CIT Vs Urban Ladder Home Décor Solutions Pvt. Ltd. (Karnataka High Court)
Karnataka High Court held that TDS is not deductible on payment to non-residents for advertisements in several social medias like Facebook, Amazon Web Services and Rocket Science Group. Accordingly, appeals are dismissed.
Facts- The assessee-respondent claims to be a Company involved in business of dealing in home décor products. It has placed advertisements in several social medias such as Facebook, Amazon Web services and Rocket Science Group, LLC, US. Assessee has made payments to non-residents without deducting tax at source. Hence, AO treated assessee in default and passed orders u/s. 201(1) and 201(1A) of the Income Tax Act, 1961 for the assessment years 2015-16, 2016-17 and 2017-18 vide orders dated 21.02.2018. Assessee preferred appeals before CIT(A) against the said orders. The said Authority passed order on 17.03.2020 confirming the orders passed by the AO. The assessee preferred appeal before the ITAT. The ITAT, vide order dated 17.08.2021, has allowed the appeals.
Conclusion- Held that the conclusion drawn by the ITAT is that, the recipients of the payments i.e., Facebook and Rocket Science Group only allowed the assessee to use their facilities for the purpose to use their advertisement contents. The payment to Amazon Web Services is only for using information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities. The ITAT has come to a conclusion that the facilities provided by the non-resident Companies are only enabling facilities which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of Amazon, the payment is in the nature of rent payments for use of infrastructure facilities. The ITAT has come to conclusion that the payments made to above three non-resident Companies do not fall within the meaning of ‘royalty’ as defined in DTAA.
