DCIT Vs Google Ireland Ltd. (ITAT Bangalore)
ITAT Bangalore held that payments made by [Google Ireland Limited] GIL towards Adwords program is not in the nature of royalty or FTS [Fees for Technical Service] and hence the same is not taxable in India.
Facts- The assessee, Google Ireland Limited (GIL) is a foreign company having its registered office at The assessee is involved in the business of sale of online advertisement space to Google India Pvt. Ltd. (GIPL) under the amended Google Ad words Program Distribution Agreement dated 12.12.2005 and to direct advertisers.
The AO noted that the assessee has given the marketing & distribution rights of Ad words program to GIPL without holding the tax at source u/s. 195 of the Income-tax Act, 1961 (the Act). During the proceedings u/s. 201 in the case of GIPL, it was found that GIPL had paid an amount of Rs. 1198,261,982 and other customers in India had paid Rs.721,311,566 during the year to GIL towards marketing & distribution rights of Ad words program in India and the receipts are taxable in the hands of GIL in India under the Act and India-Ireland DTAA as royalty as per Explanation 2 to section 9(1)(vi) of the Act. The AO noted that the ITAT, Bangalore has held the payments made to GIL towards Ad words program as royalty. AO passed the final assessment order making additions towards royalty income.
