A division bench of the Bengaluru ITAT, on Tuesday held that the distribution fee paid by Google India to Google Ireland for use of its ‘Adwords programme’ is taxable in India as ‘royalty’ under the provisions of the Income Tax Act, 1961.
Google India, after a 6 year-long legal battle, lost a tax case.
In this case, the department had took a view that for the relevant assessment years, Google India had been routinely remitting distribution fee to Google Ireland. The department found that since no tax was deducted by Google India while remitting funds to Google Ireland, it was a clear case of tax evasion. Accordingly proceedings were initiated against the assessee and demanded Rs 1,457 crore as tax.
Google India, being failed to secure relief from the first appellate authority, approached the Tribunal on second appeal.
Dismissing a series of appeals, the division bench said that “…the intention of the assessee (Google India) as well as of the GIL (Google Ireland) is clear and Google India) as well as of the GIL (Google Ireland) is clear and conspicuous that they wanted to avoid the payment of taxes in India. That is why, despite the duty of the assessee to deduct the tax at the time of payment to GIL, no tax was deducted nor any permission was sought for paying the amount (sic).”
Read the full text of the Order below.
