Annexure 1 – Intangible Business Connection – A New Predicament! • During the period under consideration (i.e. Assessment Year 2015-16), Volkswagen Finance Pvt. Ltd (‘VFPL’) along with Audi India (a division of Volkswagen Group Sales India Limited) had organised an event in Dubai on 3 May 2014. • VFPL had paid US$ 4,40,000, in respect of an appearance made by Mr. Nicholas Cage [an Oscar award winning celebrity] at aforesaid event in Dubai. • VFPL contended before the Hon’ble ITAT that since the event and the celebrity both were outside India, payment being made did not give rise to any tax implications in India. Nicholas Cage Kim Productions Inc. Objective of the event • Launch of Audi A8L facelift model USA i.e. new model of Audi for Indian market in presence of Mr. Nicholas Dubai Cage comprising of: - Unveiling of the new model - Engaging of the celebrity with Audi A-8L Launch Event personnel of Audi India for Q&A session and socialising with guests - Meet and greet, photographs and autographs as reasonably India required - Interaction with select Audi India Volkswagen members of Indian media Finance Pvt. Ltd (Division of Volkswagen • Generating enquiries of potential Group Sales India Ltd) customers who in turn would like to purchase Audi cars and finance the same from VFPL. Contentions and decision of the lower authorities: Contentions of the Assessing Contentions of the Commissioner of Income-tax Appeal Officer (‘AO’) [‘CIT(A)’] • Payment made to the • CIT (A) agreed with the contentions of the AO that celebrity was taxable in income is taxable in India under section 5(1)(b) of India as Royalty the Act, read with section 9(1)(i) of the Act. • Provisions of the India-US • Further, the CIT (A) additionally held that the whole Double Tax Avoidance purpose of organising the event targeted towards Agreement do not come to India, being held in Dubai, was a means of tax rescue of VFPL planning to avoid income being taxed in India. .