Sale of online advertisement space is not taxable if non-resident not has PE in India

Google India Private Limited Vs DCIT (International Taxation) (ITAT Bangalore)

ITAT Bangalore held that unless the non-resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA.

Facts- The assessee, Google India Private Limited, had entered into Google AdWords Program Distribution Agreement dated 12.12.2005 with Google Ireland Limited (GIL). As per the agreement, the assessee was appointed as a non-exclusive distributor of AdWords programme to the advertisers in India. The distribution fees paid by the assessee to Google Ireland as per the agreement for the relevant assessment years.

AO initiated proceedings u/s 201(1) and 201(1A) of the I.T.Act in respect of the above payments made by the assessee to Google Ireland Limited, since, no tax was deducted at source u/s 195 of the I.T.Act.

Show cause notice was issued proposing to treat the said payment as Royalty under the Act and the DTAA. The same was confirmed by AO.

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