Author in this article discusses as t

1. how Karnataka High Court should not have remanded the matter back for the second time; and

2. should have admitted the substantial question of law and / or of facts regarding taxation of transaction between Google India and Google Ireland.

The procedural lapses, as relied upon by HC are causing in-ordinate delay in deciding the matter. This matter is relevant not only for information technology industry but is omni-present in business environment as a whole.

Missing point

a. One has to understand how a software / application work. In case of any code, there are two files namely;

    • First being human readablein which the program is written or coded and
    • Second being machine readable which is actually executed.

b. Whenever any software is sold / licensed etc. except outright sale of “code”, only the machine readable file(s) are given.

c. The IPR in the machine readable file only to the extent of using such files is given. Legally speaking, [and not technically] machine readable file can not be amended.

d. Alternatively, any right in the human readable file is never ever transferred.

e. In humble opinion of the author, this point will definitely influence the interpretation of meaning of various terms like copyright, license, process, know-how etc.


The article gives authors own analysis. This article is based on a judicial pronouncement and is divided into following parts.

1 Citation of the Enactment 4 Observations of K’taka HC-:
2 Entering the subject 5 Author’s Expectation-:
3 Take away points 6 Characteristics of Google India case and current status

Citation of the Enactment

Google India Pvt. Ltd. v. CIT [International Taxation] dated April 17, 2021 [2021] 127 taxmann.com 36 (Karnataka) / ITA NOS. 503 OF 2018 & OTHERS [Kar HC]

Entering the subject

a) The whole matter is following two activities under the Income Tax Act, 1961 [the Act] namely;

      • Characterisation of activities between Google Ireland and Google India especially related to Advertisement services and
      • consequentially the valuation of consideration thereof and tax liability thereof.

b) The AO passed order against Google India Pvt. Ltd.[Google India] u/s 201 from AY 2007-08 to AY 2012-13 on 22-Feb-2013 treating assessee in default with TDS liability of Rs. 7.40 crores pertaining only for AY 2007-08.

c) Google India approached CIT(A) who dismissed the appeal by order dated 22-Sep-2013.

d) ITAT also dismissed the appeal from from AY 2007-08 to AY 2012-13 dated 23-Oct-2017

e) K’taka HC vide its orders dated 15-Nov-2017 and 20-Nov-2017 set aside the above mentioned order of ITAT. Further, it held that the ITAT should dispose off these appeals independently and without being influenced by the order set aside.

f) ITAT considered the issue in view of above HC direction and dismissed the batch of appeals of the assessee for assessment years 2007-2008 to 2015-2016 vide an order dated 11-May-2018 deciding the matter against Google India.

Take away points

g) K’taka HC set aide all the appeals which were decided against the assessee vide order dated 11-May-2018 [which include the one of penalty proceedings dated 6-Sept-2019].

h) In the decision dated 11-May-2018, ITAT conducted its own research and rendered its decision based on such material without giving opportunity either to the assessee or to the revenue to peruse / assail the said material.

i) It remanded the batch of appeals back to the ITAT with following directions;

1) The matters as decided by the order dated 23-Oct-2017 and 11-May-2018 are remanded back to ITAT for fresh adjudication without being influenced by either of these orders.

2) The parties will appear before ITAT on 3-May-2021 and both the parties will file documents / additional documents in support of their contentions within 15 days.

3) ITAT will make available any other material replied upon by it while forming the opinion to the assessee and the revenue.

4) The ITAT is requested to make all possible endeavors to decide the matters at an earlier date.

Observations of K’taka HC-:

j) The HC observed that the order dated 11-May-2018 has been passed in a mechanical manner and is a cut / copy / paste of order dated 23-Oct-2017, [Para 29, Page 17].

k) HC demonstrated the same by comparing the following; [para 30, Pages 17-22]

1) Substantial questions framed

2) Various observations in both the orders being same, word by word.

Author’s Expectation-:

l) It is almost certain that, whatever may be the decision, the same will be challenged before Karnataka High Court [being jurisdictional one].

m) The relevant assessment years start from AY 2007-08 i.e. FY 2006-07 and we are in 2021. Already 15 years have lapsed by since transactions are entered into.

n) The matter has already been adjudicated upon by two different benches consisting of different members.

o) In both rounds of adjudication, ITAT has done a voluminous work [even though found to be inadequate or faulty by HC] and apparently, the research done by ITAT was more in the nature of understanding the business model.

p) The author’s expectation is based on the need of the hour to have finality to the question. It is understood that, Supreme Court can always set aside such a decision and more so very recently in Engineering Analysis case, Supreme Court over-ruled the view of Karnataka High Court.

q) If this is not possible, ITAT president should form a Special bench of at least 5 members where other parties with similar question pending before various judicial forums can act as intervener(S) and add more wisdom to the adjudicating process.


r) It is a fact that, while delivering decision dated 11-May-2018, ITAT relied upon its own research without giving opportunity either to the assessee or to the revenue to peruse / assail the said material.

s) Undoubtedly, tribunal is a final fact finding authority and above lapse goes to the root cause of the matter in establishing the facts of the case.

Characteristics of Google India case and current status

1) The whole matter is characterisation of activities between Google Ireland and Google India especially related to Advertisement services and consequentially the valuation of consideration thereof and tax liability under the Act thereo

2) The material submitted and to be perused is voluminous. The backbone of coming to a decision is thorough understanding of the business model. Overall approach of ITAT has been rejected by K’taka HC twice.

3) It has been the experience that the treaty provisions fall short of catching the intended transactions. Introduction of Equalisation levy is quite evident of the said phenomenon. This aspect has also been considered in the order but no much discussion took place as the said levy was not applicable to the period covered by the appeals.

4) Google Ireland has been wise enough to do the tax planning across various countries.

5) In both the ITAT orders, reliance has been placed on decision of the Jurisdictional High Court in CIT Vs. Samsung Electronics (345 ITR 494) (Kar) which has been expressly overruled by Supreme Court in Engineering Analysis Centre of Excellence Private Limited Vs CIT, [2021] 125 taxmann.com 42 (SC)[02-03-2021]

6) Supreme Court has, in above mentioned orde has considered almost all the judgements as referred to in the ITAT orders and has either upheld it or has over-ruled it. SC has also considered and analysed the provisions of the Copyrights Act, 1957.

7) It will act as a good starting point rather a fresh start for adjudicating on the issue.

8) Also consider following paragraph of decision of Madras HC 4-Mar-2020 in the case of Ramco Industries Ltd. V DCIT[2020] 117 taxmann.com 382 (Madras).

8. A perusal and consideration of paragraph No. 7 of the impugned common order passed by ITAT would disclose that the Tribunal, for reaching the conclusion to confirm the order of the Assessing Officer, has also done its part by doing some research on Google Study. Admittedly, the research done by ITAT in the form of Google study was not put either to the appellant / assessee Company or to the said Revenue. As already pointed out by this Court in the earlier paragraphs, in the absence of any specific rule including the applicability of the natural justice, it is a well settled position of law that adherence to the principles of natural justice, is implied in any legislation.

9) The author is of considered opinion that there is no problem in legal wisdom of the bench members. The bench has narrated the description as to how the business is conducted but they might be failing in visualising as to how exactly the business activities are conducted.


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