Receipt via Google for Advertisers under AdWord Program is Business Profits: ITAT reiterates [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore bench, even as dismissing a Miscellaneous Petition via the profits tax branch, has reiterated that Google Ireland is taxable in India for the advertisements immediately positioned by the advertisers below AdWord Program because the identical constitute enterprise income.

Google Ireland received a sum of Rs.93 sixty-six 27,879 from Google India Private Limited (GIPL) and Rs.51,08,74,532 from other advertisers toward selling online advert space in India underneath the AdWord Program. The sales believed that the stated amount is taxable as a ‘Royalty’ beneath the Act and the Double Taxation Avoidance Agreement (DTAA).

The appeals filed using the Assessee were brushed off with the aid of the Tribunal by holding that the bills regarding Adwords made via the Company to its parent company, Google Ireland, difficult to TDS provisions in India the receipts from the sale of online advertisement space underneath AdWords application as business earnings with the aid of treating GIPL as Permanent Establishment (PE) of GIL in India.

The Revenue has now filed a miscellaneous petition contending that the evaluation changed into never made via the sales via treating the receipts from the sale of online advertisement area beneath AdWords application as commercial enterprise earnings with the aid of treating GIPL as Permanent Establishment (PE) of GIL in India however turned into an evaluation made on the premise that the receipts had been like royalty and consequently the mistake in the order of the Tribunal in paragraph 190 on the belief that the Revenue assessed the tickets within the hands of GIL as business income must be rectified certainly.

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The Tribunal considered the Assessee’s plea that using the observations in paragraph 116 of its order to the impact that GIPL acted as a distributor of commercial space. At the same time, the facts inside the instances stated on behalf of Assessee were all cases where the classified ads were at once positioned via advertisers or humans who purchased the area from the proprietor of seek engine offering online advertisement space; it appears that the Tribunal has regularly occurred that if commercials had been immediately located via advertisers or men and women who buy area from the proprietor of search engine supplying on-line advertisement space, receipts from presenting such advertisement area would be within the nature of enterprise earnings.

“Since GIL did now not have PE in India nor changed into GIPL regarded as constituting PE of GIL in India, the said receipts from direct advertisement can not be introduced to tax in India. For that reason, the Tribunal has remanded the case to the AO for clean evaluation in paragraph 190 of its order. This is the translation of the Tribunal’s order via the Assessee,” the Tribunal determined.

“We are therefore unable to fathom why the Tribunal remanded the case to the AO to reframe evaluation in the light of the guidelines in the order. We believe that inside the given statistics and circumstances of the case, the problem sought to be agitated in this MP earlier than the Tribunal is surprisingly debatable, and views are viable on the difficulty. In such situations, we believe it might not be appropriate to work out powers America 254 (2) of the Act because the order does not suffer from any apparent mistake on the face of the report. We make it clear that not one of the observations in this order must affect the mind of the events in their interpretation of the order,” the Tribunal stated.


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