Case Law Details
Google Ireland Ltd. C/o. PricewaterhouseCoopers Pvt. Ltd. Vs DCIT (IT) (ITAT Bangalore)
ITAT Bangalore held that that the payment made by GIPL (Google India Pvt. Ltd.) to GIL (Google Ireland Limited) is not in the nature of Royalty or FTS under the Act. Accordingly, TDS under section 195 of the Income Tax Act not deductible.
Facts- The assessee, Google Ireland Limited (GIL) is a foreign company having its registered office at Ireland. The assessee is involved in the business of sale of online advertisement space to Google India Pvt. Ltd. (GIPL) under distribution agreement dated 12.12.2005. Further the assessee also sells advertisement spaces to other customers in India. The assessee derives more than 97% of its total revenue from advertisement services through its AdWords program worldwide. The AdWords program is used by various business houses to promote their products and services via targeted advertising.
AO on verification of financial statement of GIPL noticed that it had credited an amount of Rs.42,57,53,347/- to the account of the assessee during the relevant assessment year without deducting tax at source u/s. 195 of the Act. Further it was noticed by the AO that GIL has also not obtained NIL deduction certificate on the sum received/payable to it. The AO in the hands of GIPL (Payer) had held that the payments made to the assessee are covered u/s. 9 of the Act and also under the provisions of DTAA. The AO in the case of GIPL (Payer) passed orders under Sections 201 & 201(1A) of the Act in respect of payments made to the assessee to the tune of Rs.42,51,53,437/-.
In draft assessment order, AO considered the amount received/receivable by the assessee towards sale of advertisement space amounting to Rs.42,57,53,347/- from GIPL and also a sum of Rs.51,08,74,532/- from other Indian customers as ‘royalty’ under the Act and the DTAA. Being aggrieved, the assessee filed objections before the Dispute Resolution Panel (DRP) which were rejected. Being aggrieved, the present appeal is filed.
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