In a major relief to Google India, the Income Tax Appellate Tribunal (ITAT), Bangalore has quashed the orders and notices for TDS default as the same were barred by limitation.
A bench comprising Shri George George K., Judicial Member and Ms. Padmavathy S, Accountant Member was considering an appeal by the assessee, a wholly owned subsidiary of Google International LLC, US. It is engaged in the business of providing Information Technology (IT) and Information Technology enabled Services [ITeS] to its group companies. The assessee has entered into Google Adword Program Distribution Agreement dated 12.12.2005 with Google Ireland Ltd. As per the agreement, the assessee is appointed as a non-exclusive authorized distributor of Adword Programs to the advertisers in India.
The assessee contended that it was mere reseller of the advertising space made available under the Adword Program distribution agreement and the assessee is distributor of advertising space with no access or control over the infrastructure or the process that is involved in rendering the Adword Program. Therefore, the sums so paid were not chargeable to tax under the relevant Double Taxation Avoidance Agreement (DTAA).
The department was of the view that the distribution fees payable to GIL should not be regarded as ‘royalty’ under the Act and consequently proceeded for withholding of tax deduction at source u/s. 195 of the Act.
The Tribunal, after considering facts and arguments from both sides, held that “In the facts of the case for the years under consideration, the period of four years from the end of the financial year in which payment is made or credit is given, expires on 31.03.2012 whereas the notice is issued by the AO on 20.11.2012. Therefore respectfully following the decision of the coordinate Bench of the Tribunal (supra), we hold that the orders of the AO passed u/s. 201(1) & 201(1A) of the Act are barred by limitation and hence quashed.In view of our decision on the preliminary issue of limitation, the other grounds on merits are rendered infructuous and hence do not require separate adjudication.”
Shri Percy Pardiwala, Sr. Advocate, Shri Anmol Anand & Ms. Priya Tandon, Advocates & Shri Vinay Mangla, CA appeared for the assessee.
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