Facts
1. Sahara India Financial Corporation Ltd. (tax payer) had entered into an agreement with IMG Canada, a foreign company through IMC India for sponsorship of the international cricket tournament between India and Pakistan to be played in Canada.
2. The sponsorship benefits inter-alia included:
- the right of renaming of the tournament as “Sahara Cup”;
- incorporation of the Sahara logo as the official logo of the tournament; and
- “Sahara” logo to be prominently displayed at both ends of the cricket ground, stumps, score boards and clothing of the players.
3. The tax payer made a lump sum payment to the foreign company for the above sponsorship benefits.
4. The revenue authority was of the view that the payment for sponsorship right is in the nature of royalty payment. However, the Appellate Tribunal held that the payment to IMG Canada could not be called as royalty as contemplated under Article 13(3) of the India-Canada Tax Treaty.
Contentions of the Revenue
- The payment made by the tax payer to the foreign company is in the nature of royalty under Article 1 3(3)(c) of the Tax Treaty between India and the Canada.
- The expression “payment of any kind including rentals”, has a very wide meaning and, therefore, it includes the payment for “any” rights.
Ruling of the High Court
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