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 the Google Ireland taxable in India for the advertisements immediately positioned by the advertisers below AdWord Program because the identical constitute enterprise income.

The 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 the sale of on-line advert space in India underneath AdWord Program. The sales took the view that the stated amount is chargeable to tax as ‘Royalty’ beneath the Act and the Double Taxation Avoidance Agreement (DTAA).

The appeals filed using the assessee was brushed off with the aid of the Tribunal by using holding that the bills regarding Adwords made via the Company to its parent company Google Ireland is difficulty to TDS provisions in India the receipts from the sale of on-line 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 receipts within the hands of GIL as business income must be rectified certainly.


The Tribunal took into consideration the plea of the assessee that going using the observations in paragraph 116 of its order that’s 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’s 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 on-line 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. It is for that reason that 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 as to why the Tribunal remanded the case to the AO to reframe evaluation in the light of the guidelines contained inside the order. We are of the view 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’re of the view that it might not be appropriate to work out powers america254(2) of the Act because the order does not suffer from any mistake apparent 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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