The issue before the Tribunal was as under:
Whether payment made by Reebok to ICC as 'Rights fee' for use of Marks of ICC for purposes of promotion and advertisement was in nature of 'Royalty' or 'Fees for technical services'?
Tribunal held in favour of Reebok as under:-
Reebok India Company (assessee) had entered into an agreement with ICC. As per terms of agreement ICC allowed Reebok to associate with it as 'Official Partner of ICC' to advertise its products during the ICC events.
ICC had agreed to grant to the assessee certain 'promotional, advertising, marketing and other commercial rights' on a worldwide basis in connection with the ICC events. In all, there were two types of payments, which the assessee was supposed to make under the Agreement, namely, 'Rights fee' and 'Royalty' Payment made by assessee as “Right fee’ exclusively for use of Marks of ICC for purposes of promotion and advertisement couldn’t be said as ‘Royalty’ asICC did not provide any technical, industrial, commercial or scientific knowledge to assessee for use of ICC marks on his product for promotion in ICC events.
There was a separate clause provided in the agreement for payment of royalty on the manufacture and sale of licensed products using the Marks of ICC which was in nature of 'Royalty' duly covered under clause(iii) of Explanation 2 to section 9(1)(iii). Thus, payment madeexclusively for use of Marks of ICC for purposes of promotion and advertisement and not for manufacture and sale of licensed products couldn’t be treated
as 'Royalty' - [2017] 79 taxmann.com 271 (Delhi - Trib.)
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