Case Law Details
Google India Pvt. Ltd. Vs JDIT (ITAT Bangalore)
Conclusion: Purchase of online advertisement space for onward resale to Indian advertisers did not amount to Royalty as unless the non-resident, who was engaged in sale of online advertisement space, had a PE in India, no portion of receipts earned by it from sale of online advertisement space in India could be brought to tax in India as Act read with the relevant DTAA. Thus, assessee was not in default u/s 201, for not deducting the tax at source, on the payment in question, under the section 195.
Held: Assessee-company, Google India Pvt. Ltd. (GIPL), having its registered office at Bangalore was incorporated as a wholly owned subsidiary of Google International LLC, US. GIPL or Google India was engaged in the business of providing Information Technology and Information Technology Enabled services to its Group companies. AO had observed that M/s. Google Ireland was not beneficial owner of the amount received from the assessee in relation to royalty amount. CIT(A) observed that in relation to characterization of amounts payable to M/s. Google Ireland as royalty by placing reliance on earlier order of the ld. CIT(A) in assessment years 2007-08 to 2012-13 in relation to contention of AO that M/s. Google Ireland was not beneficial owner of receivable from M/s. Google India Ltd., CIT(A) had rejected the same and upheld that M/s. Google Ireland was beneficial owner of the sums received from M/s. Google India Ltd. under the reseller agreement. Aggrieved by the order of CIT(A), assessee was in appeal before the Tribunal on the issue of charaterisation of the amount payable to M/s. Google Ireland as royalty and the revenue was in appeal n relation to issue as to whether M/s. Google Ireland was the beneficial owner of the amount received from M/s. Google India Ltd. It was 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. If online advertisement was already covered under definition of royalty, then bringing it as part of Equalisation Levy scheme would not arise. Since it was decided on payment made by GIPL to M/s. Google Ireland Ltd. for purchase of online advertisement phase for onward resale to India advertisers, in terms of distribution agreement dated 12.12.2005, were not in nature of royalty as defined u/s 9(1)(vi) of the Act read with Article 12(3)(a) of DTAA between India and Ireland and observed that GIPL was not an assessee in default u/s 201, for not deducting the tax at source, on the payment in question, under the section 195 of the Act and the issue of beneficial ownership which was consequential in nature and as such this issue became academic and the appeal of the revenue was not surviving. Accordingly, the appeal of the revenue was dismissed as infructuous. Applying the same ratio a discussed in earlier order of the Tribunal in IT(IT)A No.1513 to 1516/Bang/2013 dated 19.10.2022, the assessee’s appeals were allowed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
In these appeals IT(IT)A No.1190/Bang/2014 and IT(IT)A No.1295/Bang/2014 are cross appeals for the assessment year 2013-14 and IT(IT)A Nos.97/Bang/2019, 949 & 950/Bang/2017 are appeals by the assessee for the assessment years 2014-15 to 201617, wherein the issue in all these appeals are common in nature, hence, these are clubbed together heard together and disposed of by this common order for the sake of convenience.
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