Tax on payment by Indian company to foreign celebrity for appearance outside India

Volkswagen Finance Pvt Ltd Vs ITO (ITAT Mumbai)

In this case ITAT held that we are of the considered view that the income embedded in payment to the international celebrity (Nicholas Cage), for participation in Dubai A8L launch event for promoting the business of the assessee in India, is taxable as arising from a ‘business connection’ and also under Article 23(1) of Inda-USA tax treaty, was taxable in India. As a corollary to these findings, in our considered view, the assessee had the liability to withhold taxes from payment made for appearance made by the celebrity at Dubai A8L launch event, and the CIT(A) was justified in upholding impugned demands raised under section 201 r.w.s 195 of the Income Tax Act,1961.

FULL TEXT OF THE ITAT JUDGEMENT

[1] This appeal challenges correctness of the order dated 8^th February 2016, passed by the learned Commissioner (Appeals) in the matter of tax withholding demands raised by the Assessing Officer under section 201 r.w.s. 195 of the Income Tax Act, 1961, for the assessment year 2015-16.

[2] While the assessee has raised a large number of grounds of appeal, core issue requiring our adjudication in this case is whether or not the assessee appellant was required to withhold tax from part payment of US $ 4,40,000, in respect of an appearance made by Nicholas Cage, an Oscar award winning celebrity, for an appearance made by him at Dubai (UAE) in a product launch event for promoting business of the assessee in India.

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