tournament logo. The said Sahara name and logo was to be prominently displayed at either ends of the cricket ground on the outfield as also prominently displayed on the stumps and the score boards. The players clothing was also required to display the Sahara logo. Apart from these rights, certain other rights, such as provision for certain number of VVIP tickets, VIP tickets and season tickets were also part of the Title Sponsor Package. The official awards and trophies were also required to carry the Sahara name and/or logo. 5. The revenue insists that the payment made by the respondent/assessee to IMG Canada for the said rights of title sponsorship amounted to a royalty payment under article 13 (3) of the said DTAA. The Tribunal has examined this submission made by the revenue, which had found favour with the Commissioner of Income-tax (Appeals), who held that the said payment was covered under article 13(3)(c) of the said DTAA. The Tribunal, however, came to the conclusion that upon reading the various terms of the agreement between the respondent/assessee and IMG, the payment made for the title sponsorship right cannot be said to be a payment made for acquisition of or the right to use any copyright and, therefore, the question of applicability of article 13(3)(c) of the DTAA would not arise. The Tribunal conclusively held that the payment made by the respondent/assessee to IMG Canada could not be called "royalty" as contemplated under article 13(3) of the DTAA. Consequently, the Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 17 Tribunal set aside the orders of the authorities below on this aspect of the matter. 6. We have also examined the terms of the agreement between the respondent/assessee and IMG Canada. It is clear that what has been paid for by the respondent/assessee is the right of title sponsorship and the benefits connected therewith, which have been set out in the Schedule to the said agreement and to which we have already referred to above. Article 13(3) describes the term "royalties" to mean payments of any kind including rentals received as a consideration for the use of or the right to use:— (a)any patent, trademark, design or model, plan, secret formula or process; (b)industrial, commercial or scientific equipments or information concerning industrial, commercial or scientific experience; and (c)any copyright of literary, artistic or scientific work cinematographic films and films or tapes for radio or television broadcasting. It is apparent that unless and until the payment is in connection with the right to use or is by way of consideration for the right to use any of the aforesaid three categories, the payment cannot be termed as a "royalty". 7. The learned counsel for the revenue contended that the expression "payment of any kind including rentals", has a very wide meaning and, therefore, it includes the payment for "any" rights. Such a contention is not tenable in view of the fact that the payment, which may be of any kind and which may include rentals, has to be in connection with the right to use any of the rights specified in the three categories mentioned above. 8. It is apparent that the categories (a) and (b) obviously do not arise. It is for this reason that the Commissioner of Income-tax (Appeals) sought to include the payment made by the assessee to IMG Canada under the third category, that is, article 13(3)(c) of the said DTAA. Unfortunately, what the Commissioner of Income-tax (Appeals) failed to notice was that before any payment could be termed as a "royalty" under article 13(3)(c), it would have to be either as consideration for the copyright or for the right to use a copyright in any of the four categories of works mentioned therein, namely, (i) literary; (ii) artistic; (iii) scientific work; and (iv) cinematographic films and films or tapes for radio or television broadcasting. What the Commissioner of Income-tax (Appeals) failed to note was that there was no transfer of a copyright or the right to use the copyright flowing from IMG Canada to the respondent/assessee and, therefore, any payment made by the respondent/assessee to IMG Canada would not fall within article 13(3)(c) of the said DTAA. The reference in article 13(3)(c) is to "any copyright" and it is not a reference to "any right". 9. In these circumstances, we feel that the findings of fact and law and the conclusions arrived at by the Tribunal are correct. No perversity has been pointed out. Consequently, no substantial question of law arises for our consideration.” Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 18 19. Since in the present case also rights of similar nature are involved and the definition of the term “Royalty” in India-Malaysia DTAA is worded similarly to the provisions of India-Canada DTAA, therefore, respectfully following the aforesaid decision of the Hon‟ble Delhi High Court, we are of the considered opinion that payment in respect of aforesaid rights does not fall in the category of royalty as defined under Article 12(3) of the India-Malaysia DTAA. Further, once the taxability fails in terms of the treaty provisions, there is no occasion to refer to the provisions of the Act, as in terms of section 90(2) the provisions of the Act or the DTAA, whichever is more beneficial to the assessee shall be applicable. Since the payment was only alleged to be Royalty by the Revenue, therefore, there is no need to examine its taxability under any other provision of the India-Malaysia DTAA, in the present case. In view of our aforesaid findings, the Assessing Officer is directed to delete the addition on account of the advertising package/rights in respect of Sri Lanka Cricket and West Indies Cricket Board Inc. As a result, grounds raised by the assessee are allowed, while the grounds raised by the Revenue are dismissed. 20. In the result, the appeal by the assessee is allowed, while the appeal by the Revenue is dismissed. Order pronounced in the open Court on 27/03/2023 Sd/- M. BALAGANESH ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/03/2023 Total Sports & Entertainment India P. Ltd. ITA no.5717/Mum./2016 ITA no.6129/Mum./2016 Page | 19 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai