Case Law Details
Urban Ladder Home Décor Solutions Pvt. Ltd. Vs ACIT (ITAT Bangalore)
A careful perusal of the relevant provisions of the agreement entered by the assessee with Facebook and Rocket Science Group (Mailchimp) would show that both these non-resident companies are allowing the assessee to use the facilities provided in their sites, which includes, inter alia, software facilities also. The purpose of compelling the assessee to use those facilities, as could be inferred by us, is to create an environment of ease in creating the “advertisement content” to suit the platforms of Facebook or Mailchimp. The environment of ease is beneficial and time saving to both the advertiser and the advertising platform. Thus the facilities have been created by the non-resident companies for mutual benefit. However, a person shall get the right to use those facilities only when he enters into an agreement with them for hosting his advertisement or for sending bulk mails, meaning thereby, the use of facilities is intertwined with the activity of placing advertisement in web portal of Facebook or sending bulk mails. In case of web hosting charges paid to AWS, the assessee is allowed to use the information technology infrastructure facilities.
Mere usage of a facility does not give rise to provision of any technical service. Under same analogy, mere usage of facility provided by the above said non-residents does not render the payments as “royalty payments”, since the core point of parting of any “copy right” attached to the said facilities does not arise at all.
Amount paid by the assessee to M/s Google Ireland Ltd for the services rendered for uploading and display of banner advertisement on its portal was in the nature of business profit on which no tax is deductible at source, since the same was not chargeable to tax in India in the absence of PE of Google Ireland Ltd in India.
In the instant case, the recipients, i.e, M/s Facebook and Rocket Science group only allow the assessee to use their facilities for the purpose of creating advertisement content. The payment made to Amazon Web Services (AWS) is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities. In fact, these non-resident companies do not give any specific license for use or right to of any of the facilities (which include software) and those facilities are not going to be used for the use in the business of the assessee. The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in the case of Facebook and Mailchimp. In the case of AWS, the payment is made only for using of information technology infrastructure facilities on rental basis. Hence the question of transferring the copy right over those facilities does not arise at all. The agreements extracted above also make it clear that the copyright over those facilitating software is not shared with the assessee. In any case, the main purpose of making payment is to place advertisements only and not to use the facilities provided by the non-resident companies. Thus the facilities provided by the nonresident companies are only enabling facilities, which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of AWS, the payment is in the nature of rent payments for use of infrastructure facilities.
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