M/s Google India Private Limited, Bangalore V. Dy. D.I.T., Bangalore

ITA 1511/BANG/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7367 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-02-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 06-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K V ARVIND
• Assessee Lawyers: VINAY MANGLA
• Keywords: Recovery proceedings; Business income; Transfer pricing; Residential status; Rectification of order; Double taxation relief; Period of limitation; Permanent establishment; Advance ruling; Non-deduction of tax; Tangible material; Competent authority
• Section: 201(1); 147; 145

Judgement Text

PAGE - 1 IT(TP)A.1511 TO 1516/BANG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, BENGALURU BEFORE SHRI JASON P.BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER IT(TP)A.1511 TO 1518/BANG/2013 (ASST. YEARS 2007-08 TO 2012-13) M/S.GOOGLE INDIA PRIVATE LTD. NO.3, RMZ INFINITY TOWER-E, 4 TH FLOOR, OLD MADRAS ROAD, BENGALURU-560016. PAN:AACCG 0527D VS. APPELLANT ADDL. COMMISSIONER OF INCOME-TAX, RANGE-11, BENGALURU. RESPONDENT ASSESSEE BY : SHRI PERCY PARDIWALA, SR. COUNSEL, SMT. TANMAYEE RAJKUMAR, ADVOCATE & SHRI. VINAY MANGLA, CA. REVENUE BY : SHRI K.V.ARVIND, STANDING COUNSEL FOR DEPARTMENT DATE OF HEARING : 31/08/2017 DATE OF PRONOUNCEMENT: 23/10/2017 O R D E R PER LALIET KUMAR, JM : THESE ARE IN ALL SIX APPEALS ARE BY THE ASSESSEE A GAINST THE ORDER OF THE CIT(A) IV, BENGALURU, DT.20.09.2013, FOR TH E ASSESSMENT YEARS 2007-08 TO 2012-13. PAGE - 2 IT(TP)A.1511 TO 1516/BANG/2013 02. THE ASSESSEE RAISED THE FOLLOWING COMMON GROUND S OF APPEAL IN ITA NOS.1511 TO 1516/BANG/2013 FOR THE ASSESSMENT Y EARS 2007-08 TO 2012-13. GROUND 1: ERRED IN HOLDING THAT THE AD WORDS PROGRAM IS A COMPLEX COMPUTER SOFTWARE, THE RIGHT TO USE HAS BEE N GRANTED TO THE APPELLANT WITHOUT APPRECIATING THE FACT THAT ADWORDS PROGRAM IS A STANDARD ADVERTISEMENT PRODUCT THROUGH WHICH THE ADVERTISER IS ABLE TO PUBLISH ITS ADVERTISEMENT ON THE GOOGLE WEBSITE. GROUND 2 : ERRED IN HOLDING THAT GOOGLE IRELAND LIMITED, IRELAND HAS GRANTED THE APPELLANT THE RIGHT TO USE OF THE ADWORDS PROGRAM, WHICH IS A COMPLEX COMPUTER PROGRA M WITHOUT PARTING WITH THE COPYRIGHT, THUS GRANTING L ICENSE TO USE THE SOFTWARE WITHOUT APPRECIATING THE FACT THAT THE APPELLANT IS ONLY INVOLVED IN MARKETING AND DISTRIB UTION OF ADVERTISEMENT SPACE TO THE INDIAN ADVERTISERS AND T HAT IT IS GIL WHICH USES THE BACK END PROCESS/ PROGRAM FOR PROCESSING AND DISPLAYING THE ADVERTISEMENT. GROUND 3 : ERRED IN HOLDING THAT THE AMOUNT PAYABLE TOWARDS PURCHASE OF ADVERTISEMENT SPACE TO BE IN TH E NATURE OF 'ROYALTY' UNDER THE ACT, EVEN AFTER ACKNOWLEDGING THAT THE APPELLANT IS DISTRIBUTING ADVERTISEMENT SPACE TO THE ADVERTISERS IN INDIA. GROUND 4 : ERRED IN CONFIRMING THAT DISTRIBUTION AGREEMENT CANNOT BE READ WITHOUT THE SERVICE AGREEMENT (ITES AGREEMENT) BETWEEN THE APPELLANT AND GIL AND THE AP PELLANT HAS BEEN GRANTED RIGHT TO USE INTELLECTUAL PROPERTY OWNED BY GIL WITHOUT APPRECIATING THE FACT THAT ITES SERVICE AGREEMENT IS A SEPARATE AGREEMENT UNDER WHICH THE A PPELLANT PERFORMS AN INDEPENDENT GLOBAL OUTSOURCING FUNCTION FOR GIL FOR WHICH IT RECEIVES CONSIDERATION AND IS NOT LINK ED IN ANY MANNER TO THE FUNCTION OF SALE OF ADVERTISEMENT SPA CE TO THE INDIAN ADVERTISERS BEING PERFORMED BY THE APPEL LANT. GROUND, 5: ERRED IN CONFIRMING THAT . THE DISTRIBUTION RIGHTS GRANTED ARE ITSELF IP RIGHTS COVERED BY 'SIMILAR PR OPERTY' PAGE - 3 IT(TP)A.1511 TO 1516/BANG/2013 USED IN SEE 9(1)(VI) OF THE ACT AFTER HOLDING THAT AS PER THE DISTRIBUTION AGREEMENT GIL HAS AGREED TO PROVID E ADVERTISEMENT SPACE TO THE APPELLANT THROUGH ADWORD S PROGRAM FOR DISTRIBUTION TO THE INDIAN ADVERTISERS. GROUND 6: ERRED IN HOLDING THE AMOUNT PAYABLE BY THE APPELLANT TO GIL AS ROYALTY BY ATTRIBUTING THE SAME TOWARDS RIGHT TO USE OF TRADEMARK EVEN AFTER CONCLUDING THA T THE ASSESSE COMPANY WAS PERMITTED TO USE THE TRADEMARKS OF GOOGLE FOR THE PURPOSE OF MARKETING AND DISTRIBUTIO N OF ADWORDS PROGRAM. GROUND 7: WITHOUT APPRECIATING THE FACTS OF THE CASE, ERRED IN HOLDING THAT THE AMOUNT PAYABLE BY THE APPELLANT TO GIL TOWARDS PURCHASE OF ADVERTISEMENT SPACE TO BE I N THE NATURE OF 'ROYALTY' UNDER SECTION 9(1)(VI) OF THE A CT. GROUND 8: ERRED IN UPHOLDING THE ORDER OF THE AO THAT THE AMOUNT PAYABLE BY THE APPELLANT TO GIL IS TOWAR DS RIGHT TO USE OF TRADEMARK AND COPYRIGHTED COMPUTER PROGRAM AND PROCESS, HENCE IS IN THE NATURE OF 'ROY ALTY' AS PER THE ARTICLE 12 OF THE INDIA IRELAND DTAA. GROUND 9: ERRED IN HOLDING THAT THE TRAINING PROVIDED IN RELATION TO THE ADVERTISEMENT PROGRAM, ITS FUNCTION ALITY, TOOLS AVAILABLE ETC. TO THE DISTRIBUTION TEAM OF TH E APPELLANT WHO MARKETS AND DISTRIBUTES THE SAME TO ADVERTISERS IN INDIA TANTAMOUNT TO RENDERING OF SER VICES TO THE APPELLANT EVEN AFTER CONCLUDING THAT SUCH TRAIN ING IS RESTRICTED TO USE OF THE ADWORDS PROGRAM AND NOT HO W TO DEVELOP THE ADWORDS PROGRAM. GROUND 10: ERRED IN NOT FOLLOWING THE PRINCIPLE LAID DOWN BY HON'BLE MUMBAI TRIBUNAL IN THE CASE OF YAHO O INDIA AND PINSTORM TECHNOLOGY ON SIMILAR FACTS BY S TATING THAT THE FACTS AND ISSUES ARE COMPLETELY DIFFERENT AND AT NO STAGE THE MUMBAI TRIBUNAL CONSIDER WHAT EXACTLY IS THE ADWORDS PROGRAM, NOR DID IT HAVE OCCASION TO EXAMINE THE RIGHT TO USE TRADEMARK OR OTHER IP RIGH TS. PAGE - 4 IT(TP)A.1511 TO 1516/BANG/2013 GROUND 11 : ERRED IN NOT FOLLOWING THE DECISION OF THE CALCUTTA TRIBUNAL IN THE CASE OF INCOME TAX OFFICER VS RIGHT FLORISTS PVT LTD (ITA NO. 1336/KOLI2011) ON S IMILAR FACTS. 03. IN ADDITION TO ABOVE COMMON GROUNDS OF APPEAL, THE ASSESSEE RAISED THE FOLLOWING COMMON GROUND IN ITA NOS.1511 & 1512/BANG/2013 FOR ASSESSMENT YEAR 2007-08 AND 2008 -09: BRIEF FACTS 04. THE ASSESSEE GOOGLE INDIA PRIVATE LIMITED (GOOG LE INDIA) COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMP ANIES ACT AND WHOLLY SUBSIDIARY OF GOOGLE INTERNATIONAL LLC, US. GOOGLE INDIA IS APPOINTED AS A NON-EXCLUSIVE AUTHORIZED DISTRIBUTOR OF ADWORD PROGRAMS TO THE ADVERTISERS IN INDIA BY GOOGLE IREL AND. GOOGLE IS SPECIALIZED IN INTERNET SEARCH ENGINES AND RELATED ADVERTISING SERVICES. GOOGLE MAINTAINS AN INDEX OF WEBSITES AND OTHER ONL INE CONTENT WHICH IS MADE AVAILABLE THROUGH ITS SEARCH ENGINE TO ANYO NE WITH AN INTERNET CONNECTION. 05. UNDER THE GOOGLE ADWORD PROGRAM DISTRIBUTION AG REEMENT DATED 12/12/2005, GOOGLE INDIA WAS GRANTED THE MARK ETING AND DISTRIBUTION RIGHTS OF ADWORD PROGRAM TO THE ADVERT ISERS IN INDIA. PAGE - 5 IT(TP)A.1511 TO 1516/BANG/2013 06. AS PER ASSESSEE IT IS ENGAGED IN INFORMATION TE CHNOLOGY (IT) AND IT ENABLED SERVICE (ITES) TO ITS OVERSEAS GROUP COM PANIES AND IS ALSO ENGAGED AS AN NON EXCLUSIVE DISTRIBUTOR OF THE ONLI NE ADVERTISING SPACE UNDER GOOGLE ADWORD PROGRAM TO VARIOUS ADVERT ISERS IN INDIA. IT IS THE CASE OF THE ASSESSEE THAT THE GOOGLE INDI A ENTERED INTO AN AGREEMENT WITH GOOGLE IRELAND LIMITED ( HEREIN AFTE R CALLED GIL) FOR RESALE OF ONLINE ADVERTISING SPACE UNDER THE ADVER TISERS PROGRAM TO ADVERTISERS IN INDIA. FOR THE PURPOSE OF SALES AND MARKETING THE SPACE WORK WISE FLOW OF ACTIVITIES OF THE ASSESSEE AND AD VERTISER WERE AS UNDER : I. ENTER INTO RESALE AGREEMENT WITH GIL (GOOGLE IRELAND LIMITED) AND RESALE ON ADVERTISING SPACE UN DER THE ADWORD PROGRAM UNDER THE INDIAN ADVERTISERS. II. PERFORM MARKETING RELATED ACTIVITIES IN ORDER TO PROMOTE THE SALES OF ADVERTISING SPACE TO INDIAN AD VERTISERS. AFTER TRAINING TO ITS OWN SALE FLOWS ABOVE THE FEAT URES / TOOLS AVAILABLE AS PART OF ADWORD PROGRAM TO ENABLE THEM TO EFFECTIVELY MARKET THE SAME TO ADVERTISERS. III. ENTER INTO A CONTRACT WITH INDIAN ADVERTISERS IN RELATION TO SALE OF SPACE UNDER THE ADWORD PROGRAM. IV. PROVIDE ASSISTANCE / TRAINING TO INDIAN ADVERTISERS IF NEEDED IN ORDER TO FAMILIARIZE THAT WITH THE FEATUR ES / TOOLS AVAILABLE AS PART OF OUR ADWORD PRODUCT. V. RESALE INVOICE TO THE ABOVE ADVERTISERS. VI. COLLECT PAYMENTS FROM THE AFORESAID ADVERTISERS. PAGE - 6 IT(TP)A.1511 TO 1516/BANG/2013 VII. REMIT PAYMENT TO GOOGLE IRELAND LTD PAYMENT (GIL) FOR PURCHASE OF ADVERTISING SPACE FROM IT UND ER THE RESALE AGREEMENT. IT WAS THE CASE OF THE ASSESSEE THAT NO RIGHTS IN T HE INTELLECTUAL PROPERTY OF THE GOOGLE WERE TRANSFERRED TO THE ASSE SSEE FROM GIL. ASSESSEE WAS MERE RESELLER OF ADVERTISING SPACE MAD E AVAILABLE UNDER THE ADWORD DISTRIBUTION PROGRAM BY GIL. FURTHER AS PER APPELLANT, THE ASSESSEE IS A DISTRIBUTOR OF ADVERTISING SPACE AND IT DO NOT HAVE ANY ACCESS OR CONTROL OVER THE INFRASTRUCTURE OR TH E PROCESS THAT ARE INVOLVED IN RUNNING THE ADWORD PROGRAM, AS PROGRAM RUNS ON SOFTWARE, ALGORITHM, DATA CENTER WHICH ARE OWNED BY GOOGLE AND ITS SUBSIDIES OUTSIDE INDIA. IT WAS ALSO THE CASE OF TH E ASSESSEE THAT THE ADWORD PLATFORM IS RUNNING ON SERVERS LOCATED OUTSI DE INDIA THAT BELONGED TO OR HIRED BY GOOGLE. ASSESSEE IN INDIA H AS NO CONTROL OVER THE SERVER OF GOOGLE. 07. MOREOVER, IT WAS SUBMITTED THAT THE GOOGLE DOES NOT SELL ANY SOFTWARE BUT RESELLS PRODUCTS AND SERVICES WHICH ARE DEVELOPED BY GOOGLE INCORPORATION USA AND ITS SUBSIDIARIES OUTSI DE INDIA. IT WAS THE CASE OF THE ASSESSEE THAT NEITHER THE ASSESSEE NOR ITS ADVERTISERS GET ANY RIGHT OR RIGHT TO USE OR EXPLOITATION OVER THE UNDERLYING I.P. OR SOFTWARE WHICH IS ENTIRELY OWNED BY GOOGLE INCORPOR ATION AND ITS SUBSIDIES. PAGE - 7 IT(TP)A.1511 TO 1516/BANG/2013 08. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ADVE RTISERS GETS ITS ADVERTISEMENT UPLOADED INTO ADWORD PROGRAM, AND THE REAFTER IT DIRECTLY LOGGED ON THE ADWORD PROGRAM WEBSITE OWNED BY GOOGLE AND FOLLOWS THE VARIOUS STEPS TO CREATE THE ADWORD ACCO UNT FOR ITSELF. IT IS ALSO THE ASSESSEES CASE THAT THE ADVERTISERS SELECT THE KEY WORDS, CONTENT AND PRESENTATION RELATED TO ITS ADS AND PLA CES A BID ON THE ONLINE SYSTEM FOR THE PRICE IT IS WILLING TO PAY OV ERTIME ITS USER CLICKS ON ITS ADVERTISEMENT. ONE OF THE STEPS IS THE SELE CTION OF THE PAYMENT IN INR AND ONCE THE TERMS AND CONDITIONS DI SPLAYED ARE ACCEPTED AN ASSIGNING CONTRACT IS ENTERED BETWEEN T HE ADVERTISER AND GOOGLE INDIA (ASSESSEE) FOR SALE OF AD SPACE. IT WA S FURTHER SUBMITTED THAT ONCE THE ADVERTISERS CREATES THE ACCOUNTS AND UPLOAD AND ADVERTISEMENT THE SAME AUTOMATICALLY GETS STORED ON ADWORD PLATFORM OWNED BY GOOGLE ON THE SERVERS OUTSIDE THE INDIA AND THE ADS ARE DISPLAYED IN THE MANNER DETERMINED BY THE PROGR AMS RUNNING ON AUTOMATED PLATFORM. THE ASSESSEE PERIODICALLY RAISE S THE BILL ON ADVERTISERS FOR ADVERTISING SPEND INCURRED BY THE ADVERTISER ON CLICKS THROUGH THE USERS. 09. IN A NUTSHELL, IT WAS THE CONTENTION OF THE ASSESSEE THA T IT IS MERELY A RESELLER OF ADVERTISEMENT SPACE. THE ASS ESSEE ONLY PERFORMS MARKET RELATED ACTIVITIES TO PROMOTE THE SALES OF A DVERTISEMENT SPACE. NO RIGHT OR INTELLECTUAL PROPERTIES WERE TRANSFERRE D BY GOOGLE TO THE ASSESSEE OR TO THE ADVERTISER. THE ASSESSEE HAS NO CONTROL OR ACCESS TO THE SOFTWARE, ALGORITHM AND DATA CENTRE. THE SERVER ON WHICH THE ADWORD PROGRAM RUNS ARE LOCATED OUTSIDE INDIA OVER WHICH IT IS NOT PAGE - 8 IT(TP)A.1511 TO 1516/BANG/2013 HAVING CONTROL. THE ASSESSEE OR THE ADVERTISERS DO NOT HAVE ANY RIGHT OF ANY USE OR EXPLOITATION OR THE UNDERLYING I.P. A ND SOFTWARE. THE ADVERTISERS SELECT KEY WORKS AND PLACE A BID ON THE ONLINE AUCTION. THE ASSESSEE PERIODICALLY RAISES INVOICE ON ADVERTISERS FOR ADVERTISING SPEND INCURRED BY THE ADVERTISERS. 10. ON VERIFICATION OF THE FINANCIAL FOR THE FY 200 7-08 RELEVANT TO AY 2008-09, IT WAS NOTICED THAT ASSESSEE HAD CREDIT ED A SUM OF RS.119 CRORES TO THE ACCOUNT OF GOOGLE IRELAND WITHOUT DED UCTION OF TAX AT SOURCE. FURTHER, GIL (GOOGLE IRELAND) HAD ALSO NOT OBTAINED A NIL DEDUCTION CERTIFICATE ON THE SUMS PAYABLE TO IT FRO M THE DEPARTMENT. SIMILAR ARE THE FACTS FOR THE OTHER ASSESSMENT YEAR S AND THEREFORE, WE ARE NOT REPRODUCING HERE THE SAME FOR THE SAKE OF B REVITY. 10.1 AS THE APPELLANT HAD NOT COMPLIED WITH THE PRO VISIONS OF SECTION 195, THEREFORE THE PROCEEDINGS WERE INITIATED U/S.2 01 BY ISSUING THE NOTICE ON 20.11.2011, CALLING UPON THE APPELLANT WH Y IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT FOR NOT DEDUCTING TH E TAX AT SOURCE ON THE SUM PAYABLE TO GIL. 10.2 THE APPELLANT HAD FILED THE DETAILED REPLY AND SUBMITTED THE DETAIL OF THE DISTRIBUTION FEES PAYABLE TO GOOGLE I RELAND ON WHICH THE TDS WAS NOT DEDUCTED BY IT : PAGE - 9 IT(TP)A.1511 TO 1516/BANG/2013 FINANCIAL YEAR DISTRIBUTION FEE PAYABLE (IN RS.) 2005-06 NIL 2006-07 42,57,53,347 2007-08 1,19,82,61,982 2008-09 1,66,58,00,134 2009-10 1,85,68,92,343 2010-11 3,72,01,00,048 2011-12 5,70,74,19,173 10.3 BEFORE THE AO, THE ASSESSEE FILED THE DETAILED REPLY FOR ALL THE FIVE YEARS. HOWEVER THE AO WAS NOT CONVINCED WITH THE REASONING AND ACCORDINGLY THE TAX LIABILITY OF THE APPELLANT U/S.201 (1) AND 201(1A) FOR THE AY 2007-08 TO 2012-13 WERE DETERMIN ED BY CONSIDERING THE AMOUNTS PAYABLE TO GIL AS ROYALTY U NDER THE ACT AND UNDER THE DTAA. 10.4 FEELING AGGRIEVED BY THE ORDER PASSED BY THE A O, APPEALS WERE PREFERRED BEFORE THE CIT (A). HOWEVER THE CIT (A) VIDE IMPUGNED ORDER HAD DECIDED THE ISSUES AGAINST THE APPELLANT BY TREATING THE AMOUNTS PAYABLE TO GIL AS ROYALTY UNDER THE ACT AND UNDER THE DTAA. HENCE THE PRESENT APPEALS WERE FILED BY THE A SSESSEE BEFORE US ON VARIOUS GROUNDS MENTIONED HEREIN ABOVE. 10.5 IT MAY BE APPROPRIATE TO MENTION HERE THAT THE ASSESSEE, HAD RAISED THE COMMON GROUND NO.1 TO 11 IN ALL THE SIX APPEALS AND THE GROUND NO.12 WAS ONLY RESTRICTED TO TWO ASSESSMENT YEARS FOR 2007-08 PAGE - 10 IT(TP)A.1511 TO 1516/BANG/2013 AND 2008-09. DURING THE COURSE OF ARGUMENT IT WAS POINTED OUT THAT THE ASSESSEE HAD NOT RAISED THE GROUND NO.11 RAISED BEFORE CIT (A) PERTAINING TO ROYALTY INCOME, IF ANY, IS TAXABLE ON RECEIPT BASIS. THEREFORE, THE ASSESSEE, IN ALL THE APPEALS HAD FIL ED THE ADDITIONAL GROUND BEARING NO.13, BEFORE US. WE HAVE HEARD TH E ARGUMENT ON ADMISSIBILITY OF ADDITIONAL GROUND AT THIS STAGE FR OM BOTH THE SIDES. IN OUR VIEW THE ASSESSEE HAD RAISED THIS GROUND BEFORE THE CIT (A) AS GROUND NO.11 WHICH IS CLEAR FROM THE RECORD AND THE CIT (A) HAD ALSO RECORDED THE FINDING ON THIS ISSUE. MOREOVER THIS ISSUE IS LEGAL IN NATURE AND THEREFORE NO PREJUDICE WOULD BE CAUSED T O THE REVENUE IF THIS GROUND IS PERMITTED TO BE RAISED BEFORE US. A CCORDINGLY WE ALLOW ADMISSION OF ADDITIONAL GROUND NO.13 TO BE RAISED IN THE PRESENT APPEALS. WE WILL BE REPRODUCING AND DEALING THE SA ID GROUND 13 HEREIN BELOW ON ITS OWN TURN. 11. THE AO AFTER ISSUING THE SHOW CAUSE NOTICE TO A SSESSEE HAD PASSED THE SPEAKING ORDER. IN RESPECT TO GROUNDS 1- 11 ABOVE THE FINDING OF THE AO WERE AS UNDER : A. THE AO HELD THAT THE AMOUNT PAYABLE BY THE APPELLAN T TO GOOGLE IRELAND FOR THE SUBJECT ASSESSMENT YEARS IS ROYALTY AS THE SAID TERM IS DEFINED IN EXPLANATION 2 TO SECTION 9(L)(VI) OF THE ACT. THE AO HAS RELIED ON T HE FOLLOWING OBSERVATIONS TO CONCLUDE AS ABOVE: B. THE 'DISTRIBUTION RIGHTS' ARE 'INTELLECTUAL PROPERT Y RIGHTS' COVERED BY 'SIMILAR PROPERTY' AND THE PAGE - 11 IT(TP)A.1511 TO 1516/BANG/2013 DISTRIBUTION FEE PAYABLE IS IN RELATION TO TRANSFER OF DISTRIBUTION RIGHTS. C. GOOGLE IRELAND HAS GRANTED THE APPELLANT THE RIGHT ACCESS TO CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY RIGHTS. D. GOOGLE INDIA HAS BEEN ALLOWED THE USE OR THE RIGHT TO USE OF A VARIETY OF SPECIFIED IP RIGHTS AND OTHER I P RIGHTS COVERED BY 'SIMILAR PROPERTY'. E. GRANT OF DISTRIBUTION RIGHT ALSO INVOLVES TRANSFER OF RIGHT IN COPYRIGHT F. BY EXERCISING ITS RIGHT AS THE OWNER OF COPYRIGHT IN THE SOFTWARE, GOOGLE IRELAND IS AUTHORIZING GOOGLE INDIA TO SELL OR OFFER FOR SALE, I.E., MARKETING AND DISTRIBUTION OF ADWORDS SOFTWARE TO VARIOUS ADVERTISERS IN INDIA. G. THE CONSIDERATION PAID BY GOOGLE INDIA IS FOR GRANT ING LICENSE/AUTHORIZATION TO USE THE COPYRIGHT IN THE A D WORDS PROGRAM AND NOT FOR PURCHASE OF SUCH SOFTWARE . H. GIPL HAS BEEN GIVEN RIGHT TO USE GOOGLE TRADEMARKS AND OTHER BRAND FEATURES IN ORDER TO MARKET AND DISTRIBUTE OF ADWORDS PROGRAM. I. GRANT OF DISTRIBUTION RIGHT ALSO INVOLVES TRANSFER OF KNOW-HOW J. GOOGLE IRELAND IS OBLIGED TO TRAIN THE DISTRIBUTOR SO PAGE - 12 IT(TP)A.1511 TO 1516/BANG/2013 THAT APPELLANT CAN MARKET AND DISTRIBUTE AD WORDS PROGRAM. K. REFERRING TO CLAUSE 2 OF NON-DISCLOSURE AGREEMENT ('NDA') FORMING PART OF DISTRIBUTION AGREEMENT, GOOGLE IRELAND BEING THE COPYRIGHT HOLDE R OF THE AD WORDS PROGRAM, IS IN A POSITION TO SHARE CONFIDENTIAL INFORMATION WHENEVER REQUIRED WITH APPELLANT. L. GRANT OF DISTRIBUTION RIGHT ALSO INVOLVES TRANSFER OF PROCESS M. WITHOUT ACCESS TO THE BACK-END, GOOGLE INDIA CANNOT PERFORM ITS MARKETING AND DISTRIBUTION ACTIVITIES. GOOGLE INDIA HAS ACCESS TO THE PROCESSE S RUNNING ON THE DATA CENTERS, BASED ON THE DISTRIBUTION RIGHTS GRANTED TO IT BY GOOGLE IRELAND N. APPELLANT IS GRANTED THE USE OR THE RIGHT TO USE TH E PROCESS IN THE ADWORDS PLATFORM FOR THE PURPOSE OF MARKETING AND DISTRIBUTION. (PAGE 49 OF THE ORDER U /S 201) O. GRANT OF DISTRIBUTION RIGHT ALSO INVOLVES USE OF INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EQUIPMENT P. ADWORDS PROGRAM, IN ONE WAY, IS ALSO COMMERCIAL CUM SCIENTIFIC EQUIPMENT AND WITHOUT HAVING ACCESS TO SERVERS RUNNING THE AD WORDS PLATFORM, GOOGLE INDIA CANNOT PERFORM ITS FUNCTIONS AS PER THE DISTRIBUTION AGREEMENT. PAGE - 13 IT(TP)A.1511 TO 1516/BANG/2013 12. THE APPELLANT HAD CHALLENGED THE ORDER PASSED BY THE AO HOWEVER THE CIT(A) HAD DECIDED THE ISSUES AGAINST T HE ASSESSEE AND CONFIRMED THE WITHHOLDING TAX LIABILITY IN THE HAND S OF THE APPELLANT ON THE BASIS THAT THE AMOUNT PAYABLE BY T HE APPELLANT TO GOOGLE IRELAND IS IN THE NATURE ROYALTY UNDER THE P ROVISIONS OF THE ACT AS WELL AS UNDER THE INDIA-IRELAND DTAA. 13. FEELING AGGRIEVED BY THE ORDER OF CIT(A) THE A SSESSEE CHALLENGED THE ORDER OF LOWER AUTHORITIES ON THE AB OVE SAID GROUNDS. 14. THE LD AR FOR THE ASSESSEE HAD MADE ELABORATE ARGUMENTS BEFORE US WHICH CONTINUED FOR FOUR DAYS AND ALSO FI LED DETAILED WRITTEN SUBMISSIONS RUNNING INTO MORE THAN 110 PAGES. THE S UBMISSIONS OF THE LD. AR RELEVANT FOR GROUNDS NO 1-11 ARE REPROD UCED HEREIN FOR THE PURPOSES OF RECORD : 2.3.1 PROVISION OF INFORMATION TECHNOLOGY ENABLED S ERVICES ('ITES SERVICES) BY THE APPELLANT IS INDEPENDENT OF THE DISTRIBUTION OF ADV ERTISEMENT SPACE UNDER THE ADWORDS PROGRAM BY THE APPELLANT TO THE ADVERTISERS IN INDI A (I) AT THE OUTSET, IT IS RESPECTFULLY SUBMITTED THAT TH E ITES DIVISION OF THE APPELLANT IS A SEPARATE OUTSOURCING BUSINESS SEGMENT, FOR WHI CH IT EARNS REVENUE UNDER A SEPARATE OUTSOURCING SERVICE AGREEMENT WITH GOOGLE IRELAND. (II) APPELLANT WAS PROVIDING ITES SERVICES EVEN PRIOR TO COMMENCEMENT OF THE DISTRIBUTION ACTIVITY. (III) NO AMOUNT IS PAID / PAYABLE BY THE APPELLANT TO GOO GLE IRELAND UNDER ITES AGREEMENT. PLEASE REFER PAGE 22 TO 35 OF THE PAPER BOOK FOR THE COPY OF THE ITES AGREEMENT BETWEEN THE APPELLANT AND GOOGLE IRELAND IN RELATION TO THE ITES OUTSOURCING FUNCTION BEING PERFORMED BY THE APPELLA NT. (IV) THE PROVISION OF ITES SERVICES BY THE APPELLANT IS INDEPENDENT OF THE DISTRIBUTION OF ADVERTISING SPACE TO THE ADVERTISER S IN INDIA, CONSIDERING THE FOLLOWING: (A) THE ITES FUNCTION WAS UNDERTAKEN BY THE APPELLANT E VEN PRIOR TO THE APPOINTMENT AS A NON-EXCLUSIVE DISTRIBUTOR OF ADVER TISEMENT SPACE. THE ITES FUNCTION OPERATES INDEPENDENTLY AND IS UNR ELATED TO THE ADWORDS DISTRIBUTION BUSINESS. THAT IS, EVEN WHERE GOOGLE IRELAND TERMINATES ITS RESELLER CONTRACT WITH THE APPELLANT , THE ITES OUTSOURCING BUSINESS WOULD CONTINUE AND VICE VERSA. PAGE - 14 IT(TP)A.1511 TO 1516/BANG/2013 (B) THE ROLE OF DISTRIBUTION FUNCTION IS LIMITED TO DIS TRIBUTION ACTIVITIES INTER ALIA, WHEREAS, THE ITES SERVICES PERFORMED AR E TO ENSURE THE ADVERTISEMENTS PLACED BY ADVERTISERS GLOBALLY CONFI RM WITH GOOGLE EDITORIAL GUIDELINES/LOCAL GOVERNMENT REGULATIONS O F THE COUNTRY (FROM WHERE THE AD ORIGINATED). FOR EXAMPLE, WHERE AN IS AD ORIGINATED FROM SOUTH A FRICA, THE ITES TEAM IN THE APPELLANT MAY REVIEW AS A PART OF ITS O UTSOURCING SERVICES, WHETHER THE SOUTH AFRICAN AD CONFORMED WITH THE LOC AL GOVERNMENT REGULATIONS OF SOUTH AFRICA. LIKEWISE AN ADVERTISEMENT PLACED BY AN INDIAN ADVER TISER WHO HAS ENTERED INTO A CONTRACT WITH THE APPELLANT MAY BE R EVIEWED BY ANY OTHER CENTER RENDERING SAID SERVICES. SIMILARLY THE APPELLANT MAY RECORD AN ADVERTISEMENT PLACED BY A CUSTOMER SITUATED IN THE EUROPE. THERE IS NO PROFESSIONAL INTERACTION BETWEEN THE DI STRIBUTION TEAM AND ITES TEAM SINCE THESE ARE SEPARATE FUNCTIONS PERFORMED I NDEPENDENT OF EACH OTHER. (C) THE PROCESS OF REVIEW OF ADVERTISEMENTS IS LARGELY AUTOMATED AND RUN OUTSIDE INDIA, AND THE APPELLANT IS INVOLVED IN REV IEWING ONLY THOSE ADS WHICH CANNOT BE COMPLETELY REVIEWED BY THE AUTOMATED SYST EM. (D) THE FUNCTION OF PROVIDING AD POLICY ADMINISTRATION SERVICES CAN BE OUTSOURCED TO ANOTHER THIRD PARTY COMPANY OR ANO THER COMPANY OUTSIDE OF INDIA. THAT IS, THIS OUTSOURCING FUNCTION DOES N OT NEED TO BE LOCATED IN INDIA. IT IS MERE COINCIDENCE THAT THE APPELLANT HAS UNDERTAK EN TO PERFORM ITES OUTSOURCING SERVICES AS A PART OF ITS BUSINESS. THUS, BASED ON THE ABOVE, WE WISH TO SUBMIT THAT TH E ROLES OF ITES AND THE DISTRIBUTION TEAM ARE DIFFERENT IN NATURE AND ARE N OT INTER RELATED OR INTER- DEPENDENT. USE OF INTELLECTUAL PROPERTY THROUGH ITES AGREEMENT THE AO HAS ASSUMED THAT THE RIGHT TO USE THE INTELL ECTUAL PROPERTY GRANTED UNDER ITES AGREEMENT WAS USED BY THE APPELLANT FOR THE PU RPOSES OF DISTRIBUTION OF AD SPACE. BASIS THIS PRESUMPTION, THE AO HAS ADJUDGED THAT THE PAYMENTS MADE BY THE APPELLANT WERE TOWARDS THE USE OF INTELLECTUAL PROP ERTY AND THUS TAXABLE UNDER SECTION 9(1)(VI)OF THE ACT. IT IS SUBMITTED THAT FIRSTLY, EVEN UNDER THE ITES A GREEMENT, ONLY LIMITED RIGHTS TO THE USE OF THE INTELLECTUAL PROPERTY OF GOOGLE IRELAND IS G RANTED TO THE APPELLANT ONLY TO CARRY OUT THE WORK UNDER THE SAID AGREEMENT. FURTHE R, THE ITES AGREEMENT, PAGE - 15 IT(TP)A.1511 TO 1516/BANG/2013 PROVIDING SUCH LIMITED RIGHTS TO THE USE OF THE INT ELLECTUAL PROPERTY OF GOOGLE IRELAND, IS ENTERED ON 1 APRIL 2004, WHICH IS MUCH BEFORE THE AGREEMENT FOR ADWORDS PROGRAM I.E. 12 DECEMBER 2005. CONFIDENTIALITY CLAUSE UNDER THE RESELLER AGREEMENT AS SUBMITTED EARLIER, ITES AGREEMENT WHICH LAYS DOW N TERMS AND CONDITIONS FOR 'CONFIDENTIAL INFORMATION' SHARED BY GOOGLE IRE LAND TO GOOGLE INDIA FOR THE PURPOSES OF PROVIDING ITES SERVICES. THE PURPOSE OF INSERTION OF THE SAID CLAUSE IS INDE PENDENT OF PAYMENTS MADE BY THE APPELLANT UNDER THE RESELLER AGREEMENT. THE CONFIDE NTIALITY CLAUSE UNDER THE ITES AGREEMENT IS A GENERIC CLAUSE INCLUDED FOR THE PURP OSES OF PROTECTING INFORMATION EXCHANGED BY GOOGLE IRELAND AND TO FURTHER SUE THE PERSONS WHO BREACH SENSITIVE AND CONFIDENTIAL INFORMATION THAT THEY MAY ACQUIRE AS A CONSEQUENCE OF RENDERING SERVICES TO GOOGLE IRELAND. THE AO AND CIT(A) SEEM TO HAVE OVERLOOKED A BASIC F ACT EVIDENT FROM CLAUSE 6.1 OF THE ITES AGREEMENT WHICH WAS REPRODUCED BY T HE CIT(A) IN PARA 11.6 (PAGE 39) OF HIS ORDER. THE SAID CLAUSE PERMITS THE APPELLANT TO USE THE CO NFIDENTIAL INFORMATION WHICH IS LARGELY CUSTOMER DATA (NOT IN THE NATURE OF INTELLE CTUAL PROPERTY) SOLELY FOR THE PURPOSE OF PERFORMING ITS OBLIGATIONS UNDER THE ITE S AGREEMENT AND DOES NOT GIVE THE APPELLANT THE RIGHT TO USE THE SAME UNDER THE D ISTRIBUTION AGREEMENT. FURTHER, THE APPELLANT WISHES TO REITERATE THAT THE AD WORDS DIVISION AND THE ITES DIVISION OPERATE SEPARATELY AND THERE IS NO OVERLAP OF ANY ACTIVITIES AND RESPONSIBILITIES BETWEEN THE TWO DIVISIONS. THE APPROACH OF THE AO AND THE CIT(A) TO READ ONE A GREEMENT INTO THE OTHER FOR THE PURPOSES OF CONCLUDING THE TAXABILITY AS RO YALTY IS BASELESS SUCH AN APPROACH ADOPTED BY THE AO AND CIT(A) WOULD ONLY LE AD TO CIRCUITOUS ARGUMENTS LEADING TO NO DEFINITE CONCLUSION. 2.3.2 AMOUNT PAYABLE BY THE APPELLANT TO GOOGLE IR ELAND FOR PURCHASE OF ADVERTISEMENT SPACE UNDER THE DISTRIBUTION AGREEMEN T IS NOT IN THE NATURE OF 'ROYALTY' IN TERMS OF EXPLANATION 2 TO SECTION 9(1)(VI), THE TERM 'ROYALTY' MEANS CONSIDERATION FOR TRANSFER OF ALL OR ANY RIGHTS (INCLUDING THE GRANTI NG OF A LICENSE) IN RESPECT OF USE OF A PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA, PROCESS, TRADEMARK, SIMILAR INTELLECTUAL PROPERTY OR IN RELATION TO IMPARTING O F ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNO WLEDGE, EXPERIENCE OR SKILL. IN THE INSTANT CASE, AS PER THE 'GOOGLE AD WORDS PR OGRAM DISTRIBUTION AGREEMENT' BETWEEN THE APPELLANT AND GOOGLE IRELAND: THE APPELLANT IS APPOINTED AS A MERE NON-EXCLUSIVE DISTRIBUTOR OF PAGE - 16 IT(TP)A.1511 TO 1516/BANG/2013 ADVERTISEMENT SPACE TO THE ADVERTISERS IN INDIA; THE AMOUNT PAYABLE TO GOOGLE IRELAND IS FOR PURCHAS E OF ADVERTISEMENT SPACE UNDER THE AD WORDS PROGRAM AND IS NOT IN RELATION T O ANY 'TRANSFER OF ANY RIGHT' OR ANY 'RIGHT TO USE' ANY COPYRIGHT, PATENT, INVENTION ETC.; THE AGREEMENT DOES NOT INVOLVE ANY USE OF PATENTS, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADEMARK OR SIMILAR P ROPERTY BY THE APPELLANT FURTHER, ALL THE RIGHTS TITLE, AND INTEREST IN AND TO ALL INFORMATION AND DATA, INCLUDING USER DATA (I.E., DATA PROVIDED BY USERS) ARE OWNED BY GOOGLE IRELAND; THE AMOUNT PAYABLE UNDER THE AGREEMENT IS NOT IN RE LATION TO ANY KNOWLEDGE CONCERNING A PATENT OR INVENTION, AND IS NOT CONCER NED WITH THE USE OR THE RIGHT TO USE ANY SCIENTIFIC EQUIPMENT; FURTHER, GOO GLE IRELAND DOES NOT, IN ANY MANNER, PROVIDE TO THE APPELLANT ANY USE OF OR RIGHT TO USE ANY COPYRIGHT IN THE INTELLECTUAL PROPERTY OWNED BY GOOGLE IRELAN D. GIVEN THE ABOVE, IT IS SUBMITTED THAT THE AMOUNT PA YABLE BY THE APPELLANT TO GOOGLE IRELAND, BEING AN ADVERTISEMENT FEE, IS NOT IN THE NATURE OF 'ROYALTY' UNDER THE ACT. THE APPELLANT PROVIDES ITS DETAILED SUBMISSION S ON SPECIFIC CONTENTIONS OF THE AO UNDER EACH OF THE CLAUSES OF EXPLANATION 2 T O SECTION 9(L)(VI) OF THE ACT IN THE ENSUING PARAGRAPHS: AT THE OUTSET, IT IS SUBMITTED THAT THE PRICE THAT THE APPELLANT PAYS GOOGLE IRELAND IS THE CONSIDERATION FOR THE ADVERTISEMENT SPACE SOLD. IF THE REVENUE ALLEGES IT IS NOT SO, IT MUST DEMONSTRATE WITH EVIDENCE THAT SUCH IS THE POSITION. IT HAS TO CLEARLY ESTABLISH THAT THE PAYMENT IS FOR ONE OF TH E SPECIFIC INTELLECTUAL PROPERTY RIGHTS THAT ARE COVERED BY THE VARIOUS CLA USES OF EXPLANATION 2. IT CANNOT ALLEGE THAT THE APPELLANT HAS A RIGHT TO USE VARIOUS INTELLECTUAL PROPERTY RIGHTS WITHOUT TRACING SUCH RIGHT TO A SPE CIFIC CLAUSE TO THE AGREEMENT. (I) GRANT OF IP RIGHTS SIMILAR PROPERTY U/S 9(1) (VI) HAVING UPHELD THAT GOOGLE IRELAND AGREED TO PROVIDE AD SPACE TO THE APPELLANT FOR DISTRIBUTION TO THE INDIAN ADVERTISERS, THE CIT(A) ERRED IN CONCLUDING THAT (OOG1E IRELAND HAS GRANTED THE RIGHTS COVERED BY 'SIMILAR PROPERTY' UNDER IN SECTION 9(1)(VI) OF THE ACT. IN THIS REGARD, WE WISH TO SUB MIT THE FOLLOWING: THE APPELLANT IS UNABLE TO COMPREHEND HOW NON-EXCLU SIVE RIGHT TO DISTRIBUTE THE ADVERTISEMENT SPACE UNDER THE AD WOR DS PROGRAM WOULD BE REGARDED AS FALLING WITHIN THE SCOPE OF 'SIMILAR PR OPERTY' REFERRED TO IN SECTION 9(L)(VI) OF THE ACT. APPLYING THE PRINCIPLE OF EJUSDEM GENERIS AND 'NOSC ITUR A SOCIIS', TO INTERPRET THE MEANING OF THE TERM 'SIMILAR PROPERTY' MENTIONE D IN EXPLANATION 2(I) TO SECTION 9(1)(VI) OF THE ACT, IT SHALL BE UNDERSTOOD IN THE CONTEXT OF PATENT, INVENTION, MODEL, DESIGN, SECRET FORMULA OR PROCESS OR TRADE MARK WHICH ARE ALL FORM OF INTELLECTUAL PROPERTY. FROM THE DEFINITIONS OF INTELLECTUAL PROPERTY, IT M AY BE INFERRED THAT THE TERM 'INTELLECTUAL PROPERTY' REFERS TO PROPERTY WHI CH IS THE ESSENTIALLY THE PRODUCT OF HUMAN INTELLECT. PAGE - 17 IT(TP)A.1511 TO 1516/BANG/2013 THE PRESENT NON-EXCLUSIVE RIGHT TO DISTRIBUTE THE A DVERTISEMENT SPACE IS A COMMERCIAL RIGHT AND NOT AN INTELLECTUAL PROPERTY R IGHTS. IN ANY EVENT IT IS SUBMITTED THAT NO PAYMENT IS MAD E BY THE APPELLANT TO GOOGLE IRELAND FOR GRANT OF SUCH RIGHT. FURTHER THE DEFINI TION OF THE TAX ROYALTY IN ARTICLE 12(5) OF THE INDIA IRELAND DTAA IS NARROWER IN SCO PE THAN THE DEFINITION IN EXPLANATION 2 AS INTER ALIA THE WORDS 'SIMILAR PROP ERTY' HAS NOT TO BE FOUND. (II) GRANT OF DISTRIBUTION RIGHTS IN ADWORDS PROGRA M INVOLVES TRANSFER OF RIGHT IN COPYRIGHT THE AO OBSERVED THAT GOOGLE IRELAND HAS GRANTED THE APPELLANT THE RIGHT TO USE OF THE AD WORDS PROGRAM, WHICH IS A COMPUTER SOFTWARE WITH OUT PARTING WITH THE COPYRIGHT, THUS GRANTING A LICENSE TO USE THE SOFTWARE. THE A O AND THE CIT(A) HAVE FACTUALLY ERRED IN STATING THAT THE APPELLANT GETS THE RIGHT TO USE THE AD WORDS PROGRAM. DRAWING REFERENCE TO THE DESCRIPTION OF THE AD WORD S PROGRAM AND THE ROLE PLAYED BY THE APPELLANT DURING THE SALE OF THE AD SPACE, IT I S SUBMITTED THAT THE APPELLANT NEITHER RECEIVES ANY RIGHT NOR ACCESS TO THE AD WORDS PROGR AM UNDER THE DISTRIBUTION AGREEMENT AND DOES NOT USE IT IN ANY MANNER WHATSOE VER. THE AMOUNT PAYABLE Y THE APPELLANT IS MERELY TOWARDS PURCHASE OF THE AD SPACE FOR RESALE WITHOUT ACCESS TO ANY UNDERLYING COMPUTER PROGRAM. IN ARRIVING AT HIS CONCLUSION THE AO PRIMARILY RELI ED ON THE JUDGMENT OF THE HONORABLE HIGH COURT IN SAMSUNG AND AS INDICATED EA RLIER THE APPELLANT'S REPRESENTATIVE WAS CATEGORICALLY TOLD NOT TO DEAL W ITH THIS JUDGMENT IN HIS REJOINDER AND, HENCE, THE SAME IS NOT BEING DEALT W ITH. IN THE INSTANT CASE, THE APPELLANT IS A MERE NON-EX CLUSIVE DISTRIBUTOR OF ADSPACE THROUGH THE AD WORDS PROGRAM IN INDIA. THE APPELLAN T MERELY PURCHASES ADVERTISEMENT SPACE UNDER THE ADWORDS PROGRAM FROM GOOGLE IRELAND AND DISTRIBUTES THE SAME TO ADVERTISERS IN INDIA. HENCE , THE CONSIDERATION RECEIVED BY THE APPELLANT FROM THE ADVERTISERS IN INDIA IS IN T HE NATURE OF ADVERTISEMENT FEES AND THE CONSIDERATION PAID BY THE APPELLANT TO GOOG LE IRELAND IS FOR PURCHASE OF AD SPACE WHICH IS ALSO IN THE NATURE OF ADVERTISEME NT FEES. FOR ADVERTISEMENTS IN OTHER MEDIUMS LIKE NEWSPAPERS , MAGAZINES, THE CUSTOMERS APPROACH ADVERTISING AGENCY TO HAVE THEIR ADVERTISEMENT PUBLISHED IN ONE OR MORE NEWSPAPERS. THE ADVERTISING AGENCY IN TURN, APPROACHES THE RESPECTIVE NEWSPAPER ENTITY OR AN ENTITY THAT HAS BOUGHT MEDIA SPACE FOR THE PUBLISHING OF THE ADVERTISEMENT OF THEIR CUSTOMERS. THE CONSIDERATION PAID BY THE CUSTOMER TO THE ADVERTISING AGENCY IS IN THE NATURE OF ADVERTIS EMENT FEES AND THE CONSIDERATION PAID BY THE ADVERTISING AGENCY TO THE RESPECTIVE NEWSPAPER ENTITY IS ALSO IN THE NATURE OF ADVERTISEMENT FEES. PAGE - 18 IT(TP)A.1511 TO 1516/BANG/2013 SIMILARLY, IN THE INSTANT CASE, THE CONSIDERATION R ECEIVED BY THE APPELLANT FROM THE ADVERTISERS IN INDIA IS IN THE NATURE OF ADVERT ISEMENT FEES AND THE CONSIDERATION PAID BY THE APPELLANT TO GOOGLE IRELAND FOR PURCHAS E OF ADVERTISEMENT SPACE THROUGH ADWORDS PROGRAM IS ALSO IN THE NATURE OF AD VERTISEMENT FEES. (III) GRANT OF RIGHT TO USE TRADEMARKS AND BRAND FE ATURES THE AO SOUGHT TO CHARACTERISE THE AMOUNT PAYABLE TO GOOGLE IRELAND AS ROYALTY, CONSIDERING THAT THE APPELLANT USES THE BRAND NAME 'GOOGLE', WHICH WOULD AMOUNT TO USE OF TRADEMARK UNDER THE PROVISIONS OF THE ACT. GOOGLE TRADEMARKS AND OTHER BRAND FEATURES BEING RE FERRED TO IN THE DISTRIBUTION AGREEMENT ARE MERE INCIDENTAL TO ENABLE THE APPELLA NT TO DISTRIBUTE THE AD SPACE IN INDIA. THERE HAS BEEN NO SPECIFIC TRANSFER OF ANY P ATENT/ TRADEMARK TO THE APPELLANT IN THIS REGARD. ANY RESELLER OR DISTRIBUTOR TO PERFORM ITS OBLIGATI ONS AS A RESELLER NEEDS TO USE THE BRAND OF THE PRODUCT BEING SOLD. FOR EXAMPLE, IF RA YMOND APPOINTS A PERSON AS ITS AUTHORISED DISTRIBUTOR, SUCH PERSON MAY IDENTIFY HI MSELF AS AN AUTHORISED RESELLER OF RAYMOND PRODUCTS THROUGH SIGNAGE BOARD. THIS DOES N OT MEAN THAT PAYMENTS BY THE RESELLER TO RAYMOND FOR PURCHASE OF PRODUCTS IS ROY ALTY. IT IS SUBMITTED THAT MERE USE OF NAME OF BRAND FOR PROCURING AD CONTRACTS WOULD NOT AMOUNT TO USE OF TRADEMARK AND, HENCE, EVEN ASSUMIN G THAT A VIEW IS TAKEN THAT A PART OF THE PRICE PAID BY THE APPELLANT TO GOOGLE IRELAND C AN BE CHARACTERIZED AS A PAYMENT FOR THE ALLEGED USE (WHICH IS DENIED) SUCH INCOME WOULD NOT BE LIABLE TO TAX AS ROYALTY UNDER THE PROVISIONS OF THE ACT. REL IANCE IS PLACED ON THE JUDGEMENTS REFERRED TO IN PARA 3.3.5 IN SECTION II (IN RELATION TO SUBMISSIONS FOR AY 2008-09 I.E. ITA NO 374 OF 2013) WHEREIN IT HAS BEEN HELD THAT INCIDENTAL USE OF TRADEMARK SHOULD NOT OVER SHADOW THE MAIN PURPOSE O F ENTERING INTO THE AGREEMENT WHICH WAS MARKETING AND PUBLICITY. (IV) GRANT OF DISTRIBUTION RIGHTS INVOLVES TRANSFER OF RIGHTS IN PROCESS THE AO, DRAWING REFERENCE TO THE ACTIVITIES UNDERTA KEN BY THE ITES DIVISION, OBSERVED (IN PARA 1.2, PAGE 47 OF THE ORDER) THAT T HE APPELLANT HAS TO PERFORM FUNCTIONS WHICH INVOLVE APPROVING AND ADMINISTERING ADVERTISEMENTS TO CONFORM TO THE GOOGLE EDITORIAL GUIDELINES AND RESPONDING TO C USTOMER QUERIES. THE AO ALSO OBSERVED THAT THE FRONT-END PORTION IS WHAT THE ADV ERTISER OR THE END-USER SEES WHILE THE BACK-END PORTION IS ACCESSIBLE ONLY BY GOOGLE I RELAND AND GOOGLE INDIA. THE AO FURTHER OBSERVED THAT WITHOUT ACCESS TO THE BACK-EN D, THE APPELLANT CANNOT PERFORM ITS ACTIVITIES OF MARKETING AND DISTRIBUTION. IN THIS REGARD, IT IS IMPORTANT TO HIGHLIGHT THAT T HE APPELLANT DOES NOT HAVE ACCESS TO ANY BACK-END PORTION AS REFERRED BY THE AO AS DATAB ASES, SOFTWARE TOOLS, ETC UNDER THE DISTRIBUTION AGREEMENT. THEREFORE, THE CONCLUSION O F THE THAT THE APPELLANT HAS BEEN GRANTED THE USE OF OR THE RIGHT TO USE THE PROCESS IN THE AD WORDS PLATFORM, ESPECIALLY FOR THE PURPOSE OF MARKETING AND DISTRIBUTION IS FA CTUALLY INCORRECT AND IS BASED ON SURMISE AND CONJECTURE. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT HUMBL Y SUBMITS THAT THE ADWORDS, THOUGH A PROGRAM, CANNOT BE CONSIDERED AS A 'PROCESS' WITH IN THE MEANING UNDER EXPLANATION 2(I) TO SECTION 9(1)(VI) OF THE ACT ON ACCOUNT OF THE FOLLOWING: PAGE - 19 IT(TP)A.1511 TO 1516/BANG/2013 EXPLANATION 2(I) REFERS TO TRANSFER OF RIGHTS IN IN TELLECTUAL PROPERTY. THE TERM 'PROCESS' USED THEREIN IS TO BE UNDERSTOOD IN THE C ONTEXT OF INTELLECTUAL PROPERTY BASED ON PRINCIPLE OF `NOSCITUR A SOCIIS'. HENCE, THE TER M 'PROCESS' REFERRED IN EXPLANATION 2(I) NEEDS TO BE A SECRET PROCESS OR ONE THAT CAN B E CLASSIFIED UNDER INTELLECTUAL PROPERTY. HOWEVER, THE ADWORDS PROGRAM CANNOT BE EQUATED TO A SECRET PROCESS SINCE INFORMATION RELATING TO THE PROGRAM IS FREELY AVAIL ABLE TO THE PUBLIC ON GOOGLE'S WEBSITE ALONG WITH EXPLANATORY VIDEOS REGARDING THE SAME. HENCE, GOOGLE AD WORDS PROGRAM CANNOT BE CONSIDERED A SECRET PROCESS AND HENCE, IT DOES NOT CONSTITUTE 'PROCESS' WITHIN THE MEANING OF THE TERM AS DEFINED IN CLAUSE (I). (V) GRANT OF DISTRIBUTION RIGHTS ALSO INVOLVES TRANSFER OF KNOW-HOW THE AO OBSERVED THAT GOOGLE IRELAND IS OBLIGED TO T RAIN GOOGLE INDIA FOR MARKETING AND DISTRIBUTION OF AD WORDS PROGRAM. FURTHER, THE AO ALSO DRAWS UNWARRANTED REFERENCE TO THE ITES DIVISION IN THIS REGARD. THE AO HAS AGAIN DISREGARDED THE FACT THAT REVIEW O F ADVERTISEMENTS AS PER THE LOCAL LAW REQUIREMENTS AND GOOGLE EDITORIAL POLICIES IS U NDERTAKEN BY THE ITES DIVISION AND NOT BY THE AD WORDS DIVISION. FURTHER, THE AO OBSERVED THAT THE TRAINING IS GIVEN TO GOOGLE INDIA FOR THE PURPOSE OF IMPARTING OF INFORMATION CONCERNING TECHNICAL, COMM ERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL AS SPECIFIED IN CLAUSE (IV) OF EXPLANATION 2 TO SECTION 9(L)(VI) OF THE ACT. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT THE TE RM INFORMATION' HAS NOT BEEN DEFINED UNDER THE ACT. USED INDEPENDENTLY, THE WORD 'INFORM ATION' MAY CONVEY A VERY BROAD MEANING. THE TERM 'INFORMATION' AS USED IN CLAUSE ( IV) WOULD DRAW ITS MEANING IN THE LIGHT OF THE MEANING OF THE TERM AS USED IN THE MAIN BODY OF THE SECTION. THE TERM 'INFORMATION' FOR SECTION 9(1)(VI) WOULD ALLUD E TO THE CONCEPT OF KNOW-HOW. THE VARIOUS TYPES OF KNOWLEDGE, EXPERIENCE OR SKILL REF ERRED TO IN THE DEFINITION WOULD REFER TO KNOW-HOW BEING MADE AVAILABLE IN LIGHT OF THE ORIGINAL ESSENCE OF THE TERM ROYALTY. CIRCULAR NO. 202 DATED 05 JULY 1976 ISSUED BY THE C BDT WHICH EXPLAINS THE AMBIT OF SECTION 9(1)(VI) OF THE ACT, HAS CLEARLY BROUGHT OUT THAT THE PAYMENT FOR INFORMATION SHOULD BE IN RESPECT OF ANY DATA, DOCUMENTATION, DR AWING OR SPECIFICATIONS RELATING TO ANY PATENT, INVENTION, MODEL, DESIGN, SECRET FOR MULA OR PROCESS OR TRADEMARK. IN THE INSTANT CASE: THERE HAS BEEN NO PROVISION OF SPECIFIC INFORMATI ON CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNO WLEDGE, EXPERIENCE OR SKILL. THE INFORMATION BEING REFERRED BY THE AO UNDER TH E NDA IS A STANDARD PAGE - 20 IT(TP)A.1511 TO 1516/BANG/2013 NON-DISCLOSURE CLAUSE. THERE IS NO SPECIFIC INFORMA TION ACTUALLY RECEIVED BY THE APPELLANT FROM GOOGLE IRELAND. THE SAID CLAUSE IS I NTENDED TO PROTECT CONFIDENTIALITY OF THE INFORMATION, IF ANY, WHICH EITHER PARTY GATHERS DURING THE COURSE OF THE BUSINESS. FURTHER, THE TRAINING MATERIAL/ INFORMATION ARE ALS O PUBLICLY AVAILABLE ONLINE. HENCE, THE SAME CANNOT BE CONSIDERED IMPARTING OF I NFORMATION CONCERNING WORKING OF OR USE OF PATENT. THE ACCESS TO INFORMATION IN RELATION TO THE ADW ORDS ACCOUNTS, BILLING, ETC IS ALSO AVAILABLE TO THE ADVERTISERS. HENCE, THE SA ME IS NOT IN THE NATURE OF 'ROYALTY'. FURTHER, THE CIT(A) HAS UPHELD THAT THERE HAS BEEN NO IMPARTING OF KNOW- HOW TO THE APPELLANT AND THE REVENUE HAS NOT CHALLE NGED THE FINDING OF THE CIT(A) BY FILING AN INDEPENDENT APPEAL. (VI) GRANT OF DISTRIBUTION RIGHTS ALSO INVOLVES USE OF INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EQUIPMENT AS PER CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 9(1 )(VI) OF THE ACT, CONSIDERATION FOR THE TO 'USE' OR 'RIGHT TO USE' AN Y INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT IS CLASSIFIED AS 'ROYALTIES.' THE SIN QUA NON TO TAX A PAYMENT AS ROYALTY IS THAT THE SAI7 IS FOR THE 'USE OF' OR 'THE RIGHT TO USE' AN INTELLECTUAL PROP ERTY RIGHT. WHERE SUCH USE OR RIGHT TO USE HAS NOT BEEN GRANTED, THE PAYMENT CANNOT BE CHARACTERIZED AS 'ROYALTY. THE TERM 'USE' OR 'RIGHT TO USE' HAS NOT BEEN DEFIN ED UNDER THE ACT. AS PER OXFORD ADVANCED LEARNER'S DICTIONARY AND TREATI SE AUTHORED BY D P MITTAL TITLED 'INDIAN DOUBLE TAXATION AGREEM ENTS & TAX LAWS', TO CONSTITUTE 'USE' OR 'RIGHT TO USE' THE PA YER SHOULD HAVE (A) COMPLETE CONTROL OF THE IP AND (B) EXCLUSI VE USE WHICH EXCLUDES MULTIPLE USERS. IN THE INSTANT CASE, THE AMOUNT PAYABLE BY THE APPE LLANT TO GOOGLE IRELAND IS NOT FOR THE USE OR FOR RIGHT TO USE ANY SCIENTIFIC EQUIPMENT. HENCE, BASED ON THE FOLLOWING FACTS, THE SAME IS NO T IN THE NATURE OF 'ROYALTY' EVEN UNDER EXPLANATION 2(IVA) TO SECTION 9(L)(VI) OF THE ACT. - NO PART OF THE SERVER IS DEVOTED AND EARMARKED FO R THE APPELLANT; - 'USE' OR 'RIGHT TO USE' EQUIPMENT CONNOTES THAT THE APPELLANT HAS THE POSSESSION AND CONTROL OVER THE EQUIPMENT AND THE E QUIPMENT IS VIRTUALLY AT ITS DISPOSAL. THE APPELLANT DOES NOT EXERCISE ANY POSSE SSORY RIGHTS IN RELATION TO THE SERVER. - THE APPELLANT IS NOT CONCERNED WITH THE INFRASTR UCTURE/ SERVER INSTALLED BY GOOGLE IRELAND OR THE COMPONENTS EMBEDDED IN IT. TH E OPERATION, CONTROL AND MAINTENANCE OF THE SERVER, SOLELY RESTS WITH GOOGLE IRELAND. - THE APPELLANT DOES NOT HAVE ANY RIGHT TO MODIFY OR DEAL WITH THE SERVER WHICH ONLY VESTS WITH GOOGLE IRELAND. PAGE - 21 IT(TP)A.1511 TO 1516/BANG/2013 FURTHER, THE CIT(A) HAS CONFIRMED THAT THE APPELLAN T HAS NOT GAINED ANY RIGHT TO USE ANY SCIENTIFIC EQUIPMENT AS CAPTURED IN CLAUSE (IV) AND AS SUBMITTED EARLIER THE REVENUE HA S NOT FILED ANY APPEAL IN THIS REGARD. 2.3.3 AMOUNT PAYABLE TO GOOGLE IRELAND IS IN THE NA TURE OF BUSINESS PROFITS THE APPELLANT PLACES RELIANCE ON ITS SUBMISSIONS IN PARA 3.3.4 OF SECTION II OF THIS SUBMISSION (I.E. SUBMISSION FOR AY 2008-09 IN ITA NO 374 OF 2013) IN SUPPORT OF ITS CONTENTION THAT THE AMOUNT PAYABLE TO GOOGLE IRELAND IS IN FACT, IN THE NATURE OF BUSINESS PROFITS AND NOT ROYALTY. 15. BEFORE US, THE ASSESSEE HAS FURTHER SUBMITTED THAT THE ADWORD PROGRAMS ENABLE THE ADVERTISER TO CHANGE AND MONITO R THE PERFORMANCE OF SPONSORED LINKED TO SET A LANDING P AGE FOR ADVERTISING AND ONLY PAY WHEN PEOPLE CLICKS THE AD . THE ADVERTISER CAN PROVIDE THE TEXT OF THE ADVERTISEMENT AND BY PROVIDING SUCH TERM OR PHRASE OR KEY WORD WHICH IS RELEVANT FOR TH E ADVERTISER PROSPECTIVE SO THAT WHEN THE SAID TERM OR PHRASE IS SEARCHED BY ANY USER ON THE GOOGLE SEARCH ENGINE, ADVERTISEMENT (AD) MAY GET DISPLAYED ON THE SEARCH RESULTS IN ADDITION TO THE ORGANIC SEARCH RESULT ALONGWITH THE SPONSORED LINKED AD. THE KEY WORDS SE LECTED / PURCHASED / SOUGHT TO BE PURCHASED BY THE ADVERTISE R THROUGH THE ADWORD PROGRAM WOULD POP UP WITH THE HELP OF ALGORI THM. IT WAS SUBMITTED THAT THE QUALITY AND RELEVANCE OF KEY WO RDS AND VARIOUS PARAMETERS OF LANDING PAGES PLAYS SIGNIFICANT ROLE FOR DETERMINING THE PRICE OF THE ADVERTISEMENT. IT WAS CONTENDED BEFORE US THAT SUCCESS OF THE ADS NOT ONLY DEPEND UPON THE BIDDING BUT ALSO D EPEND UPON THE RELEVANT KEY WORDS SELECTED FOR THE ADVERTISEMENT. PAGE - 22 IT(TP)A.1511 TO 1516/BANG/2013 16. ON THE OTHER HAND, THE LEARNED STANDING COUNSE L FOR REVENUE HAD SUBMITTED THAT THE GOOGLE IS SPECIALIZED IN INTERNE T SEARCH ENGINES AND RELATED ADVERTISING SERVICES. GOOGLE MAINTAINED IND EX OF WEBSITE AND OTHER ONLINE CONTENT WHICH IS MADE AVAILABLE THROUG H ITS SEARCH ENGINE TO ANYONE WITH AN INTERNET CONNECTION. IT WAS SUBMI TTED THAT THE AMOUNT CREDITED BY GOOGLE INDIA TO THE ACCOUNT OF G IL WOULD CONSTITUTE A SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT AS THE PAYMENT IS IN THE NATURE OF ROYALTY FOR THE PURPOSE S OF LICENSE TO USE TO THE INTELLECTUAL PROPERTY RIGHTS (IPR). IT WAS SUB MITTED THAT AMOUNT CREDITED BY GOOGLE INDIA TO THE ACCOUNT OF GOOGLE I RELAND WOULD CONSTITUTE SUM CHARGEABLE UNDER THE PROVISIONS OF T HE ACT AS THE PAYMENT IS IN THE NATURE OF ROYALTY FOR THE PURPOSE OF LICENSE TO USE INTELLECTUAL PROPERTY RIGHTS (IPR). 17. SHOW CAUSE NOTICE UNDER SECTION 201 OF THE ACT WAS ISSUED AS GOOGLE INDIA FAILED TO COMPLY WITH PROVISIONS OF SE CTION 195 OF THE ACT. IN PARA-3, PAGE 5 OF THE ORDER, THE AO HAS REC ORDED THAT THE DISTRIBUTION ADWORD PROGRAM INVOLVES THREE PARTIES VIZ, THE LICENSOR, THE RESELLER AND THE ADVERTISER. THE LICENSOR IS G OOGLE IRELAND, THE DISTRIBUTOR IS GOOGLE INDIA AND THE END-USER IS THE ADVERTISER. THE ASSESSING OFFICER BY CONSIDERING THE JUDGMENT OF TH E MADRAS HIGH COURT IN THE CASE OF CONSIM INIDIA PVT LTD VS GOOGL E INDIA PVT LTD DATED 30/9/2010 EXPLAINED THE CONCEPT OF SEARCH ENG INE AND EXPLAINED HOW SEARCH ENGINE OPERATE. THE AO CONSIDERING THE P ROVISIONS OF SECTION 9(1)(VI) R.W EXPLANATION-2 OF THE ACT READ WITH DTAA CONCLUDED THAT THE PAYMENT BY GOOGLE INDIA TO GOOGL E IRELAND IS IN PAGE - 23 IT(TP)A.1511 TO 1516/BANG/2013 THE NATURE OF ROYALTY. A REFERENCE IS INVITED TO GO OGLE ADWORD PROGRAM DISTRIBUTION AGREEMENT CONSIDERED BY THE AO AT PAGE 15 OF THE ORDER. 18. AS PER CLAUSE 2.6 OF THE ADWORD PROGRAM DISTRIB UTION AGREEMENT, THE DISTRIBUTOR (GOOGLE INDIA) WILL PROV IDE AFTER SALES SERVICES TO ADVERTISERS IN ACCORDANCE WITH THE BROA D INSTRUCTIONS, TRAINING STANDARDS OF GOOGLE. CLAUSE 3.1 OF THE ADW ORD AGREEMENT PROVIDES FOR GOOGLE IRELAND TO UTILISE THE SPACE T HROUGH THE ADWORD'S PROGRAM FOR DISTRIBUTION BY GOOGLE INDIA TO ADVERTI SERS AS SET FORTH. CLAUSE 3.4 PROVIDES FOR MINIMUM LEVEL OF SERVICE AS SPECIFIED IN EXHIBIT -C. CLAUSE 7 OF THE ADWORD AGREEMENT PROVID ES FOR AGREEMENT TO MUTUAL NONDISCLOSURE AGREEMENT WHICH IS EXHIBIT - B TO THE ADWORD AGREEMENT. EXHIBIT C TO ADWORD AGREEMENT, RE FERRED TO AS SERVICE LEVEL AGREEMENT PROVIDES FOR GOOGLE INDIA S HALL BE SOLELY RESPONSIBLE FOR PROVIDING ALL CUSTOMER SERVICES TO ADVERTISERS, ACCORDING TO PROCEDURES, AND IN COMPLIANCE WITH STA NDARDS, PROVIDED BY GOOGLE. ALL ADVERTISERS SHALL BE INSTRUCTED BY D ISTRIBUTOR TO CONTACT DISTRIBUTOR DIRECTLY FOR SUPPORT, AND NOT TO COMMUN ICATE DIRECTLY WITH GOOGLE. OUR ATTENTION WAS INVITED TO MUTUAL NONDIS CLOSURE AGREEMENT WHICH IS MADE PART OF THE ADWORD AGREEMENT BY VIRTU E OF CLAUSE 7. IT WAS SUBMITTED IN VIEW OF THE SPECIFIC OBLIGATION TO PROVIDE AFTER SALES SUPPORT BY THE GOOGLE INDIA TO THE ADVERTISERS AND ALSO IN VIEW OF THE SERVICE LEVEL AGREEMENT, THE GOOGLE INDIA WOULD BE PROVIDING SERVICES AS PER THE SERVICES AGREEMENT DATED 1/4/2004. BY RE ADING OF THE PAGE - 24 IT(TP)A.1511 TO 1516/BANG/2013 SERVICE AGREEMENT DATED 1/4/2004 IT IS CLEAR THAT G OOGLE INDIA HAS BEEN PROVIDED WITH CONFIDENTIAL INFORMATION AS REFE RRED TO IN CLAUSE 1.2 OF THE SERVICE AGREEMENT AND OBLIGATION AT CLAU SE 3.3 TO RENDER SUCH SERVICES SOLELY FOR GOOGLE IRELAND OR ITS AFFI LIATES. CLAUSE 5 OF THE SERVICE AGREEMENT DEALS WITH OWNERSHIP, CLAUSE 5.5 PROVIDES FOR NO UNAUTHORISED USE AND CLAUSE 5.6 PROVIDES FOR NO REP RODUCTION. CLAUSE 6 OF THE SERVICE AGREEMENT PROVIDES FOR CONFIDENTIA L INFORMATION, ACCESS AND USE OF CONFIDENTIAL INFORMATION, AGREEME NT NOT TO DISCLOSE CONFIDENTIAL INFORMATION, OWNERSHIP AND RETURN OF C ONFIDENTIAL INFORMATION AND INJUNCTIVE RELIEF. CLAUSE 12.5 OF T HE SERVICE AGREEMENT PROVIDES FOR RIGHTS AND DUTIES ON TERMINATION. FROM THE READING OF ALL THE CLAUSES OF VARIOUS AGREEMENTS IN CONJUNCTION WI TH THE GOOGLE ADWORD PROGRAM DISTRIBUTION AGREEMENT, IT IS CLEAR BEYOND DOUBT THAT THE GOOGLE INDIA HAS BEEN PROVIDED LICENSE TO USE I PR FOR WHICH GOOGLE INDIA HAS AGREED TO MAKE CERTAIN PAYMENTS TO GOOGLE IRELAND AND THE SAME IS IN THE NATURE OF ROYALTY AS PER THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT READ WITH DTAA.. THE GOOGLE IRE LAND IS ALLOWING GOOGLE INDIA ACCESS TO ALL INTELLECTUAL PROPERTY AN D CONFIDENTIAL INFORMATION AND IS USED BY THE GOOGLE INDIA FOR ACT IVITIES RELATED TO DISTRIBUTION AGREEMENT. THE OBLIGATIONS UNDER THE D ISTRIBUTION AGREEMENT AND THE SERVICE AGREEMENT WOULD MAKE IT C LEAR THAT BOTH THE DOCUMENTS CANNOT BE SEPARATED FROM EACH OTHER. FOR THE PURPOSE OF MARKETING AND DISTRIBUTION ACTIVITIES GOOGLE INDIA IS GRANTED THE RIGHT TO USE THE VALUABLE BUSINESS ASSET OF GOOGLE IRELAND WHICH INCLUDES PAGE - 25 IT(TP)A.1511 TO 1516/BANG/2013 INTELLECTUAL PROPERTY IN THE PRODUCTS AND SERVICES OFFERED BY GOOGLE IRELAND. 19. DR SUBMITTED THAT INTELLECTUAL PROPERTY RIGHTS OF GOOGLE RESIDES IN SEARCH ENGINE TECHNOLOGY, ASSOCIATED SOFTWARE AN D OTHER FEATURES, HENCE RIGHT TO USE IPR FOR PERFORMING VARIOUS ACTIV ITIES LIKE ACCEPTING ADVERTISEMENTS AND PROVIDING AFTER SALE SERVICES WO ULD CLEARLY FALL WITHIN THE AMBIT OF 'ROYALTY'. 20. AS PER THE TERMS OF THE DISTRIBUTION AGREEMENT, GOOGLE INDIA HAS BEEN AUTHORIZED TO SELL OR OFFER FOR SALE THE ADWOR D PROGRAM TO THE ADVERTISERS WHICH IS NOTHING BUT GRANTING OF LICENC E TO GOOGLE INDIA TO SELL OR OFFER FOR SALE TO ADVERTISERS. BY ACQUIRING THE DISTRIBUTION AND MARKETING RIGHTS, GOOGLE INDIA HAS BEEN GRANTED LIC ENCE IN RESPECT OF ADWORD'S PROGRAM, LICENSED TO SELL OR OFFER FOR SAL E CERTAIN RIGHTS TO THE ADVERTISERS AND SUCH RIGHTS OR THE RIGHTS TO US E THE ADWORD PROGRAM. THEREFORE THE LICENSE TO USE THE ADWORD PR OGRAM BY THE COPYRIGHT HOLDER IS LICENSED TO MARKET AND SELL THE ADWORD PROGRAM. THE LICENSE TO USE THE ADWORD PROGRAM (SEARCH ENGIN E) WHICH IS COPYRIGHTED BY GOOGLE WOULD AMOUNT TO RIGHT TO USE THE COPYRIGHT. 21. IT WAS ALSO CANVASSED BEFORE US THAT GIL IS ALL OWING THE ACCESS TO ASSESSEE ALL IPRS AND CONFIDENTIAL INFORMATION W HICH IS SOUL OF DISTRIBUTION ACTIVITIES OF THE ASSESSEE. IT WAS SUB MITTED THAT IN THE ABSENCE OF THE ACCESS TO THE GOOGLE TOOLS, IPRS, SO FTWARE, PATENTED TECHNOLOGY AND CONFIDENTIAL INFORMATION, IT IS NOT POSSIBLE FOR THE PAGE - 26 IT(TP)A.1511 TO 1516/BANG/2013 APPELLANT TO RENDER THE SERVICES TO THE ADVERTISERS . IT WAS SUBMITTED THAT THE APPELLANT WAS GIVEN RIGHT TO USE THE VALUA BLE ASSETS OF THE GOOGLE IRELAND WHICH INCLUDE THE PRODUCT AND SERVIC ES OFFERED BY GOOGLE. IT WAS SUBMITTED THAT GOOGLE RESEARCH ENGIN E IS A PATENTED TECHNOLOGY AND THE ADWORD PROGRAMS, WORKS OF ALGORI THM WHICH ITSELF IS PATENTED AND THE ENGINEERING TECHNOLOGY A SSOCIATED WITH THAT, ALL FALLS WITHIN THE FOUR CORNERS OF THE ROYALTY. 22. IT WAS FURTHER CONTENDED BY THE LEARNED ADVOCA TE THAT THE CONTENTION OF THE ASSESSEE THAT THE ADWORD PROGRAM IS MERELY A PROGRAM TO SELL THE ADVERTISEMENT SPACE IS CONTRARY TO THE FACTS AND CIRCUMSTANCES AND ATTENDING FEATURES OF THE ADWORD PROGRAM. OUR ATTENTION WAS DRAWN TO AN AGREEMENTS ENTERED WITH T HE ADVERTISER AS WELL AS WITH THE OTHER FEATURES OF THE ADWORD PROGR AM. IT WAS SUBMITTED THAT THE ASSESSEE BY ACQUIRING THE DISTRI BUTION AND MARKETING RIGHTS FROM GOOGLE IRELAND IN RESPECT OF ADWORD PROGRAM TO THE ADVERTISERS, IS LICENSED TO USE THE SEARCH E NGINE WHICH IS COPY RIGHTED AND THEREFORE FALLS WITHIN THE DEFINITION R OYALTY. 23. IT WAS FURTHER SUBMITTED THAT THE LICENSE TO SE LL, PRESUPPOSES LICENSE BEING GRANTED TO THE DISTRIBUTOR (GOOGLE IN DIA). THE LICENSE TO SELL ENABLES THE GOOGLE INDIA TO TRANSACT THE LICEN SE/RIGHT TO USE THE ADWORD PROGRAM. THE CONSIDERATION PAID IS FOR THE L ICENSE TO ENABLE GOOGLE INDIA TO RESELL THE LICENSE/RIGHT TO USE TO THE ADVERTISERS. AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE ABOVE REFERRED CASES BUT FOR THE LICENSE, THE SALE OF ADVERTISEMENT SPACE TO THE ADVERTISER BY THE PAGE - 27 IT(TP)A.1511 TO 1516/BANG/2013 GOOGLE INDIA IN THE SEARCH ENGINE OF GOOGLE WHICH I S AN IP WOULD AMOUNT TO INFRINGEMENT. 24. UNDER THE DISTRIBUTION AGREEMENT THE ASSESSEE H AS BEEN GRANTED RIGHT TO USE TRADEMARKS AND BRAND FEATURES. THE GRANT OF RIGHT TO USE TRADEMARKS AND BRAND FEATURES IS FOR THE PURPOS E OF SELLING THE ADVERTISEMENT SPACE AND THE LICENSE TO USE THE IP B EING TOOL OF THE TRADE FOR THE GOOGLE INDIA, RIGHT TO USE GOOGLE TRADEMARK S AND OTHER BRAND FEATURES WITHOUT ANY AMBIGUITY WOULD AMOUNT T O LICENSE TO USE IP AND THE CONSIDERATION CONSTITUTES ROYALTY CHARGE ABLE UNDER SECTION 195 OF THE ACT. 25. UNDER THE DISTRIBUTION AGREEMENT THE ASSESSEE H AS BEEN GRANTED DISTRIBUTION RIGHTS INVOLVING TRANSFER OF RIGHTS IN PROCESS. THE ENTIRE SEARCH ENGINE TECHNOLOGY ON WHICH LICENSE HAS BEEN GRANTED TO GOOGLE INDIA FOR SELLING ADVERTISEMENT SPACE TO THE ADVERT ISERS IS A 'PROCESS'. THE SEARCH ENGINE TECHNOLOGY IS AN IP. HENCE THE LI CENSE TO USE THE 'PROCESS' BEING IP AND CONSEQUENTIAL PAYMENT IS 'RO YALTY'. 26. THE DISTRIBUTION AGREEMENT WAS ALSO ENTERED FOR TRANSFER OF KNOW-HOW IN VIEW OF CLAUSE 3.1 OF THE DISTRIBUTION AGREEMENT WHEREIN THE GOOGLE INDIA HAS BEEN PROVIDED ACCESS TO INTERN AL TOOL FOR THE PURPOSE OF PERFORMING THE OBLIGATIONS UNDER THE ADW ORD AGREEMENT. THE STATEMENTS RECORDED FROM THE PERSONS CONCERNED OF THE GOOGLE INDIA REPRODUCED AT PAGE 53 AND 54 OF THE AO'S ORDE R WOULD MAKE IT CLEAR THAT MARKETING,DISTRIBUTION AND MAINTENANCE O F ADWORD PROGRAM PAGE - 28 IT(TP)A.1511 TO 1516/BANG/2013 IS THE RESPONSIBILITY OF GOOGLE INDIA INVOLVING KNO WLEDGE OF TOOLS AND TRAINING ON ITS USAGE, KNOWLEDGE OF TRADEMARK POLIC Y, ADD CONTENT POLICY. SUCH KNOWLEDGE HAS BEEN IMPORTED THROUGH EX TENSIVE TRAINING BY GOOGLE IRELAND TO GOOGLE INDIA WHICH WOULD AMOUN T TO TRANSFER OF KNOW-HOW AND LIABLE FOR TAX UNDER SECTION 9(1)(VI) OF THE ACT AS ROYALTY. 27. IT WAS FURTHER SUBMITTED THAT NONDISCLOSURE AGR EEMENT WHICH IS EXHIBIT-B OF THE DISTRIBUTION AGREEMENT WOULD CLEAR LY DEMONSTRATE THAT BY VIRTUE OF THE DISCLOSURE OF THE CONFIDENTIA L INFORMATION AND ACCESS PROVIDED TO THE CONFIDENTIAL INFORMATION TO THE GOOGLE INDIA BY GOOGLE IRELAND, THE SUMS PAYABLE BY GOOGLE INDIA TO GOOGLE IRELAND IS FOR INFORMATION, KNOW- HOW AND SKILL IMPARTED TO GOOGLE INDIA. FURTHER GRANT OF DISTRIBUTION RIGHTS INVOLVES USE O F INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EQUIPMENT. ADWORD PLATFOR M IS SIMILAR TO PORTAL RUNNING ON SERVERS AND ADWORD'S PLATFORM IS BASED ON SEARCH ENGINE TECHNOLOGY OF GOOGLE. HENCE ADWORD PROGRAM I S COMMERCIAL AND SCIENTIFIC EQUIPMENT AND WITHOUT HAVING ACCESS TO THE SERVERS RUNNING ON THE ADWORD PLATFORM, GOOGLE INDIA CANNOT PERFORM ITS FUNCTIONS/ EXPLOIT ITS RIGHTS AS PER THE DISTRIBUTI ON AGREEMENT. HENCE THE DISTRIBUTION RIGHTS INCLUDE THE RIGHT TO USE TH E INDUSTRIAL, COMMERCIAL AND SCIENTIFIC EQUIPMENT WHICH ARE THE S ERVERS. OUR ATTENTION WAS DRAWN TO THE CASE OF CARGO COMMUNITY NETWORK LTD (159 TAXMAN 243) WHEREIN IT WAS HELD THAT PORTAL AN D SERVER TOGETHER CONSTITUTE INTEGRATED COMMERCIAL AND SCIENTIFIC EQU IPMENT AND FOR PAGE - 29 IT(TP)A.1511 TO 1516/BANG/2013 OBTAINING INTERNET ACCESS TO AIRLINES THE USE OF PO RTAL WITHOUT SERVER IS UNTHINKABLE. ULTIMATELY IT HAS BEEN CONCLUDED THAT PAYMENTS MADE FOR CONCURRENT ACCESS TO UTILISE THE SOPHISTICATED SERV ICES OFFERED BY THE PORTAL, WOULD BE COVERED BY THE EXPRESSION ROYALTIE S. HENCE IN VIEW OF THE RULING OF THE AAR, THE PAYMENT FOR LICENSE TO U SE OR FOR ACCESS TO PORTAL IS ROYALTY UNDER SECTION 9(1)(VI) OF THE ACT . 28. LD STANDING COUNSEL RELIED UPON JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF SYNOPSIS INTERNATIONAL LTD (2013)212 TAXMAN 454 (KARNATAKA) SAMSUNG ELECTRONICS LTD (245 CTR (R) 481), CGI INFORMATION SYSTEMS AND MANAGEMENT CONSUL TANTS (2014) 226 TAXMAN 319, AUTHORITY FOR ADVANCE RULING IN SKI LLS OF IRELAND LTD, VODAFONE SOUTH LTD (ITAT BANGALORE BENCH) AND ABB FZ-LCC (2017) 83 TAXMAN.COM 86 (BANGALORE -ITAT), THE AMOUNT PAID TOWARDS LICENSE TO USE IPR IS THE NATURE OF ROYALTY AND CHARGEABLE UNDER THE ACT UNDER SECTION 195 OF THE ACT. 29. ON THE BASIS OF THE ABOVE, IT WAS SUMMARIZED LE ARNED ADVOCATE FOR THE REVENUE THAT EXPLOITATION OF SEARCH ENGINE WHICH IS AN IPR AND THE SAID IPR BEING USED BY THE GOOGLE INDIA AS TOO LS OF TRADE AND THEREFORE IS ROYALTY AND THEREFORE LIABLE FOR TAX UNDER THE ACT AS WELL AS DTAA. 30. THE LEARNED ADVOCATE SOUGHT TO DISTINGUISH THE JUDGMENT RELIED UPON BY THE ASSESSEE IN THE MATTER OF RIGHT FLORIST LIMITED IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PR ESENT CASE. IN THE PAGE - 30 IT(TP)A.1511 TO 1516/BANG/2013 CASE RELIED ON BY THE ASSESSEE, THE ADVERTISER HAS ONLY PLACED ADVERTISEMENT IN THE SEARCH ENGINE AND NO RIGHT IN THE IPR WAS CONFERRED ON THE ADVERTISER. IN SUCH CIRCUMSTANCES IT HAS BEEN HELD THAT PAYMENT BY THE ADVERTISER DOES NOT AMOUNT TO ROYALT Y. WHEREAS IN THE PRESENT CASE THE GOOGLE INDIA HAS BEEN PROVIDED ACC ESS TO THE IPR AND GOOGLE INDIA HAS USED IPR AS TOOL OF THE TRADE FOR GENERATION OF INCOME WITHOUT WHICH, IT WOULD HAVE BEEN AN INFRING EMENT OF THE COPYRIGHT OWNED/RETAINED BY THE GOOGLE IRELAND (LIC ENSOR). SIMILARLY FOR HIGH-POWER COMMITTEE REPORT DATED 16/12/1999 AN D TAX TREATY DATED 1/2/2001, IT WAS SUBMITTED THAT PAYMENT MADE BY THE ADVERTISER DIRECTLY TO THE OWNER OF THE SEARCH ENGINE WOULD NO T AMOUNT TO ROYALTY. REBUTTALS AGAINST THE ARGUMENTS OF DR 31. LD AR IN REBUTTAL HAD SUBMITTED THAT THE BRA ND FEATURES ARE PREDOMINANTLY COMMERCIAL RIGHTS AND ARE INCIDENTAL/ CONSEQUENTIAL TO THE DISTRIBUTION ACTIVITY AND DOES NOT INVOLVE TRANSFER OF ANY SEPARATE RIGHT. IN LIGHT OF THE DEC ISIONS OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SHERATON IN TERNATIONAL INC(SUPRA) AND FORMULA ONE WORLD CHAMPIONSHIP LTD (SUPRA), THE PAYMENT CANNOT BE CHARACTERIZED AS ROYALTY. 32. FURTHER, LD AR SUBMITTED THAT NEITHER APPELLA NT NOR THE ADVERTISERS HAVE THE ACCESS TO THE SERVERS RUNNING THE SEARCH ENGINE. THE DISTRIBUTOR OR ADVERTISERS ARE NOT CONCERNED WI TH THE BACK END PAGE - 31 IT(TP)A.1511 TO 1516/BANG/2013 FUNCTIONING OF THE ADWORDS PROGRAM WHICH IS SOLELY CARRIED OUT BY GOOGLE IRELAND. FURTHER, LD AR SUBMITTED CONTENTI ON OF THE DR IS THAT THE PAYMENT IS BEING MADE FOR THE USE OF THE S EARCH ENGINE, THE USE OF SUCH SEARCH ENGINE IS BY THE END-USER AND NO T BY THE INDIAN ADVERTISER AND THEREFORE THE CONTENTION IS ALSO INC ORRECT. THE PERSON WHO USES THE SEARCH ENGINE TO VIEW ADS PROVI DED BY AN INDIAN ADVERTISER MAY NOT NECESSARILY BE BASED IN I NDIA. USE OF SOFTWARE EMBEDDED IN GOOGLE SEARCH SERVICE BY THE E ND USER IS SOLELY TO ENABLE THE END-USER TO USE AND ENJOY BENE FIT OF THE SERVICES AS PROVIDED BY GOOGLE, IN THE MANNER PERMI TTED BY THE TERMS. FURTHER, LD AR SUBMITTED THAT ADVERTISER IS NOT INTERESTED IN USE OF SEARCH SERVICE. OBJECTIVE OF THE ADVERTISER IS TO GET HIS ADVERTISEMENT PLACED ALONG WITH THE ORGANIC SEARCH RESULTS DISPLAYED BASIS THE SEARCH RESULTS. AD GETS DISPLAY ED ONCE THE SEARCH BY THE END USER IS OVER AND SEARCH RESULTS A RE DISPLAYED. 33. LD AR FURTHER SUBMITTED THAT THE REVENUE FA ILED TO APPRECIATE THAT THE FUNCTIONING OF THE APPELLANT UNDER THE ITE S SERVICE AGREEMENT IS SEPARATE FROM THAT OF THE DISTRIBUTION FUNCTION WHICH OUGHT TO BE TREATED DISTINCTLY. 34. LD AR SUBMITTED THAT BOTH THE REPORTS OF HIGH POWERED COMMITTEE AS WELL AS TECHNICAL ADVISORY GROUP HAVE CONCLUDED THAT THE PAYMENTS IN RELATION TO ADVERTISEMENT FEES ARE NOT IN THE NATURE OF 'ROYALTY'. ACCORDINGLY, WHEN THE PAYMENTS MADE DIRECTLY BY ADVERTISERS TO GOOGLE IRELAND CANNOT BE REGARDED AS ROYALTY, PAGE - 32 IT(TP)A.1511 TO 1516/BANG/2013 THE PAYMENTS MADE BY THE DISTRIBUTOR FOR THE SAME A D SPACE CANNOT BE CHARACTERISED AS ROYALTY. 35. LD AR SUBMITTED THAT THE MINIMUM LEVELS OF SE RVICE SPECIFIED IN EXHIBIT C CAST OBLIGATIONS ON GIL AS A WELL AS ON THE APPELLANT TO RENDER THE SERVICES. IN TERMS OF CLAUS E 2.6 OF THE RESELLER AGREEMENT, THE APPELLANT IS REQUIRED TO PR OVIDE AFTER- SALES SUPPORT. IN TERMS OF EXHIBIT C, THE ADVERTISE RS ARE TO CONTACT THE APPELLANT FOR SUPPORT AND THE TERMS IN THE EXHIBIT ONLY SPECIFY THE MINIMUM LEVELS OF SERVICE TO BE ADHERED TO BY THE A PPELLANT WHILST COMMUNICATING WITH THE CUSTOMERS. THE TERMS IN THE EXHIBIT CANNOT BE READ DE HORS THE MAIN AGREEMENT TO CONCLU DE THAT EXHIBIT C IS LINKED TO THE ITES AGREEMENT AND NEITHER DOES A READING OF THE EXHIBIT SUGGEST THAT, EVEN REMOTELY. WHAT IS EN VISAGED UNDER THE SAID EXHIBIT IS ONLY THAT THE APPELLANT RESPOND S TO ALL ROUTINE QUERIES OF CUSTOMERS WITHOUT GIL HAVING TO DO THE S AME. TYPICALLY, SALES AND BILLING RELATED QUESTIONS ARE TO BE RESPO NDED TO THE BY THE APPELLANT. IN CASE OF ADVERTISER ISSUES OR TECHNICA L ISSUES, GIL WOULD HAVE TO RESPOND TO THE CUSTOMER QUERIES. EVIDENTLY , NO RIGHT TO USE ANY IPS IS GRANTED TO THE APPELLANT. FURTHER LD AR SUBMITTED THAT THE RELIANCE ON CLAUSE 3 OF THE NDA BY LD DR IS ALSO OF NO AVAIL. CLAUSES CONTAINING PROTECTION OF CONFIDENTIAL INFORMATION A RE GENERIC TO MOST AGREEMENTS AND THIS CLAUSE FOR PROTECTION PER SE CANNOT ESTABLISH THAT THERE IS A USE OF RIGHT TO USE ANY I PS. THE CONFIDENTIALITY CLAUSE IS INCLUDED FOR THE PURPOSES OF PROTECTING PAGE - 33 IT(TP)A.1511 TO 1516/BANG/2013 INFORMATION WHICH MAY BE EXCHANGED BY EITHER PARTY TO THE AGREEMENT (NOT GOOGLE IRELAND ALONE) IN THE COURSE OF PERFORMING THE OBLIGATIONS UNDER THE RESELLER AGREEMENT. THIS CANNOT PER SE LEAD TO THE CONCLUSION THAT THERE IS A POSITIVE ACT ION OF TRANSFER OF RIGHT TO USE/ IMPARTING OF CONFIDENTIAL INFORMATION BY GIL TO THE APPELLANT. IN ANY EVENT, READ WITH CLAUSES 7 AND 8, THE INFORMATION DISCLOSED UNDER THE RESELLER AGREEMENT WOULD IF AT ALL BE USER DATA WHICH, AT BEST IS DISCLOSED TO THE APPELLANT, WITHO UT THERE BEING ANY RIGHT TO USE THE SAME FOR ANY COMMERCIAL EXPLOI TATION, AND WHICH, IS IN ANY CASE, NOT IN THE NATURE OF INTELLE CTUAL PROPERTY. DISCUSSIONS AND FINDINGS 36. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES AND PERUSED THE RECORD. WE SHALL BE COLLECTIVELY DECIDING ALL THE GROUNDS NO 1-11 TOGETHER AS ALL THE GROUNDS ARE INTERLINKED AND INT ERDEPENDENT. BEFORE WE ADJUDICATE THE ALL THESE ISSUES, IT IS IMPORTANT TO UNDERSTAND HOW THE GOOGLE ADWORD PROGRAM FUNCTIONS AND WORK. DURIN G THE COURSE OF ARGUMENT, WE HAVE DIRECTED THE PARTIES TO FILE DETA ILED SUBMISSIONS ON HOW THE GOOGLE ADWORD PROGRAM FUNCTIONS, TOOLS AND SPACE USED BY ASSESSEE AS WELL AS ADVERTISER FOR POSTING THE ADV ERTISEMENT ON THE GOOGLE SEARCH ENGINE OR DISPLAYING ON THE WEBSITE. 37. IN RESPONSE TO OUR POINTED QUERIES AND DIRECTIO NS THE ASSESSEE, HAD FILLED THE WRITTEN SUBMISSIONS AND IN WRITTEN S UBMISSION IN CHAPTER 2, THE ASSESSEE ADDRESSED TO WHAT IS GOOGLE PROGRAM . WE ARE PAGE - 34 IT(TP)A.1511 TO 1516/BANG/2013 REPRODUCING HEREIN BELOW ALL THESE SUBMISSIONS MADE BY THE LD. AR IN THIS REGARD AS UNDER: II. ABOUT ADWORDS PROGRAM 1. WHAT IS GOOGLE ADWORDS PROGRAM? GOOGLE ADWORDS PROGRAM IS A SELF-SERVE ONLINE ADV ERTISING SERVICE PROVIDED BY GOOGLE (REFERENCE HEREINAFTER T O GOOGLE WOULD INCLUDE GOOGLE INC / GOOGLE IRELAND AS THE CO NTEXT MAY REQUIRE) FOR BUSINESS WANTING TO DISPLAY ADS IN REL ATION TO THEIR WEBSITES ON GOOGLE PROPERTY OR THIRD PARTY PROPERTY (ADVERTISING SPACE). THE ADWORDS PROGRAM ENABLES ADVERTISER TO CREATE, CHANGE AND MONITOR THE PERFORMANCE OF SPONSORED LI NKS TO SET A BUDGET FOR ADVERTISING AND ONLY PAY WHEN PEOPLE CLICK THE ADS. THIS, THE ADVERTISER CAN DO BY PROVIDING THE TEXT OF THE ADVERTISEMENT AND BY PROVIDING/REGISTERING A SEARC H TERM OR PHRASE OR A KEYWORD WHICH IS RELEVANT TO THE ADVE RTISERS WEBSITE, SO THAT WHEN THE SAID TERM OR PHRASE IS SE ARCHED FOR BY ANY USER ON THE GOOGLE SEARCH ENGINE, THE ADVERTISE MENT (AD) OF THE ADVERTISER MAY ALSO GET DISPLAYED ON THE SEARCH RESULTS PAGE IN ADDITION TO THE ORGANIC SEARCH RESU LTS, THOUGH SEPARATELY IDENTIFIED AS SPONSORED LINKS OR ADS . A USER THUS GETS AN OPPORTUNITY TO MAKE AN INFORMED DECISION AS TO WHICH WEBSITE HE WANTS TO EXPLORE. BUSINESSES THAT USE ADWORDS CAN CREATE RELEVANT ADS USING KEYWORDS OR PHRASES MATCHING WITH THE TERMS OR PHRA SES (SEARCH QUERY) THAT PEOPLE WHO SEARCH THE WEB USING THE GO OGLE SEARCH ENGINE. MULTIPLE ADVERTISERS CAN PROVIDE/REGISTER T HE SAME KEYWORD AND GOOGLE DOES NOT SELL THESE KEYWORDS N OR DOES IT ALLOW ONLY ONE ADVERTISER TO EXCLUSIVELY USE A SPEC IFIC KEYWORD AND RESTRICT OTHERS. THESE KEYWORDS ARE MERELY TEXT UAL CHARACTERS OR STRINGS THAT ARE USED TO ALGORITHMICA LLY TRIGGER ADVERTISEMENTS THROUGH THE FRESH FLOWER DELIVERY AS ONE PAGE - 35 IT(TP)A.1511 TO 1516/BANG/2013 KEYWORD IN THE ADWORDS CAMPAIGN. WHEN SOME USER SEA RCHES GOOGLE USING THE SEARCH QUERY WITH PHRASE FRESH FL OWER DELIVERY OR A SIMILAR TERM, THE ADVERTISERS ADVER TISEMENT MIGHT APPEAR NEXT TO GOOGLE ORGANIC SEARCH RESULTS. THE MAIN COMPONENTS OF AD RANK ARE BIDS AND AD RELE VANCE, THE QUALITY OF THE ADVERTISEMENTS, KEYWORDS, AND WEBSIT E AS MEASURED BY WHAT IS REFERRED TO AS THE QUALITY SCOR E. IN THIS REGARD, THE QUALITY AND RELEVANCE OF THE KEYWORDS, VARIOUS PARAMETERS OF LANDING PAGES (SUCH AS LOADING SPEED, CONTENT RELEVANCE, POSITIONING OF RELEVANT INFORMATION, WEB SITE DESIGN, ETC.), AND THE ADVERTISEMENT ARE EVERY BIT AS IMP ORTANT TO THE ADVERTISEMENT 'S RANK AS THE AMOUNT THE ADVERTISER IS WILLING TO SPEND. THEREFORE, EVEN IF AN ADVERTISERS COMPETITO RS HAVE HIGHER BIDS, AN ADVERTISER CAN STILL WIN A HIGHER P OSITION AT A LOWER PRICE BY USING HIGHLY RELEVANT KEYWORDS AND ADVERTISEMENTS. THEREFORE, THE PRICE BID IS NOT THE ONLY DETERMINANT AS TO WHETHER AN ADVERTISEMENT APPEAR S AND WHERE AN ADVERTISEMENT APPEARS - THIS ENHANCES THE USER EXPERIENCE. 2. WHO PROVIDES THE ADVERTISEMENT SPACE TO ADVERTISE RS IN INDIA UNDER THE ADWORDS PROGRAM GOOGLE IRELAND LIMITED (GIL) MARKETS AND DISTRIBU TES THE GOOGLE GROUPS PRODUCTS AND SERVICES TO CUSTOMERS I N THE EUROPE, MIDDLE EAST AND AFRICA AND ASIA PACIFIC REG IONS. GOOGLE INDIA PRIVATE LIMITED (GIPL) IS APPOINTED BY GOOGLE IRELAND LIMITED (GIL) AS A NON-EXCLUSIVE AUTHORISED RESELLER OF ADVERTISING SPACE UNDER THE ADWORDS PROGRAM TO THE ADVERTISERS IN INDIA EFFECTIVE DECEMBER 2005. 3. WHAT ARE THE STEPS INVOLVED FOR AN ADVERTISER IN IN DIA TO SET UP ADWORDS ACCOUNT AND ADWORDISE ON GOOGLE? PAGE - 36 IT(TP)A.1511 TO 1516/BANG/2013 A. STEP 1 (EMAIL ACCOUNT & WEBSITE) IN ORDER TO SETUP AN ADWORDS ACCOUNT AND BEGIN ADVERTISING ON GOOGLE, THE ADVERTISER NEEDS AN E- MAIL ADDRESS AND A WEBSITE TO WHICH THE USER CAN BE DIRE CTED TO FROM THE GOOGLE SEARCH RESULTS PAGE THAT DISPLAYS T HE ADVERTISEMENT . (PLEASE REFER ANNEXURE PAGE 212 OF PAPER BOOK VOLUME. THIS STEP IS GENERIC TO ANY ADVERTISER IN THE WORLD WHO WISHES TO ADWORDISE THROUGH THE ADWORDS PROGRAM. TH E ADWORDS ACCOUNT IS SET-UP ON THE SERVERS OWNED/ HIR ED BY GOOGLE OUTSIDE INDIA. ACCORDINGLY, GOOGLE INDIA DOE S NOT HAVE ANY ROLE TO PLAY AT THIS STAGE OF THE ADWORDS ACCOUNT SET-UP PROCESS. THE ADVERTISER WOULD BE FIRST REQUI RED TO CREATE A WEBSITE HAVING DETAILS OF THEIR PRODUCTS / SERVICES. B. STEP 2 (SETTING UP OF ADWORDS ACCOUNT BASIS LOCATIO N, TIME ZONE AND CURRENCY) ADVERTISER WILL THEN BE REQUIRED TO SET UP ADWORDS ACCOUNT ('HTTPS://ADWORDS.GOOGLE.COM). ONCE THE EMAIL ADDRE SS IS PROVIDED, THE ADVERTISER IS REQUIRED TO SELECT HIS LOCATION AND TIME ZONE ALONG WITH THE CURRENCY THAT THE ADVE RTISER WISHES TO USE (PLEASE REFER PAGE 213 OF PAPER BOOK VOLUME. THIS PART OF THE ACCOUNT SET-UP PROCESS IS COMMON FOR ADVERTISERS ACROSS LOCATIONS AND NOT SPECIFIC TO IN DIA BASED CUSTOMERS. IT IS ONLY AFTER INDIA IS SELECTED AS TH E BILLING ADDRESS AND INDIAN RUPEE AS A BILLING CURRENCY IS S ELECTED THAT GOOGLE INDIA GETS INVOLVED. PAGE - 37 IT(TP)A.1511 TO 1516/BANG/2013 C. STEP 3 (SELECTION OF ADVERTISEMENT CAMPAIGN S ETTINGS) PURSUANT TO UPDATING THE ABOVE MENTIONED PREFERENC ES, THE ADVERTISER MOVES TO THE NEXT STEP WHERE DETAILS OF THE ADVERTISING CAMPAIGN WOULD NEED TO BE KEYED IN BY THE ADVERTISER. THE FOLLOWING INFORMATION IS SOUGHT FROM THE ADVER TISER TO CREATE AN ADVERTISEMENT CAMPAIGN LOCATIONS TO BE TARGETED IN THE ADVERTISEMENT CAMPAIGN LANGUAGE IN WHICH THE ADVERTISEMENT SHOULD BE PUBLISHED BIDDING AND BUDGET: THE ADVERTISER HAS AN OPTION TO SUBMIT A BID AMOUNT FOR A SPECIFIC KEYWORD THAT HE WISHES TO USE. THE ADVERTISER ALSO PROVIDES ITS BUDGET RATE/COST PER CLICK TO DISPLAY THE ADVERTISEMENT AND OFFER TO PAY TO GOOGLE WHEN THE SURFER/USER CLICK ON THE ADVERTISERS WEBSITE LINK. THE ADVERTISER CAN ALSO FIX THE MAXIMUM AMOUNT OF HIS BUDGET. THE ADVERTISER PAYS ONLY WHEN THE USER CLICKS ON THE ADVERTISEMENT AND VISITS THE ADVERTISERS WEBSITE FOR DETAILED INFORMATION ON PRODUCTS/SERVICES OR FOR PURCHASING SUCH PRODUCTS/SERVICES. THE ADVERTISER IS ALSO GIVEN AN OPTION TO CUSTOMIZE THE TARGET AUDIENCE BY SELECTING CERTAIN SPECIFIED AD EXTENSIONS WHICH ENABLE THE ADVERTISER TO POST ADDITIONAL INFORMATION NOT FORMING PART OF THE ADVERTISEMENT CONTENT, SUCH AS LOCATION INFORMATION, PHONE NUMBER, ETC. AD GROUP NAME: THE ADVERTISER IS REQUIRED TO IDENTIFY THE ADVERTISEMENT CAMPAIGN THROUGH AN AD GROUP NAME (TO BE KEYED IN BY THE ADVERTISER PAGE - 38 IT(TP)A.1511 TO 1516/BANG/2013 HIMSELF). THIS NAME WOULD ONLY BE USED TO IDENTIFY A SPECIFIC ADVERTISEMENT CAMPAIGN FORM OF ADVERTISEMENT : THE ADVERTISER IS REQUIRED TO SELECT WHETHER THE ADVERTISEMENT SHOU LD BE IN THE FORM OF TEXT, IMAGE, ETC. AND ACCORDINGLY , PROVIDE THE RELEVANT HEADLINE, DESCRIPTION AND DESTINATION URL KEYWORDS: SUBSEQUENTLY, THE ADVERTISER IS REQUIRED TO CHOOSE THE KEYWORDS BASIS WHICH THE RESPECTIVE ADVERTISEMENTS CAN BE DISPLAYED ON THE GOOGLE SEARCH RESULTS PAGE AS MENTIONED ABOVE, THE ABOVE INFORMATION IS SUBMITTED BY THE ADVERTISER DIRECTLY AND IS STORED ON THE SERVERS OUTSIDE INDIA. GOOGLE INDIA DOES NOT PLAY ANY ROLE IN THE UPLOADING OF THE ADVERTISEMENT ON THE SERVERS BELONGING TO GOOGLE IRELAND AND DOES NOT HAVE ANY ACCESS TO THESE SERVERS. D. STEP 4 (BILLING DETAILS) UNDER THIS SECTION, THE FOLLOWING PAYMENT METHODS WOULD NEED TO BE SELECTED BY THE ADVERTISER: WHETHER AUTOMATIC OR MANUAL PAYMENTS WHETHER THROUGH CREDIT CARD, NET BANKING OR CHEQUE THESE OPTIONS ARE ALSO REQUIRED TO BE SELECTED BY THE ADVERTISER ON THE GOOGLE WEBSITE, AS PER HIS DISCRETION AND WITHOUT ANY INTERFERENCE FROM GOOGLE INDIA PRIVATE LIMITED. PAGE - 39 IT(TP)A.1511 TO 1516/BANG/2013 E. STEP 5: ACCEPTANCE OF ADVERTISING PROGRAM TERMS THIS STEP REQUIRES THE ADVERTISER TO ACCEPT THE ADVERTISING PROGRAM TERMS FOR THE ADWORDS PROGRAM. THESE TERMS MAY BE ACCEPTED BY THE ADVERTISER BY SELECTING THE BOX YES, I AGREE TO THE ABOVE TERMS AND CONDITIONS. WHERE THE ADVERTISER SELECTS INDIAN RUPEE AS THE BILLING CURRENCY (BASIS THE COUNTRY SELECTED IN STEP 2) THE ADWORDS PROGRAM WILL AUTOMATICALLY DIRECT THE ADVERTISER TO THE ADVERTISING PROGRAM TERMS RELEVANT TO GOOGLE INDIA PRIVATE LIMITED. WHEN CONTRACT IS ENTERED INTO BY GOOGLE INDIA PRIVATE LIMITED, ADVERTISER IS BOUND BY ALL ADWORDS PROGRAM TERMS & CONDITIONS AND GOOGLE IRELAND LIMITED IS BOUND TO PLACE TH ADVERTISEMENT SUBJEC T TO AD REVIEW PROCESS, PURSUANT TO THE OBLIGATION CA ST ON GOOGLE IRELAND LIMITED UNDER THE AMENDED AND RESTATED GOOGLE ADWORDS PROGRAM DISTRIBUTION AGREEMENT DATED 12 DECEMBER 2005 (REFERRED TO AS DISTRIBUTION AGREEMENT). WHEN THE ADVERTISER ACCEPTS THE ADVERTISING PROGRAM TERMS, THE SAID TERMS BIND BOTH THE ADVERTISER AS WELL AS GOOGLE INDIA PRIVATE LIMITED INTO A CONTRACT. GOOGLE IRELA ND WOULD PROVIDE THE RELEVANT INFORMATION CONTAINED IN THE ADVERTISER ACCOUNT TO GOOGLE INDIA, AS SPECIFIE D IN CLAUSE 5.1 OF THE DISTRIBUTION AGREEMENT TO ENABLE GOOGLE INDIA TO COLLATE THE NECESSARY INFORMATION FOR ITS PURPOSE AND TO PREPARE AND SHAR E THE REQUISITE MONTHLY REPORTS THAT MAY NEED TO FURNISH UNDER CLAUSE 5.2 OF THE DISTRIBUTION AGREEMENT. PAGE - 40 IT(TP)A.1511 TO 1516/BANG/2013 4. HOW ARE ADS UPLOADED ON GOOGLE ADWORDS ACCOUNT? PROCESS TO UPLOAD ADS ON GOOGLE ADWORDS ACCOUNT IS AS UNDER: SIGN IN TO YOUR ADWORDS ACCOUNT AT HTTPS://ADWORDS . GOOGLE.COM CLICK THE CAMPAIGNS TAB, AND THEN CLICK THE NAME OF THE DISPLAY CAMPAIGN YOU WANT TO WORK ON. ON THE + AD MENU, CLICK IMAGE AD. IN THE 'CHOOSE HOW TO CREATE YOUR IMAGE AD' DIALOG, CLICK UPLOAD AN AD. 'UPLOAD IMAGE AD' FORM, CLICK SELECT AN AD GROUP, SEARCH FOR THE AD GROUP YOU WANT, AND THEN CLICK THAT AD GROUP TO ADD IT. DRAG IMAGES, FLASH FILES, OR HTML5 AD FILES INTO TH E GRAY BOX OR CLICK BROWSE FILES. ENTER A DISPLAY URL AND A LANDING PAGE. ENSURE THAT THE AD COMPLIES WITH ALL ADWORDS PROGRAM POLICIES PREVIEW YOUR UPLOADED AD. IF YOU WANT THE AD TO SHOW ON MOBILE DEVICES, SELEC T THE MOBILE CHECKBOX. CLICK SAVE. TO EDIT YOUR IMAGE AD, FIND YOUR AD ON THE ADS TA B AND CLICK THE PENCIL ICON NEXT TO THE AD THAT YOU WANT TO EDIT. CHANGE THE AD NAME, DISPLAY URL, OR LANDING PAGE, A ND THEN SELECT WHETHER YOU WANT THE AD TO SHOW ON MOBI LE DEVICES. CLICK SAVE. PAGE - 41 IT(TP)A.1511 TO 1516/BANG/2013 ALL THE AFORESAID STEPS ARE CARRIED OUT BY THE ADVE RTISER OR IF IT SO DESIRES IT COULD TAKE ASSISTANCE OF A GOOG LE CERTIFIED PARTNER TO ASSIST HIM IN THE PROCESS TO W HOM THE ADVERTISER PAYS A SEPARATE FEE PURSUANT TO AN INDEP ENDENT CONTRACT. 5. WHAT HAPPENS TO THE AD ONCE ITS UPLOADED ON THE GOOGLE ADWORDS ACCOUNT? AFTER ADVERTISEMENT IS CREATED OR EDITED BY THE A DVERTISER AND UPLOADED ON DATA CENTERS OUTSIDE INDIA, THE REV IEW PROCESS BEGINS AUTOMATICALLY BY GOOGLE IRELAND LIMI TED. ALL ASPECTS OF THE AD ARE REVIEWED, INCLUDING THE H EADLINE, DESCRIPTION, KEYWORDS, AND WEBSITE. THESE ASPECTS A RE REVIEWED ACCORDING THE ADWORDS ADVERTISING POLICIES . MOST ADS ARE REVIEWED WITHIN ONE BUSINESS DAY, AND SOME ADS ARE ELIGIBLE TO RUN WHILE IN REVIEW. IF ADVERTISER AD HAS ANY ISSUES, IT WILL STOP RUNNI NG. TO HELP GET AD RUNNING AGAIN, ADVERTISER IS NOTIFIED OF THE POLICY BY GOOGLE IRELAND LIMITED AND INFORMED WHAT THE ADVERT ISER CAN NEXT DO TO GET IT RUNNING AGAIN. ONCE AN ADVERTISER REGISTERS FOR ADWORDS THROUGH TH E ONLINE PROCESS AND PLACES HIS ADVERTISEMENT FOR DISPLAY, THE ADVERTISEMENT (I.E. THE DATA) IS REVIEWED THROUGH A N AUTOMATED SYSTEM. AN ADVERTISEMENT WHICH IS NOT P ROCESSED THROUGH THE AUTOMATED SYSTEM IS SENT TO SERVICE PRO VIDERS IN DIFFERENT JURISDICTIONS (ITES TEAM) FOR REVIEW/ CON FORMITY WITH THE GOOGLE EDITORIAL GUIDELINES. THE PURPOSE O F THE ITES OUTSOURCING SERVICE ENGAGEMENT IS TO REVIEW TH E ADS SPECIFIED FOR MANUAL REVIEW (ORIGINATING FROM VARIO US COUNTRIES) FOR CONFORMANCE WITH GOOGLES EDITORIAL POLICY/GUIDELINES. THESE ADS ARE REVIEWED IN ACCORDANCE WITH GOOGLE PO LICIES/ GUIDELINES. IT IS SUBMITTED THAT APPX 94% OF THE AD S ARE AUTOMATICALLY REVIEWED BY THE AUTOMATED SYSTEM OUTS IDE OF PAGE - 42 IT(TP)A.1511 TO 1516/BANG/2013 INDIA. APPX 6% OF THE ADS COME FOR MANUAL REVIEW PERFORMED. THE ROLE SIMPLY INVOLVES REVIEWING THE A DS SENT FOR MANUAL REVIEW AND SPECIFYING WHETHER ADS UPLOAD ED BY THE ADVERTISER IS IN ACCORDANCE WITH THE GOOGLE POL ICIES/ GUIDELINES. THE AD REVIEW OUTSOURCING FUNCTION IS C ARRIED OUT FOR ALL GLOBAL CUSTOMERS INCLUDING INDIA. AD REVIEW TEAMS ARE BASED IN VARIOUS JURISDICTIONS LIKE INDIA, DUBLIN, CHINA, JAPAN, US, KOREA ETC. AD REVIEW TEAM CONSISTS OF GO OGLE EMPLOYEES AND THIRD PARTY VENDOR EMPLOYEES WHO ARE GRADUATES FROM VARIOUS COLLEGES. GOOGLE INDIA PERFORMS OUTSOURCED AD REVIEW SERVICES UNDER AN ITES AGREEMENT WITH GIL FOR WHICH GOOGLE INDIA I S SEPARATELY COMPENSATED BY GIL. THESE SERVICES MAINL Y INVOLVE IT-ENABLED DATA PROCESSING WORK. THE SAID D ATA I.E. ADS IS PLACED BY THE ADVERTISERS (ORIGINATING FROM VARIOUS COUNTRIES) AND ROUTED TO GOOGLE INDIA THROUGH A WOR KFLOW BASED ON LANGUAGE AND TIME ZONE FROM GIL. PROCESS FLOW CHART IN RELATION TO AD REVIEW IS ENCL OSED AS EXHIBIT 1. 6. HOW ARE ADS PLACED ON GOOGLE WEBSITE ADS ARE TRANSMITTED THROUGH INTERNET FROM ADVERTISE R TO DATA CENTERS OUTSIDE INDIA. WHERE A USER ENTERS A QUERY ON SEARCH ENGINE, SEARCH ENGINE SHOWS VARIOUS SEARCH RESULTS IN RESPONSE TO THE USERS SEARCH QUERY. GOOGLE ALGORIT HM BASED ON SYSTEM STORED ON DATA CENTERS OUTSIDE INDIA ALON GWITH RANKS AND DISPLAYS SEARCH RESULTS, AND SEPARATE ALG ORITHM THAT ARE SIMILARLY BASED ON SYSTEMS OUTSIDE INDIA RANKS AND DISPLAYS PUTS IN THE MOST RELEVANT ADS BASED ON USE R QUERY. ADS ARE PLACED ON GOOGLE SEARCH WEBSITE BASIS THE A DWORDS AUCTION PROCESS DETAILED HEREINABOVE. PAGE - 43 IT(TP)A.1511 TO 1516/BANG/2013 7. WHAT ARE GOOGLE DATA CENTERS & ALGORITHMS AND HO W ARE THEY USED FOR ADWORDS PROGRAM? GOOGLE PROVIDES ITS PRODUCTS AND SERVICES USING ITS PROPRIETARY SOFTWARE (ALGORITHM) AND HARDWARE INFRASTRUCTURE HO USED IN DATA CENTERS OUTSIDE INDIA. THESE DATA CENTERS AND ALGORITHM FORMS CORE OF GOOGLE PRODUCTS/SERVICES. GOOGLE INDI A HAS NO ROLE WHATSOEVER IN OWNING AND OPERATING THE DATA CE NTERS AND ALGORITHM. GOOGLE'S INFRASTRUCTURE SIMPLIFIES STORAGE AND PROC ESSING OF LARGE AMOUNTS OF DATA, EASES DEPLOYMENT OF GLOBAL P RODUCTS AND SERVICES, AND AUTOMATES MUCH OF THE ADMINISTRAT ION OF LARGE-SCALE CLUSTERS OF COMPUTERS. THIS INFRASTRUCTURE ALSO SHORTENS THE PRODUCT DEVEL OPMENT CYCLE AND LETS GOOGLE PURSUE R&D INITIATIVES MORE C OST- EFFECTIVELY. ALTHOUGH MOST OF THIS INFRASTRUCTURE IS NOT DIRECTL Y VISIBLE TO USERS, IT IS A PART OF PROVIDING A HIGH-QUALITY USER EXPERIENCE AND ENABLING SIGNIFICANT IMPROVEMENTS IN THE RELEVANCE OF THE SEARCH AND ADVERTISING RESULTS ALGORITHMS ONE OF THE KEY DRIVERS OF GOOGLES SUCCESS IS THE TECHNOLOGY BEHIND ITS ALGORITHM: THE PAGERANK TECHN OLOGY. HISTORICALLY, SEARCH ENGINES RELIED HEAVILY ON HOW MANY TIMES A WORD APPEARED ON A WEB PAGE TO DETERMINE RELEVANCE OF THAT PAGE TO A USERS QUERY. GOOGLES SEARCHES, HOWEVER, USED THE PAGERANK ALGORITHM TO EXAMINE THE ENTIRE LINK STRUCTURE OF THE WEB AND DETERMINE WHIC H PAGES ARE MOST IMPORTANT, CREATING GREATER ACCURACY AND RELEVANCE. PAGE - 44 IT(TP)A.1511 TO 1516/BANG/2013 8. HOW CAN ADVERTISER MANAGE ITS ADWORDS ACCOUNT? ADVERTISER NEEDS TO MANAGE ADWORDS ACCOUNT ON ITS O WN OR IT CAN SEEK SERVICES OF GOOGLE CERTIFIED PARTNERS/ MARKETING AGENCIES. GOOGLE CERTIFIED PARTNERS/ MARKETING AGENCIES HELP WITH A RANGE OF SERVICES, INCLUDING MANAGING ADVERTISERS ADWORDS ACCOUNT OR DEVELOPING WEBSITE, HELP SAVE TI ME AND MAXIMIZE RETURN ON INVESTMENT. GOOGLE CERTIFIED PARTNERS ARE AGENCIES, MARKETING PROFESSIONALS, AND ONLINE EXPERTS WHO HAVE BEEN CERTIFIED BY GOOGLE TO MANAGE ADWORDS ACCOUNTS. COMPANIES WHO QUALIFY FOR PARTNER STATUS EARN THE GOOGLE PARTNER OR PREMIER GOOGLE PA RTNER BADGE. THE BADGE SHOWS THAT A COMPANY HAS DEMONSTRA TED ADWORDS SKILL AND EXPERTISE, MET ADWORDS SPEND REQUIREMENTS, DELIVERED AGENCY AND CLIENT REVENUE G ROWTH, AND SUSTAINED AND GROWN THEIR CLIENT BASE. 38. BESIDE FILLING THESE WRITTEN SUBMISSIONS, NO OT HER LITERATURE OR BOOKS OR DOCUMENTS WERE FILED BY THE ASSESSEE OR BY THE REVENUE FOR THE BENEFIT OF THE BENCH SO THAT THE BENCH CAN APPR ECIATE THE WORKING OF GOOGLE ADWORD AND GOOGLE ANALYTICS, AS THE PARTI ES HAVE FAILED TO BRING ANY TANGIBLE MATERIAL EXCEPT IN THE FORM OF W RITTEN NOTE MENTIONED HEREIN ABOVE, THE BENCH, HAD GONE THROUGH THE BOOKS AVAILABLE IN PUBLIC DOMAIN ON GOOGLE ADWORD AND GOO GLE ANALYTICS AND ALSO GONE THROUGH THE WEBSITE OF THE GOOGLE AND THE ADWORD LINKS THEREIN. ON THE BASIS OF THE ABOVE, OUR UNDERSTANDI NG OF HOW THE GOOGLE ADWORD FUNCTIONS IS AS UNDER: I. THE GOOGLE ADWORD GIVES AN OPPORTUNITY TO THE ADVER TISER TO REACH ITS TARGET AUDIENCE WITH THE ADVERTISING M ESSAGES. THE TEXT BASED ADS ARE DISPLAYED ON GOOGLE SEARCH R ESULTS PAGE - 45 IT(TP)A.1511 TO 1516/BANG/2013 HOWEVER THE GOOGLE ADWORDS CAN ALSO BE USED TO MESS AGE OUT IN OTHER FORMS INCLUDING IMAGE, AUDIO AND VIDEO S. ANOTHER WAY OF ADVERTISEMENT IS DISPLAYING THE ADVERTISEMENT AS PEOPLE BROWSE AND ENGAGED WITH T HE CONTENT ONLINE. II. THE ONLINE ADVERTISING IS DIFFERENT FROM THE TRADI TIONAL ADVERTISING LIKE ADVERTISEMENT IN MAGAZINE, NEWS PAPER AND TELEVISION AS THE ONLINE ADVERTISING IS MEASUR ABLE ON COST PER CLICK BASIS (CPC) AND ALSO GIVES THE ADVAN TAGE TO THE ADVERTISER TO TARGET THE PARTICULAR CLASS INTO AGE, SEX, LANGUAGE, RELIGION, REGION ETC,. III. THE ONLINE ADVERTISING (ADWORDS) IS A PATENT TOOL U SED BY THE ADVERTISER IN CONJECTURE WITH THE VARIOUS SOPHI STICATED TOOLS AND IPRS OF GOOGLE. GOOGLE GIVES THE PLATFOR M, TECHNIQUES, DATA BASED, THE IPR, I.P. ADDRESS AND A LSO SUGGEST POTENTIAL USER/CLIENT OF THE ADVERTISER. IV. THE SEARCH ADVERTISING WITH THE HELP OF SEARCH ENGI NE, ALLOWS THE ADVERTISER TO TARGET THE PEOPLE AS THEY SEARCH FOR KEY WORDS. THIS TECHNIQUE IS BEING USED IN THE SEAR CH ENGINE, ENABLE THE ADVERTISEMENT POP UP IF THE KEY WORDS ARE SEARCHED BY THE PEOPLE . ADVERTISEMENT WOULD BE SHOWN TO THE TARGET CONSUMER ADVERTISEMENT WITH T HE HELP OF VARIOUS TOOLS, WHICH INCLUDE SHOWING OF ADVERTISEMENT WITH KEYWORDS, PHRASE, AND BROAD WORD S WITH GENERIC OR SAME MEANING. V. THE GOOGLE SEARCH ENGINE OR SEARCH BASED CAMPAIGN G IVES HIGH CONVERSION RATE AND BETTER RETURN OF INVESTMEN T THEN DISPLAY OF ADVERTISEMENT ON TELEVISION RATE, NEWS PAPER AND MAGAZINE. 39. AS ONE CAN EXPERIENCE WHENEVER HE/SHE IS SEARCH ING ON A SEARCH ENGINE THE HOTELS IN BANGALORE THEN VARIOUS ADVERTISEMENT WOULD PAGE - 46 IT(TP)A.1511 TO 1516/BANG/2013 DISPLAY IN THE SEARCH RESULTS. IN THIS PROCESS OF D ISPLAY OF ADVERTISEMENT SEARCH IS FOCUSED ON KEY WORDS THAT P EOPLE MAY BE ENTERING INTO SEARCH ENGINE. THUS FOR DISPLAYING A DVERTISEMENT, THE ALGORITHM THE PAGERANK TECHNOLOGY IS USED IN ADW ORDS PROGRAM TO TARGET CONTENT, THINGS ON DISPLAY SIDES, BASED ON BEHAVIORAL TARGETING OF SERVERS ALONG WITH WEBSITE SURFERS . ANOTHER MOD E OF ADVERTISEMENT BY THE GOOGLE ADWORD PROGRAM IS A SOCIAL ADVERTISIN G PROGRAM WHERE THE ADVERTISEMENTS POP UP AT FACE BOOK, TWITTER AND OTHER SOCIAL MEDIA WITH THE HELP OF KEYWORDS OR USER PROFILE. IN THE CASE OF THE SOCIAL ADVERTISEMENT, THE ADVERTISEMENT CAMPAIGN IS TARGETED BASED ON THE GEOGRAPHY, CATEGORY OF PEOPLE, AREA OF INTER EST ETC. 40. THE GOOGLE ADWORD HAS VARIOUS BENEFITS NAMELY I T SHOWS (A) RELEVANT ADS TO THE PEOPLE (B) TARGET TO THE SELECT AUDIENCE. (C) IT CAUSES MINIMUM ADVERTISING EXPENSES AND (D) IT IS ONLY PA YABLE WHEN PEOPLE ARE ENGAGED. IT GIVES THE ACCESS TO THE ADVERTISER THE TOOLS OF THE ADWORD PROGRAM WHICH CAN BE ACCESSED THROUGH THE GATEWAY OF GOOGLE INDIA / APPELLANT. THROUGH THE USE OF PATENT ED TECHNOLOGY WITH THE HELP OF APPELLANT GATE WAY, ADWORD PLATFORM GIV ES THE ADVERTISER TO CHOOSE THE PREFERRED TIME, SEASON OF THE YEAR WH EN THE ADS ARE TO BE SHOWN.. IN FACT AFTER ADVERTISER ACCEPT THE TERMS, THEREAFTER ASSESSEE GIVES THE ADVERTISER ACCESSES TO THE VARIOUS TOOLS OF ADWARDS PROGRAM. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS HAD ACCEPTE D THIS IN THE FOLLOWING MANNER : PAGE - 47 IT(TP)A.1511 TO 1516/BANG/2013 WHEN CONTRACT IS ENTERED INTO BY GOOGLE INDIA PRIVA TE LIMITED, ADVERTISER IS BOUND BY ALL ADWORDS PROGRAM TERMS & CONDITIONS AND GOOGLE IRELAND LIMITED IS BOUND TO PLACE THE ADVERTISEMENT SUBJECT TO AD REVIEW PROCESS, P URSUANT TO THE OBLIGATION CAST ON GOOGLE IRELAND LIMITED UNDER THE AMENDED AND RESTATED GOOGLE ADWORDS PROGRAM DISTRIBUTION AGREEMENT DATED 12 DECEMBER 2005 (REFE RRED TO AS DISTRIBUTION AGREEMENT). WHEN THE ADVERTISE R ACCEPTS THE ADVERTISING PROGRAM TERMS, THE SAID TER MS BIND BOTH THE ADVERTISER AS WELL AS GOOGLE INDIA PRIVATE LIMITED INTO A CONTRACT. . 41. THE TIME ZONE AND DISPLAY TIME OF ADVERTISEMENT IS IDENTIFIED AND ALLOCATED BY APPELLANT TO THE ADVERTISER WITH THE HELP OF THE ASSISTANCE OF THE GOOGLE ADWORD PROGRAM. ADWORDS PR OGRAM IS MORE FOCUSED AND TARGETED IN ADVERTISEMENT CAMPAIGN WHI CH RESULTS INTO MORE ATTENTION, ENGAGEMENT, DELIVERY AND CONVERSION . WHICH IS ONLY POSSIBLE ON THE GOOGLE NETWORK WITH THE ACCESS OF TOOLS OF SEARCH ENGINE AND GOOGLE ANALYTICS. 42. APPELLANT / GOOGLE IS HAVING THE ACCESS TO THE I.P. ADDRESS OF THE DESKTOP OR LAPTOP OR I.P. ADDRESS OF THE TABLET , PHOTOGRAPHS , TIME SPENT ON A WEB SITE, EATING HABITS WEARING PREFEREN CES ETC. WITH THE HELP OF I.P. ADDRESS, GOOGLE SEARCH ENGINE IS HAVIN G THE ACCESS TO VARIOUS INFORMATION AND DATA PERTAINING TO THE USER OF THE WEBSITE IN THE FORM OF NAME, SEX, CITY, STATE, COUNTRY, PHONE NUMBER, RELIGION ETC,. BESIDES THE ABOVE BASIC INFORMATION, THE GOOG LE IS ALSO HAVING THE ACCESS OF THE HISTORY OF THE USERS AS WELL AS T O THE BEHAVIOR OF THE PERSONS SEARCHING GOOGLE SEARCH ENGINE. PAGE - 48 IT(TP)A.1511 TO 1516/BANG/2013 43. BASED ON VARIOUS INPUTS MENTIONED ABOVE AND CON TENTS OF MORE THAN TWO MILLION WEBSITES THE APPELLANT / GOOGLE WA S ABLE TO PROVIDE THE EFFECTIVE FOCUSED AD CAMPAIGN TO THE ADVERTISER S. THE ADWORD PROGRAMS AND TOOLS THEREIN GIVE THE ADVERTISER TO P ICK UP THE KEY WORDS, PHRASES WHICH ARE SIMILAR IN NATURE AND GERM ANE, WHICH ARE IN A DIGITALISED TABULATED FORM / GROUPED TOGETHER. T HE ADVERTISER IS HAVING THE ACCESS TO THIS GOOGLE ANALYTICS PROGRAMM E (PATENTED AND SPECIALIZED SOFTWARE) THROUGH THE APPELLANT. WHENEV ER ONE PARTICULAR KEY WORD IS SEARCHED, THE TARGETED CONSUMERS WILL B E SHOWN THE AD AND BY CLICKING ON THE AD, THE CONSUMERS WILL BE LA NDED ON A WEB PAGE. THE SELECTION AND THE DISPLAY OF THE KEY WORD , PLAY A PIVOTAL ROLE IN THE ADVERTISING CAMPAIGN AND FOR THE PURPOS E, APPELLANT / GOOGLE HAS PROVIDED THE OPTIMIZATION AND TECHNIQUE TO THE ADVERTISER. GOOGLE (APPELLANT AS SERVICE PROVIDER UNDER THE AGR EEMENT) USES ITS EXPERTISE AND THE INFORMATION WITHIN ITS DOMAIN AND CONTROL, TO SUGGEST THE KEY WORDS BASED ON THE RECENT MARKETING MATERIA L AND NEED OF THE ADVERTISER. THE APPELLANT ALSO SUGGESTS PERIODICAL REVIEW OF THE WEBSITE HOME PAGE, PRODUCT AND SERVICES WHICH CAN B E BUNDLED TOGETHER. THE KEY WORD PLANNER IS A PART OF THE APP ELLANT / GOOGLE TECHNOLOGY TOOL. IT ALSO SUGGESTS THE TRAFFIC FOREC AST OF THE LIST OF KEY WORDS, MULTIPLE KEY WORD PLACED TO GET NEW KEY WORD IDEAS. THUS, THE KEY WORDS OR PLANNER WHICH WILL DISPLAY A LIST OF ADDITIONAL KEY WORD SUGGESTION. BASED ON INITIAL KEY WORDS, THE ADVERTI SER ENTERS AND THE TOOLS SHOWS VARIOUS KEY WORD SUGGESTIONS AUTOMATICA LLY GROUPED INTO DIFFERENT AD GROUPS. THIS IS ONLY POSSIBLE AS APPE LLANT PERMITS THE USE PAGE - 49 IT(TP)A.1511 TO 1516/BANG/2013 OF INFORMATION, DATA AND KEY PLANNER TO THE ADVERTI SERS WHICH IS PATENT AND PROTECTED SOFTWARE OF THE GOOGLE. THE KEY WORD PLANNER ALSO SUGGESTS THE SUITABILITY OF THE KEY WORDS WHICH ARE USEFUL IN THE PARTICULAR MONTH OF THE YEAR. THE ADVERTISER IS AB LE TO PLAN ITS CAMPAIGN FOR OPTIMIZATION OR FOR THE PURPOSE OF GET TING MORE IMPRESSION AND CONVERSION BASED ON KEYWORD PLANNER. BASED ON THIS IMPRESSION AND FORECAST, THE ADVERTISER IS ABLE TO BID ON THE KEY WORDS. 44. THE DISPLAY OF THE ADVERTISEMENT BASED ON THE KEY WORDS, IS DEPENDENT UPON THE AUCTION PRICE PAID BY THE ADVERT ISER. THE KEY WORD BID AT HIGHEST RATE BY THE ADVERTISER WOULD BE SHOW N AT THE TOP OF THE SEARCH RESULTS AND THEREFORE, IS LIKELY TO FETCH MO RE VISIBILITY AND ATTENTION.. WITH THE HELP OF TOOLS OF GOOGLE, THE A DVERTISER AS WELL AS THE APPELLANT HAVE AN ACCESS TO THE IMPACT OF CHANG E OF KEY WORDS ON THE LIKELY IMPRESSIONS OF THE ADVERTISEMENT I.E. HOW THE CHANGE IN KEY WORDS WOULD AFFECT THE TRAFFICKING OF THE IMPRE SSION OR THE VISITOR TO WEBSITE OF THE ADVERTISER. 45. WITH THE HELP OF KEY WORD MATCHING, VARIOUS APP ROACHES ARE BEING ADOPTED BY THE GOOGLE ADWORD PROGRAM I.E. BRO AD MATCH, PHRASE MATCH AND EXACT MATCH. THE EXACT MATCH FOR E XAMPLE ALLOWS THE ADVERTISER TO FOCUS ON THE OPTIMIZATION PHRASE ON THE INDIVIDUAL KEY WORDS AND IT YIELD THE BEST RESULT POSSIBLE. WH EREAS THE PHRASE PAGE - 50 IT(TP)A.1511 TO 1516/BANG/2013 MATCH IS MORE PROCESSING THAN THE BROAD MATCH AND T HE BROAD MATCH PROVIDES THE GREATEST POSSIBILITY OF COVERAGE OF TH E ADVERTISEMENT. 46. THE APPELLANT FACILITATE THE ADVERTISERS TO STA RT THE CAMPAIGN OF ADVERTISING INITIALLY WITH THE HELP BROAD MATCH THE REAFTER WITH PHRASE MATCH AND THEREAFTER WITH EXACT MATCH. NOW WITH THE HELP OF THE KEY WORD MANAGEMENT, THE GOOGLE ADWORD PROGRAM TAKES CA RE OF THE MISS SPELLING, SINGULAR PLURAL, ABBREVIATION, ACRON YMS (SHORT WORD) STEMMING. FOR EXAMPLE, IF THE ADVERTISEMENT SHOWS THE FORMAL SHOES, THEN THE KEY WORDS ARE FORMAL PLUS SHOES. IF IT IS BROAD MATCH KEY WORDS THEN THE ADVERTISEMENT WILL SHOW FORMAL SHOE, SPORT SHOE, BLACK DRESS SHOE, PARTY SHOES ETC. HOWEVER IF THE ADVERTISER HAD ONLY OPTED FOR EXACT WORD MATCH, THEN SEARCH RESULT WOULD ONLY SHOW A FORMAL SHOE. 47. APPELLANT HELPS THE ADVERTISER WITH THE HELP O F TOOLS OF ADWARDS PROGRAM TO INCLUDE OR DELETE VARIOUS VARIATION OF THE KEY WORDS IN THE REALM OF ADVERTISEMENT CAMPAIGN AND SIMILARLY THE ADVERTISER MAY WITH THE HELP OF GOOGLE TOOL CAN AVOID THE UNNECESS ARY TRAFFIC ON ITS WEBSITE. FOR EXAMPLE, IF AN ADVERTISER DOES NOT WA NT THE VISIT OF THE A SURFER WHO IS SEARCHING THE SERVICE APARTMENT ON RE NT BASIS AND ONLY WANTS THAT THE PERSON SURFING AND THE PERSON WHO IS SURFING TO BUY THE APARTMENT, THEN THE APPELLANT CAN HELP HIM BY PUTTI NG NEGATIVE WORDS OF RENT IN THE KEY-WORD SEARCH. THEREFORE THE ONLY PERSON WHO IS SEARCHING FOR SERVICE APARTMENT WOULD BE LANDING ON TO THE PAGE - 51 IT(TP)A.1511 TO 1516/BANG/2013 ADVERTISERS WEB SITE AND THE PERSON WHO IS SEARCHI NG ON RENTED SERVICE APARTMENT WOULD NOT BE VISITING THE WEB SIT E OF ADVERTISER I.E ADVERTISEMENT WOULD NOT BE DISPLAYED TO HIM IN TH E SEARCHED RESULTS . THUS WITH THE HELP OF THIS TECHNIQUE OF NOT SHOWIN G THE PARTICULAR KEY WORD THERE WOULD BE EFFECTIVE IMPROVEMENT IN CTR (C LICK THROUGH RATE) I.E. THE WEBSITE WOULD BE SAVED FROM UNNECESS ARY VISIT OF THE NON-CONVERTIBLE OR NON-INTERESTED VISITORS. SIMILA RLY THE SAME MODUS OPERANDI CAN BE USED FOR NEGATIVE PHRASE AND NEGATIVE EXACT MATCH. 48. LIKEWISE IF THE ADVERTISER IS SELLING IN LEATHE R COVER FOR IPHONE THEN THE ADVERTISER MAY NOT LIKE THAT THE PERSON WH O IS LOOKING FOR LEATHER COVER FOR ANOTHER BRAND MAY VISIT THE WEBSI TE OF THE ADVERTISER. THEREFORE, THE NEGATIVE WORDS CAN BE USED TO AVOID TO IMPROVE THE CTR, WITH THE HELP OF THESE TOOLS. BY USING THESE T OOLS, APPELLANT HAD BEEN GIVING VARIOUS SUGGESTIONS TO THE ADVERTISER T O INCLUDE VARIOUS KEY WORDS. 49. THE GOOGLE ADWORD PROGRAM IS ALSO HAVING GOOGLE ANALYTICS WHICH IS CONNECTED WITH THE GOOGLE ADWORD PROGRAMME AND WHICH IS A POTENTIAL PATENTED TOOL TO TARGET THE KEY WORDS A ND THE NEGATIVE KEY WORDS. THIS IS THE USP OF THE GOOGLE ADWORD PROGRAM , WHICH IS MAINTAINING THOUSANDS OF DIFFERENT KEY WORDS USED B Y THE PEOPLE TO SEARCH THE WEBSITE AND BASED ON THIS USER BEHAVIOR, THE GOOGLE ANALYTICS SUGGESTS THE APPROPRIATE KEY WORDS TO BE USED BY THE ADVERTISER FOR ENCOURAGING THE TRAFFIC ON THE WEBSI TE. SIMILARLY THE GOOGLE ANALYTICS ALSO USES THE SAME DATA TO FILTER OUT THE NEGATIVE KEY PAGE - 52 IT(TP)A.1511 TO 1516/BANG/2013 WORD ON THE BASIS OF WHICH AN UNATTENDED OR UNWARRA NTED PERSONS HAVE LANDED ON THE WEBSITE OF THE ADVERTISER. APPEL LANT IS USING ALL THESE TOOLS IN CONJECTURES WITH ADVERTISERS AT THE TIME OF GRANTING THE BACK HAND SERVICES TO THE ADVERTISERS, AS THE APPEL LANT IS HAVING ACCESS TO ALL THESE DATA, INFORMATION ETC. 50. APPELLANT SUGGESTS THE VARIOUS STRATEGIES NAMEL Y ADVERTISEMENT CAMPAIGN TO CREATE AWARENESS ABOUT THE PRODUCT AND SERVICES. THERE ARE DIFFERENT ADVERTISEMENT CAMPAIGNS FOR ENGAGEMENT, C ONVERSION AND RETENTION. IN ALL THE ADVERTISEMENT CAMPAIGNS I.E. FOR AWARENESS, ENGAGEMENT, CONVERSION AND RETENTION, DIFFERENT STR ATEGIES TOOLS AND SUGGESTIONS ARE SUGGESTED BY APPELLANT AND THOSE S TRATEGIES ARE FOCUSED DEPENDING UPON REQUIREMENT OF THE ADVERTISE R. FOR EXAMPLE, IF A NEW PRODUCT IS TO BE LAUNCHED, THEN THE ADVERTISE R WOULD LIKE TO GO FOR AWARENESS PROGRAM TO DISPLAY THE FEATURES OF ITS NE W UPCOMING PRODUCTS. HOWEVER IF IT IS FOR ENGAGEMENT, THEN A DIFFERENT STRATEGY AND DIFFERENT ADVERTISEMENT CONTENT IS PROVIDED, IF ITS FOR CONVERSION, THEN DIFFERENT STRATEGIES ARE PROVIDED AND IF IT IS FOR RETENTION OF THE OLD CUSTOMER, THEN REFER A FRIEND SUGGEST A FRIEND ETC. , ARE BEING SUGGESTED. 51. FOR ALL THESE STRATEGIES, THE GOOGLE IS HAVING A TARGETED GEOGRAPHY WISE, REGION WISE, GENER WISE, CLASS WISE DATA BASE TOOLS. WITH THE USE OF THESE TOOLS THERE WILL BE AN INCREA SE OF THE CTR (CLICK THROUGH RATE). FOR THAT PURPOSES THE EXPERTISE AND THE DATA BASE OF THE GOOGLE IS ESSENTIAL. WITH THE HELP OF THESE STRATE GIES, THE TARGETS CAN PAGE - 53 IT(TP)A.1511 TO 1516/BANG/2013 BE FIXED BY THE ADVERTISER WITH THE HELP OF GOOGLE ADWORD AND THE TARGET CAN BE FIXED LIKE WHERE IT IS TO BE DISPLAYE D (TABLET, DESKTOP, MOBILE, IPAD ETC.,) SEARCH NETWORK COUNTRY, STATE, CITY, POSTAL CODE AD SCHEDULE OF THE DAY, HOUR AND THE DAY OF DISPLAY. . LIKE FOR EXAMPLE, IF A DOCTOR IS FREE DURING THE NOON TIME OF EVERY F RIDAY, THEN THE AD COMPANY CAN BE STRATEGIZED FOR SHOWING HIS ABILITY DURING THE MORNING / NOON TIME OF FRIDAY OR ON THE EVENING TIME OF THU RSDAY. ASSESSEE WITH THE HELP OF GOOGLE ANALYTICS GIVES THE ACCURAT E IMPRESSION OF PERSONS VISITING THE ADVERTISEMENT AND ALSO PROVIDE HOW MANY ARE CONVERTED. THE GOOGLE ANALYTICS OPTIMIZE THE IMPRES SION, BASED ON THE USER BEHAVIOR AND THIS NEEDS TO BE A MAJOR CONV ERSATION AND CAMPAIGN, WHICH RESULTS INTO RETURN FOR INVESTMEN T. THERE ARE VARIOUS OTHER FEATURES OF THE ADWORD PROGRAM WHICH SHOWS TH AT THE PROGRAM IS HAVING EMBEDDED TOOLS TO DISPLAY THE ADVERTISEME NT OF THE ADVERTISER TO THE TARGETED CONSUMERS. 52. ON THE BASIS OF ABOVE, IN OUR VIEW THE AGREEMEN T BETWEEN THE ASSESSEE AND THE GOOGLE IRELAND WAS NOT IN THE NATU RE OF PROVIDING THE SPACE FOR ADVERTISEMENT AND DISPLAY THE ADVERTISEME NT TO THE CONSUMERS. AS PER OUR UNDERSTANDING IF THE AGREEMEN T WAS MERELY FOR SALE AND MARKETING FOR PROVIDING THE SPACE FOR ADVE RTISEMENT, THEN IN THAT EVENTUALITY, IT SHOULD BE TREATED AS AN AGREEM ENT AKIN TO AN AGREEMENT FOR ADVERTISEMENT IN NEWSPAPER / TELEVISI ON. PAGE - 54 IT(TP)A.1511 TO 1516/BANG/2013 53. IF WE LOOK INTO THE ADVERTISEMENT MODULE OF ADW ORD PROGRAM STATED HEREIN ABOVE, THEN WE WILL COME TO AN IRRESI STIBLE CONCLUSION THAT IT IS NOT MERELY AN AGREEMENT TO PR OVIDE THE ADVERTISEMENT SPACE BUT IS AN AGREEMENT FOR FACILIT ATING THE DISPLAY AND PUBLISHING OF AN ADVERTISEMENT TO THE T ARGETED CUSTOMER. IF WE LOOK INTO THE SUBMISSION MADE BY TH E LEARNED AR, IT IS CLEAR THAT THE ADVERTISER, SELECTS SOME K EY WORDS AND ON THE BASIS OF KEY WORDS, THE ADVERTISEMENT IS DISPLA YED ON THE WEBSITE OR ALONG WITH THE SEARCH RESULT AS AND WHEN THE CUSTOMER SELECTS THE KEY WORDS RELATABLE TO THE ADVERTISEMEN T. THE MODULE AS SUGGESTED DOES NOT MERELY WORK BY PROVIDING THE SPACE IN THE GOOGLE SEARCH ENGINE, BUT IT WORKS ONLY WITH THE HE LP OF VARIOUS PATENTED TOOLS AND SOFTWARE. AS WE HAVE ANALYZED DE TAILED FUNCTIONING OF ADWORD PROGRAM, IT IS CLEAR THAT WIT H THE HELP OF THE SEARCH TOOL/SOFTWARE / DATA BASE, THE GOOGLE IS ABLE TO IDENTIFY THE TARGETED CONSUMER/PERSON AS PER THE REQUIREMENT OF THE ADVERTISER. IF ONLY SERVICE RENDERED BY THE ASSESSE E WAS FOR PROVIDING THE SPACE THEN THERE IS NO OCCASION OF EI THER DIRECTING/ CHANNELIZING THE TARGETED CONSUMERS TO THE ADVERTIS EMENT OF THE ADVERTISER. IN OUR VIEW TRUNCATED SEARCH RESULTS AR E DISPLAYED KEEPING IN MIND THE COMMERCIAL NEEDS OF THE ADVERTI SERS. PAGE - 55 IT(TP)A.1511 TO 1516/BANG/2013 THE ASSESSEE / GOOGLE, IS HAVING THE ACCESS TO VA RIOUS DATA WITH RESPECT TO THE AGE, GENDER, REGION, LANGUAGE, TASTE HABITS, FOOD HABITS, CLOTH PREFERENCE, THE BEHAVIOR ON THE WEBSI TE ETC. AND IT USES THIS INFORMATION FOR THE PURPOSES OF SELECTING THE AD CAMPAIGN AND FOR MAXIMIZING THE IMPRESSION AND CONVERSION OF THE CUS TOMERS TO THE ADS OF THE ADVERTISERS. THUS THE ACTIVITIES OF THE ASS ESSEE ARE NOT MERELY RESTRICTING TO DISPLAY OF ADVERTISEMENT BUT IS EXTE NDED TO VARIOUS OTHER FACETS AS MENTIONED HEREIN ABOVE. IN OTHER WORDS, BY USING THE PATENTED ALGORITHM, APPELLANT DECIDES WHICH ADVERTI SEMENT IS TO BE SHOWN TO WHICH CONSUMER VISITING MILLIONS OF WEBSIT E / SEARCH ENGINE. THEREFORE, IN OUR VIEW, IT IS NOT THE ADVERTISEMENT OR SELLING OF THE SPACE RATHER IT IS FOCUSED TARGETED MARKETING FOR T HE PRODUCT/ SERVICES OF THE ADVERTISER BY THE ASSESSEE/GOOGLE WITH THE H ELP OF TECHNOLOGY FOR REACHING THE TARGETED PERSONS BASED ON THE VARI OUS PARAMETERS INFORMATION ETC,. HAD IT BEEN MERELY PROVIDING THE SPACE THEN THE OTHER FEATURES AS DELIBERATED AND DISCUSSED HEREINA BOVE WOULD NOT BE REQUIRED. MOREOVER IN OUR VIEW, THE SPACE ON SEARC H ENGINES / WEBSITES ARE READILY AVAILABLE AND THEREFORE THERE WAS NO OCCASION TO MARKET AND SELL IT. ANY PERSON WITH THE HELP OF BUY ING THE STATIC IP ADDRESSES CAN UPLOAD THE DATA/ ADVERTISEMENT IN THE ENDLESS WEB WORLD. THEREFORE, IN OUR VIEW, THE AGREEMENT ENTERE D BETWEEN THE ASSESSEE AND THE GOOGLE INDIA IS NOT MERELY FOR PRO VIDING THE ADVERTISEMENT SPACE BUT WAS IN THE NATURE OF PROV IDING THE SERVICES FOR DISPLAYING AND PROMOTING OF THE ADVERTISEMENT TO THE TARGETED CONSUMERS. PAGE - 56 IT(TP)A.1511 TO 1516/BANG/2013 54. AS RECORDED HEREIN ABOVE THE GOOGLE IS WORKING ON VARIOUS PLATFORMS AND THE SAID PLATFORMS USES VARIOUS CUSTO MER DATA FOR TARGETED ADS CAMPAIGN. THE FILES OF THESE CUSTOMER DATA ARE SHARED FOR RUNNING THE CAMPAIGN BY THE APPELLANT WITH THE ADVE RTISERS. THE POPULAR AD CAMPAIGNS OF GOOGLE IS LIKE- ALIKE AD, CUSTOMER- AUDIENCE ADS, ETC WHERE DETAILS OF LIKE-SET OF USE RS ARE PROVIDED BY THE APPELLANT FOR RUNNING THE TARGETED CAMPAIGN. SI MILARLY TARGET MARKETING CAMPAIGNS ARE DONE WITH THE HELP OF CUSTO MER AUDIENCE (WHERE THE CLIENT OF ADVERTISER IS HAVING ITS OWN D ATA AND WISH TO ADVERTISE TO THEM). LIKE, IF ICE CREAM VENDOR WANTE D TO GO FOR LAUNCHING OF NEW ICE CREAM PRODUCT, IT MAY APPROACH APPELLANT /GOOGLE TO SHARE DATA WITH SIMILAR USER PROFILE OR LIKING FOR ICE-CREAM, THE APPELLANT IN POSSESSION OF SUCH DATA SHARES THI S DATA WITH THE ADVERTISER ICE-CREAM PRODUCE MANUFACTURER. BASED ON THIS ICE CREAM MANUFACTURER FORMULATES ITS MARKETING CAMPAIGN WITH THE HELP OF APPELLANT AND OTHER CHANNEL PARTNERS . 55. IN OUR VIEW IP OF GOOGLE VESTS IN THE SEARCH EN GINE TECHNOLOGY, ASSOCIATED SOFTWARE AND OTHER FEATURES, AND HENCE USE OF THESE TOOLS FOR PERFORMING VARIOUS ACTIVITIE S MENTIONED HEREIN ABOVE, INCLUDING ACCEPTING ADVERTISEMENTS, PROVIDIN G BEFORE OR AFTER SALE SERVICES, CLEARLY FALL WITHIN THE AMBIT OF 'ROYALTY'. THEREFORE, CONTENTION OF THE ASSESSEE IS NOT CORREC T WHEN THE ASSESSEE IS ALLEGING THAT THE USER OF THE SEARCH ENGINE IS E ND USER PAGE - 57 IT(TP)A.1511 TO 1516/BANG/2013 AND NOT THE APPELLANT OR THE ADVERTISERS AND THEREF ORE IT WILL NOT FALL WITHIN THE AMBIT OF ROYALTY. 56. FURTHER FROM THE READING OF AGREEMENT DATED 12/ 12/2005 IT IS CLEAR THAT : AS PER CLAUSE 2.6 APPELLANT WILL PROVIDE AFTER SALE S SERVICES TO ADVERTISERS IN ACCORDANCE WITH THE BROAD INSTRUC TIONS, TRAINING AND STANDARDS OF GOOGLE. AS PER CLAUSE 3.1, APPELLANT IS PROVIDED BY THE GOOGLE IRELAND TO UTILIZ SPACE THROUGH THE ADWORD S PROGRAM FOR DISTRIBUTION TO ADVERTISERS . AS PER CLAUSE 3.4, PROVIDES FOR MINIMUM LEVEL OF SERVICE AS SPECIFIED IN EXHIBIT C, APPELLANT SHALL BE SOLELY RESPONSIBLE FOR PROVIDING ALL CUSTOMER SERVI CES TO ADVERTISERS, ACCORDING TO PROCEDURES, AND IN COM PLIANCE WITH STANDARDS, PROVIDED BY GOOGLE. ALL ADVERTISERS SHALL BE INSTRUCTED BY APPELLANT TO CONTACT IT FOR SUPPORT, AND NOT TO COMMUNICATE DIRECTLY WITH GOOGLE. CLAUSE 7 PROVIDEFOR MUTUAL NON-DISCLOSURE AGREEMENT (EXHIBIT B) TO THE ADWORD AGREEMENT. AS PER CLAUSE 8, GIL OWNS ALL RIGHT, TITLE AND INTE REST IN AND TO ALL INFORMATION DATA INCLUDING THE USER DATA, CO LLECTED BY GOOGLE RELATED TO ADVERTISERS IN CONNECTION WITH TH E PROVISIONS OF ADWORD PROGRAMME. FURTHER IT IS THE DUTY OF THE APPELLANT TO MAINTAIN ALL USER DATA IN ACCORDAN CE WITH LOCAL LAWS AND REGULATIONS. 57. ASSESSEE HAS BEEN PROVIDING AFTER SALES SUPPO RT TO THE ADVERTISERS. IT IS NOT THE CASE OF APPELLANT THAT I T IS NOT PROVIDING AFTER PAGE - 58 IT(TP)A.1511 TO 1516/BANG/2013 OR BEFORE SALE SERVICES TO THE ADVERTISERS. IT IS T HE CASE OF THE APPELLANT THAT ITES SEGMENT OF THE APPELLANT PROVIDS SERVICE S TO GOOGLE IRELAND TO MEET THE QUERIES OF VARIOUS CLIENTS OF GOOGLE IRELAND WORLDWIDE AND FOR THAT PURPOSES THE ACCESS TO IPR S, CONFIDENTIAL INFORMATION AND NDAS ARE THERE. 58. HOWEVER AS PER THE AGREEMENT DT.12.12.2005, THE PRIMARY RESPONSIBILITY IS ON THE APPELLANT TO PROVIDE AFTER OR BEFORE SALE SERVICES, AFTER HAVING ACCESS TO USER DATA, IPRS, S ECRET FORMULA, PROCESS, SOFTWARE AND CONFIDENTIAL INFORMATION OF GOOGLE IRELAND, IN ITS OWN CAPACITY UNDER THE AGREEMENT DT.12.12.2005 AND NOT UNDER THE AGREEMENT DT.01.04.2004. THE APPELLANT, FOR THE PU RPOSES OF MANAGING ITS OWN AFFAIRS CAN AFFORD TO PROVIDE THES E SERVICES TO THE ADVERTISER THROUGH THE ROUTE OF AGREEMENT DT.01.04. 2004, BUT THE RENDITION OF SERVICES BY THE APPELLANT TO THE ADVER TISERS IN INDIA ARE OBLIGATIONS UNDER THE AGREEMENT DT.12.12.2005 AND N OT UNDER THE AGREEMENT DT.01.04.2004. THE SUBSTANCE OF THE AGRE EMENTS IS TO BE GIVEN PRECEDENCE OVER THE FORM OF THE AGREEMENTS. CLAUSE 6 OF THE SERVICE AGREEMENT DT.01/4/2004 P ROVIDES FOR CONFIDENTIAL INFORMATION, ACCESS AND USE OF CONFIDE NTIAL INFORMATION AND FURTHER PROVIDES NOT TO DISCLOSE CONFIDENTIAL I NFORMATION, OWNERSHIP AND RETURN OF CONFIDENTIAL INFORMATION AN D INJUNCTIVE RELIEF. 59. IN OUR VIEW WITHOUT EXERCISING ITS RIGHT UNDER THIS AGREEMENT, (1.4.2004) THE OBLIGATION OF THE APPELLANT UNDER TH E AGREEMENT DATED PAGE - 59 IT(TP)A.1511 TO 1516/BANG/2013 12/12/2005 AND UNDER THE APPELLANT-ADVERTISER AGREE MENTS CANNOT BE DISCHARGED. THEREFORE THE AO WAS RIGHT IN RELYING ON THIS AGREEMENT DATED 1/4/2004 FOR THE PU RPOSES OF BRINGING THE CASE UNDER ROYALTY, AS PER THE PROV ISIONS OF SECTION 9(1)(VI) OF THE ACT READ WITH DTAA. AS PER CLAUSE 8 OF THE AGREEMENT DT.12.12.2005 MENT IONED HEREIN ABOVE, THE DISTRIBUTOR IS UNDER AN OBLIGATIO N TO MAINTAIN THE USER DATA AND THEREFORE IS HAVING ACCESS TO SUCH DA TA. THE SAID USER DATA IS BEING USED BY THE APPELLANT FOR DISCHARGING ITS OBLIGATION TOWARDS THE ADVERTISERS AND THE CLAIM OF THE ASSESS EE IS WRONG THAT IT DOES NOT HAVE THE ACCESS TO THE USER DATA. 60. NOW COMING TO THE NEXT ARGUMENT THAT SPACE OF A DVERTISEMENT IS BEING SOLD BY THE ASSESSEE TO THE ADVERTISER, ADWO RD PROGRAM, IS WORKING ON VARIOUS PARAMETERS, VARIABLES, DYNAMICS AND USING VARIOUS PERMUTATION AND COMBINATION TO SHOW THE ADVERTISEME NT TO TARGETED CONSUMERS. THE ADVERTISEMENTS ON ADWORD PROGRAM ARE CHANGING ON DAY TO DAY, WEEK TO WEEK OR MONTH TO MONTH BASIS. T HE ONLINE BIDS ARE REQUIRED TO BE PLACED BY THE VARIOUS COMPETITORS ON DYNAMIC BASIS. IF WE ASSUME THAT THE SPACE IS SOLD BY THE ASSESSEE TO THE ADVERTISER, THEN THERE IS NO QUESTION OF BIDDING OR OUT- BIDDING FOR RUNNING OR DISPLAYING OF THE ADVERTISEMENTS. THE INTER-SE BID DING AMONG THE ADVERTISERS FOR DISPLAYING THE ADVERTISEMENT IN RE AL-TIME BASIS, CLEARLY SHOWS THAT THE SPACE IS NOT SOLD BY THE ASSESSEE, R ATHER THE PLACEMENT OF THE ADVERTISEMENT TO A PARTICULAR TARGETED CONSU MER AT A PARTICULAR PAGE - 60 IT(TP)A.1511 TO 1516/BANG/2013 TIME IS BIDED AMONG THE ADVERTISERS AND FOR THAT, SERVICES WERE RENDERED BY THE APPELLANT WITH THE HELP OF PATENTED ADWORD PROGRAM . IF ONE ADVERTISER BID FOR THE PARTICULAR KEY WORD LIKE SPORT SHOES HIGHER THAN THE OTHER COMPETITOR, THEN THE ADVERTIS EMENT OF THAT SPORT SHOES WOULD BE DISPLAYED FIRST IN COMPARISON TO OTH ER COMPETITORS. HOWEVER IF IN THE NEXT WEEK THERE IS SALE FOR THE PRODUCT OF THE SECOND BIDDER PERTAINING TO SPORT SHOES, THE SECOND BIDDER MAY BID HIGHER IN COMPARISON WITH THE FIRST BIDDER, IN THA T EVENTUALITY, THE ADVERTISEMENT OF THE SECOND BIDDER WOULD BE DISPL AYED FIRST ON THE SEARCH RESULT, IN COMPARISON TO THE FIRST ADVERTISE R. THUS THERE WAS NO SALE OF AD SPACE ON THE WEB FOR DISPLAYING OF ADVER TISEMENT ON A PARTICULAR PLACE / SITE. EVEN OTHERWISE, IF WE CON SIDER THAT THE APPELLANT IS SELLING ADVERTISEMENT SPACE THEN, AT W HICH LOCATION/ WEB PLACE, THE SAID AD- SPACE WAS SOLD BY THE APPELLANT TO THE ADVERTISER,. IT IS THE CASE OF THE ASSESSEE THAT THE ADS ARE STO RED IN THE SERVERS SITUATED OUTSIDE INDIA. IN OUR VIEW, THE APPELLANT HAS NOT SOLD THE STORAGE SPACE ON THE SERVER OUTSIDE INDIA NOR IT HA S SOLD THE IDENTIFIED / DEMARCATED AD ON THE WEB SITE / SEARCH ENGINE. FUR THER IF THE AD-SPACE IS SOLD, THEN THE ADWORD PROGRAM WOULD BE INCAPABLE OF FUNCTIONING AS THE ADVERTISEMENT WOULD BE SHOWN TO VARIOUS LOCA TIONS, PERSONS AND TARGETED CONSUMERS. IN OUR VIEW, THERE IS NO SALE O F SPACE, AS CONCLUDED HEREINABOVE RATHER IT IS A CONTINUOUS TAR GETED ADVERTISEMENT CAMPAIGN TO THE TARGETED AND FOCUSED CONSUMER IN A PARTICULAR LANGUAGE TO A PARTICULAR REGION WITH THE HELP OF D IGITAL DATA AND OTHER INFORMATION WITH RESPECT TO THE PERSON BROWSING THE SEARCH ENGINE OR PAGE - 61 IT(TP)A.1511 TO 1516/BANG/2013 VISITING THE WEBSITE. FURTHER, THE ARGUMENT OF SEL LING THE SPACE IS NOT AVAILABLE TO THE ASSESSEE AND WE ARE OF THE OPINION THAT IT IS NOT MERELY SELLING THE SPACE BUT IT IS RENDERING THE SERVICES BY MAKING AVAILABLE THE TECHNOLOGY PERMITTED BY THE GOOGLE TO THE APPEL LANT AND PERMITTING THE SAME TO BE USED BY ADVERTISER. FOR PURPOSE OF TARGETED FOCUSED ADVERTISEMENT CAMPAIGN BY USING THE GATEWAY OF GOOGLE INDIA / ASSESSEE. THUS THE ACTIVITIES CLEARLY FALL WITHIN THE AMBIT OF ROYALTY AS MENTIONED IN INCOME TAX ACT AND UNDER DTAA. 61. IN OUR VIEW THOUGH APPELLANT CLAIMED TO BE SEP ARATELY EARNING REVENUE FROM ITES SEGMENT, UNDER A SEPARATE OUTSOUR CING SERVICE AGREEMENT WITH GOOGLE IRELAND WHICH IS INDEPENDENT OF THE DISTRIBUTION OF ADVERTISING SPACE TO THE ADVERTISER S IN INDIA, WE ARE NOT IN AGREEMENT WITH THE SAME. 62. UNDER THE ADVERTISEMENT DISTRIBUTION AGREEMENT, IT IS THE PRIME RESPONSIBILITY OF THE APPELLANT TO GIVE POST AND PR IOR SALES SERVICE FOR RESOLVING THE ISSUES OF THE ADVERTISERS, AND TO ENS URE DUE COMPLIANCES OF APPLICABLE LAWS. ALL THESE FUNCTIONS ARE TO BE D ISCHARGED BY THE APPELLANT THROUGH IT ITES SEGMENT. FURTHER INPUTS F ROM ITES ARE ALWAYS REQUIRED IN THE BUSINESS MODEL OF APPELLANT, WITHOUT WHICH THERE CANNOT BE ANY TARGETED MARKETING FOR ADVERTIS EMENTS AND PROMOTION OF SALES OF ADVERTISERS. PAGE - 62 IT(TP)A.1511 TO 1516/BANG/2013 63. THEREFORE, THE SERVICES RENDERED UNDER ITES AGR EEMENT CANNOT BE DIVORCED WITH THE ACTIVITIES UNDERTAKEN BY THE A SSESSEE UNDER THE DISTRIBUTION AGREEMENT. BOTH THE AGREEMENTS ARE CO NNECTED WITH NAVAL CHORD WITH EACH OTHER. THE ASSESSEE WAS DUTY-BOUND TO PROVIDE AS PER THE DISTRIBUTION AGREEMENT VARIOUS ITES SERVICES, W HICH THE ASSESSEE HAD WRONGLY CLAIMED TO HAVE BEEN PROVIDED NOT UNDER THE DISTRIBUTION AGREEMENT, BUT UNDER THE SERVICE AGREEMENT. THIS I S ONLY A DESIGN / STRUCTURE PREPARED BY THE ASSESSEE TO AVOID THE PAY MENT OF TAXES. 64. THE APPELLANT CANNOT BE COMPENSATED BY THE GIL FOR RENDERING THE SERVICES TO ITSELF OR FOR RENDERING THE SERVICE S WHICH THE APPELLANT IS REQUIRED TO RENDER UNDER THE DISTRIBUTION AGREEM ENT. THE USE OF INTELLECTUAL PROPERTY IS EMBEDDED IN THE GOOGLE ADW ORDS PROGRAMME WHICH IS NECESSARY TO BE USED BY THE APPELLANT FOR RENDERING THE SERVICES PRIOR OR POST SALES OF THE ADVISEMENT SPAC E UNDER THE DISTRIBUTION AGREEMENT OR SERVICE AGREEMENT. 65. AS IS CLEAR FROM THE ABOVE, THE APPELLANT WAS U SING THE CUSTOMER DATA NOT ONLY FOR RENDERING THE SERVICES UNDER ITES BUT ALSO FOR PROMOTING MARKETING AND DISTRIBUTING THE AD SPACE O N THE SEARCH ENGINE AND WEBSITES. THE CUSTOMER DATA IS A CONFIDE NTIAL DATA WHICH IS IN CONTROL OF THE GOOGLE, WHICH IS MAINTAINED BY TH E APPELLANT AS WELL AND THE ENTIRE ADWORDS PROGRAMME WORKS AROUND CUSTO MER DATA, USERS PROFILE ETC. IT IS INCONCEIVABLE TO RUN THE G OOGLE / APPELLANT MARKETING PROGRAMME WITHOUT HAVING ACCESS TO THE CU STOMER DATA. PAGE - 63 IT(TP)A.1511 TO 1516/BANG/2013 THEREFORE THE ARGUMENT OF THE ASSESSEE THAT IT WAS ONLY USING CUSTOMER DATA, IPR ETC., FOR RENDERING THE SERVICES RELATING TO ITES IS INCORRECT. IN OUR VIEW, THE CONCLUSION OF THE AUTHORITIES BELO W THAT THE USE OF THE CONFIDENTIAL CLAUSE AND CONFIDENTIAL DATA BY THE AP PELLANT WAS CORRECT. THEREFORE IN OUR VIEW AMOUNT WAS BEING PAID BY THE ASSESSEE TO GOOGLE IRELAND FOR THE USE OF PATENT INVENTION, MOD EL, DESIGN, SECRET FORMULA, PROCESS, ETC . 66. IT WAS FURTHER CONTENDED BY THE LEARNED AR THAT THERE IS NO TRANSFER OF THE TRADEMARK OR COPY RIGHT OF GOOGLE T O THE ASSESSEE AND THEREFORE IT WILL NOT FALL WITHIN THE PURVIEW OF TH E ROYALTY. IT WAS SUBMITTED BY THE LEARNED AR THAT THERE IS NO SPECIF IC TRANSFER OF ANY PATENT TRADEMARK TO THE APPELLANT AND THE USE OF GO OGLE TRADEMARK AND OTHER BRAND FEATURES REFERRED IN THE DISTRIBUTION A GREEMENT ARE MERELY INCIDENTAL TO UNABLE THE APPELLANT TO DISTRIBUTE TH E AD SPACE IN INDIA. 67. IT WAS SUBMITTED BY ASSESSEE THAT MERE USE OF NAME OF BRAND FOR PROCURING AD CONTRACTS WOULD NOT AMOUNT TO USE OF T RADEMARK AND, HENCE, EVEN ASSUMING THAT A PART OF THE PRICE PAID BY THE APPELLANT TO GOOGLE IRELAND CAN BE CHARACTERIZED AS A PAYMENT FO R THE ALLEGED USE FOR TRADE MARK SUCH INCOME WOULD NOT BE LIABLE TO TAX AS ROYALTY UNDER THE PROVISIONS OF THE ACT . FOR THIS PURPOSES THE APPELLANT RELIED UPON FINANCIAL AND SUBMITTED THAT NO PART OF THE SAID SUM OF RS. 119.82 CRORES WAS THE PAYMENT FOR U SE OF TRADEMARK, AS THE APPELLANT WAS ONLY HAVING A RIGHT TO USE TH E TRADEMARK FOR DISTRIBUTION PURPOSE. ASSESSEE SUBMITTED THAT NO RI GHT TO PAGE - 64 IT(TP)A.1511 TO 1516/BANG/2013 COMMERCIALLY EXPLOIT ITS TRADEMARK WAS GIVEN BY THE GIL AND THEREFORE, HAVING REGARD TO THE FOLLOWING DECISIONS OF THE HON'BLE DELHI HIGH COURT, THE PAYMENT CANNOT BE CHARACTERIZ ED AS A PAYMENT BY WAY OF ROYALTY. IN ANY EVENT, NO PAYMENT AS SUCH IS MADE FOR THE USE OF THE TRADEMARK. SHERATON INTERNATIONAL INC V DDIT [2009) 313 ITR 26 7 (DELHI HC) 'IN VIEW OF THE AFORESAID FINDINGS OF THE TRIBUNAL THAT THE MAIN SERVICE RENDERED BY THE ASSESSEE TO ITS CLIENT S-HOTELS WAS ADVERTISEMENT, PUBLICITY AND SALES PROMOTION KE EPING IN MIND THEIR MUTUAL INTEREST AND, IN THAT CONTEXT, TH E USE OF TRADEMARK, TRADE NAME OR THE STYLIZED 'S' OR OTHER ENUMERATED SERVICES REFERRED TO IN THE AGREEMENT WI TH THE ASSESSEE WERE INCIDENTAL TO THE SAID MAIN SERVICE, IT RIGHTLY CONCLUDED, IN OUR VIEW, THAT THE PAYMENTS RECEIVED WERE NEITHER IN THE NATURE OF ROYALTY UNDER SECTION 9(1) (VI) READ WITH EXPLANATION 2 OR IN THE NATURE OF FEE FOR TECH NICAL SERVICES UNDER SECTION 9(1) (VII) READ WITH EXPLANA TION 2 OR TAXABLE UNDER ARTICLE 12 OF THE DTAA. THE PAYMENTS RECEIVED WERE THUS, RIGHTLY HELD BY THE TRIBUNAL, T O BE IN THE NATURE OF BUSINESS INCOME. AND SINCE THE ASSESSEE A DMITTEDLY DOES NOT HAVE A PERMANENT ESTABLISHMENT UNDER THE A RTICLE 7 OF THE DTAA 'BUSINESS INCOME' RECEIVED BY THE ASSES SEE CANNOT BE BROUGHT TO TAX IN INDIA. THE FINDINGS OF THE TRIBUNAL ON THIS ACCOUNT CANNOT BE . /AULTED. THE TRIBUNAL POINTEDLY OBSERVED THAT THERE WAS NO EVIDENCE BROUG HT ON RECORD BY THE REVENUE TO ENABLE THEM TO HOLD THAT T HE AGREEMENT WAS A COLOURABLE DEVICE, IN PARTICULAR, T HAT THE PAYMENTS RECEIVED WERE FOR USE OF TRADE MARK, BRAND NAME AND STYLIZED MARK 'SY' FORMULA ONE WORLD CHAMPIONSHIP LTD. V CIT [20161 76 TAXMANN.COM 6 (DELHI HC): PAGE - 65 IT(TP)A.1511 TO 1516/BANG/2013 'THERE IS NO DOUBT THAT THE MAIN OBJECT OF THE RPC AND THE RELEVANT PROVISIONS OF THE ALA WAS NOT THE PERMISSION TO USE THE TRADEMARKS, BUT GRANTING AND DESIGNATING JAYPEE AS THE PROMOTER OF THE EVENT AND LAYING OUT THE RIGHTS OF THE PARTI ES, PARTICULARLY FO WC AS REGARDS THE EVENT, THE SPACES TO BE MADE AVAILABLE TO IT EXCLUSIVELY, THE SOLE AND EXCL USIVE RIGHTS OVER ALL EVENT RELATED ACTIVITIES, THE RIGHT TO EXP LOIT THEM COMMERCIALLY, ETC. THE USE OF THE MARK ON THE TICKETS SOLD BY JAYPEE WAS ONLY INCIDENTAL. THE AAR'S FINDINGS THAT THE USE OF THE MARK AND INTELLECTUAL PROPERTY RIGHTS BE NEFITTED JAYPEE, WHICH PAID FOR THEM, IS ENTIRELY ERRONEOUS. JAYPEE PERMITTED USE, AS IT WERE, WAS FOR A LIMITED DURATI ON AND OF AN EXTREMELY RESTRICTED MANNER; THIS IS CONTAINED I N THE DEFINITION OF EMITTED USE' IN THE ALA.AS EVENT PROM OTER AND HOST JAYPEE HAD TO PUBLICIZE THE F] GRAND PRIX CHAMPIONSHIP. THEREFORE, IT WAS BOUND TO USE THE F] MARKS, LOGOS AND DEVICES; HOWEVER, IT WAS NOT AUTHORIZED T O USE THE MARKS ON ANY MERCHANDISE OR SERVICE OFFERED BY IT. THIS CONDITION, IN THE OPINION OF THE COURT, PLACES THE MATTER BEYOND THE PALE OF CONTROVERSY; THE USE OF THE TRAD EMARKS WERE PURELY INCIDENTAL. THE CONCLUSION OF THE AAR I S THEREFORE, INCORRECT. THE ANSWER TO THE QUESTION IS THAT THE AMOUNTS PAID TO FOWC BY JAYPEE WERE NOT 'ROYALTY' WITHIN THE MEANING OF ARTICLE 13 OF THE DTAA, AS TH EY WERE BUSINESS INCOME AND COULD NOT BE BROUGHT TO TA X UNDER THE HEAD OF 'ROYALTY.' 68. ON THE OTHER HAND LD COUNSEL FOR REVENUE HAD SU BMITTED THAT CONTENTION OF THE ASSESSEE IS NOT CORRECT, AS THE U SE OF TRADE MARK IS NOT INCIDENTAL AND HENCE AMOUNT TO ROYALTY. THE ASSESSEE HAS ACQUIRED A RIGHT UNDER THE DISTRIBUTION AGREEME NT TO SELL THE ADVERTISEMENT SPACE IN THE SEARCH ENGINE WHICH IS A N IPR INCLUDING THE TRADEMARKED. THE ASSESSEE IS USING TH E DISTRIBUTION AGREEMENT COUPLED WITH IPR AS TOOL OF THE TRADE AND HENCE THE PAGE - 66 IT(TP)A.1511 TO 1516/BANG/2013 PAYMENT TOWARDS USE OF TRADEMARKED IS ALSO IN THE N ATURE OF ROYALTY AND LIABLE TO TAX UNDER THE ACT AS WELL AS UNDER DT AA. 69. THE RELIANCE ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF SHERATON INTERNATIONAL 313 ITR 267 AND FORMULA ONE WORLD CHAMPIONSHIP DELHI HIGH COURT (2016) 76 TAXMAN.COM IS NOT RELEVANT FOR THE ISSUE UNDER CONSIDERATION. IN ALL THE JUDGMENTS RELIED ON BY THE ASSESSEE AND REFERRED TO ABOVE, TH E MAIN SERVICE PROVIDED WAS NOT THE ADVERTISEMENT AND PROV IDING OF ANY LICENSE TO USE THE IPR WAS NOT INVOLVED. WHEREAS IN THE PRESENT CASE THE USE OF IPR IS INVOLVED. IN THE FACTS AND C IRCUMSTANCES OF THE ABOVE CASES THE HON'BLE COURTS HAVE HELD THA T USE OF TRADEMARK WERE INCIDENTAL TO THE MAIN PURPOSE OF TH E AGREEMENT. THE MAIN PURPOSE OF THE AGREEMENT IS REF ERRED TO AS CARRYING OUT ADVERTISEMENT, PUBLICITY AND SALES PRO MOTION. THE MAIN PURPOSE/ BUSINESS DO NOT INVOLVE PROVIDING LICENSE TO USE ANY IPR AND IPR WAS NOT USED AS A TOOL OF THE TRADE. 70. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PART IES AND PERUSED THE RECORD. CLAUSE 1.5 OF THE AGREEMENT DT.12.12.2 005 PROVIDES GOOGLE BRAND FEATURES. AS PER THE SAID CLAUSE, THE APPELLANT WAS PERMITTED TO USE TRADENAME TRADEMARKS, SERVICE MARK S, DOMAINS OR OTHER DISTINCTIVE BRAND FEATURES OF GOOGLE SOLELY F OR THE USE UNDER THE DISTRIBUTION AGREEMENT. FURTHER, CLAUSE 6 OF THE A GREEMENT PROVIDES THE BRAND FEATURE LIKE IPRS RELATING TO BRAND FEATU RES, THE SAID IPRS PAGE - 67 IT(TP)A.1511 TO 1516/BANG/2013 WERE GRANTED BY THE GOOGLE TO THE APPELLANT ON A NO N-EXCLUSIVE AND NON-SUB-LICENCEABLE BASIS FOR THE PURPOSES OF MARKE TING AND DISTRIBUTION OF ADWORD PROGRAMME, SUBJECT TO THE CO NDITION MENTIONED THEREIN. IF WE LOOK INTO THE ACTIVITIES OF THE ASSESSEE, FOR THE PURPOSE MARKETING AND DISTRIBUTION OF ADWORD PROGRAMME, THEN, IT IS N OT POSSIBLE FOR THE APPELLANT TO UNDERTAKE THESE ACTIVITIES, WITHOUT TH E USE OF THE GOOGLE, TRADEMARK AND OTHER BRAND FEATURES. FURTHER, FOR MA RKETING AND DISTRIBUTION OF GOOGLE ADWORD PROGRAMME, THE USE O F THE GOOGLE TRADEMARK IS ESSENTIAL AND PIVOTAL FOR DOING THE BU SINESS OF THE ADVERTISEMENT ON THE SEARCH ENGINE AND THE WEBSITES . IN THE ABSENCE OF THE GOOGLE TRADEMARK, IT IS DIFFICULT TO COMPREH END THAT ASSESSEE WOULD ATTRACT LOT OF ADVERTISERS FOR ITS ADVERTISEM ENT SPACE ON SEARCH ENGINE AND WEB SITE . APPELLANT WAS GETTING LOT OF ENGAGEMENT AND CLIENTAGE ONLY ON ACCOUNT OF GOOGLE TRADEMARK . IT MAY NOT BE POSSIBLE TO HAVE THIS KIND OF BUSINESS INFLOW OF AD VERTISEMENTS WITHOUT USING THE TRADE MARK OF GOOGLE . THE DISTRI BUTION AGREEMENT HAD NOT MADE ANY PROVISION FOR MAKING THE PAYMENT F OR THE GOOGLE BRAND FEATURES AND HAD ONLY MADE PROVISION FOR MAKI NG THE LUMPSUM PAYMENT UNDER THE AGREEMENT. AS PER EXHIBIT- A. T HEREFORE IN OUR VIEW, THE PAYMENTS MADE BY THE ASSESSEE UNDER THE A GREEMENT WAS NOT ONLY FOR MARKING AND PROMOTING THE ADWORD PROGRAMME S BUT WAS ALSO FOR THE USE OF GOOGLE BRAND FEATURES.. NEEDLESS T O ADD THAT THE SAID GOOGLE BRAND FEATURES WERE USED BY THE APPELLANT A S MARKETING TOOL PAGE - 68 IT(TP)A.1511 TO 1516/BANG/2013 FOR PROMOTING AND ADVERTISING THE ADVERTISEMENT SP ACE, WHICH IS MAIN ACTIVITY OF ASSESSEE AND IS NOT INCIDENTAL ACTIVITI ES .THE USE OF TRADEMARK FOR ADVERTISING MARKETING AND BOOKING IN THE CASE OF HOTEL SHERETON (SUPRA) AS WELL AS IN THE CASE OF FORMULA 1 WERE INCIDENTAL ACTIVITIES OF THE ASSESSEE THEREIN AS THE MAIN ACTI VITIES IN THE CASES WERE PROVIDING HOTEL ROOMS AND ORGANIZING CAR RACIN G RESPECTIVELY WHEREAS IN THE PRESENT CASE THE MAIN ACTIVITY OF TH E ASSESSEE IS TO DO MARKETING OF ADVERTISEMENT SPACE FOR GOOGLE ADWOR DS PROGRAMME. THEREFORE, THESE TWO JUDGMENTS ARE NOT APPLICABLE T O THE FACTS OF THE PRESENT CASE. HENCE FOR THIS REASON ALSO THE PAYM ENT MADE BY THE APPELLANT TO GIL ALSO FALLS WITHIN THE FOUR CORNERS OF ROYALTY AS DEFINED UNDER THE PROVISIONS OF ACT AS WELL AS UNDE R THE DTAA. GRANT OF DISTRIBUTION RIGHTS INVOLVES TRANSFER OF R IGHTS IN PROCESS 71. ASSESSEE BEFORE US HAD SUBMITTED THAT AO, WRONG LY DRAWN REFERENCE TO THE ACTIVITIES UNDERTAKEN BY THE ITES DIVISION, OBSERVED THAT THE APPELLANT HAS TO PERFORM FUNCTION S WHICH INVOLVE APPROVING AND ADMINISTERING ADVERTISEMENTS TO CONFO RM TO THE GOOGLE EDITORIAL GUIDELINES AND RESPONDING TO CUSTOMER QUE RIES. FURTHER APPELLANT SUBMITTED AO ALSO OBSERVED THAT THE FRONT -END PORTION IS WHAT THE ADVERTISER OR THE END-USER SEES WHILE THE BACK-END PORTION IS ACCESSIBLE ONLY BY GOOGLE IRELAND AND GOOGLE INDIA AND IT WAS WRONGLY OBSERVED THAT WITHOUT ACCESS TO THE BACK-EN D, THE ASSESSEE CANNOT PERFORM ITS ACTIVITIES OF MARKETING AND DIST RIBUTION. PAGE - 69 IT(TP)A.1511 TO 1516/BANG/2013 72. ASSESSEE IN THIS REGARD, HAS SUBMITTED THAT THE ASSESSEE DOES NOT HAVE ACCESS TO ANY BACK-END PORTION AS REFERRED BY THE AO AS DATABASES, SOFTWARE TOOLS, ETC UNDER THE DISTRIBUTI ON AGREEMENT. THEREFORE, THE CONCLUSION OF AO THAT THE APPELLANT HAS BEEN GRANTED THE USE OF OR THE RIGHT TO USE THE PROCESS IN THE A D WORDS PLATFORM, ESPECIALLY FOR THE PURPOSE OF MARKETING AND DISTRIB UTION IS FACTUALLY INCORRECT AND IS BASED ON SURMISE AND CONJECTURE. 73. FURTHER APPELLANT SUBMITTED THAT THE ADWORDS, T HOUGH A PROGRAM, CANNOT BE CONSIDERED AS A 'PROCESS' WITHIN THE MEANING UNDER EXPLANATION 2(I) TO SECTION 9(1)(VI) OF THE A CT. FURTHER ADWORDS PROGRAMME CANNOT BE EQUATED TO A SECRET PRO CESS SINCE INFORMATION RELATING TO THE PROGRAM IS FREELY AVAIL ABLE TO THE PUBLIC ON GOOGLE'S WEBSITE ALONG WITH EXPLANATORY VIDEOS REGA RDING THE SAME. HENCE, GOOGLE AD WORDS PROGRAM CANNOT BE CONSIDERED A SECRET PROCESS AND HENCE, IT DOES NOT CONSTITUTE 'PROCESS' WITHIN THE MEANING OF THE TERM AS DEFINED IN CLAUSE (I). 74. ON THE OTHER HAND LD COUNSEL FOR REVENUE HAD SU BMITTED THAT CONTENTION OF THE ASSESSEE IS NOT CORRECT AS THE AP PELLANT IS USING THE SECRET FORMULA/ PROCESS FOR MARKETING AND ADVERTISING THE ADVERTISING PROGRAMME OF THE ADVERTISERS . 75. IN THIS REGARD IT WILL SUFFICE TO SAY THAT WE HAD ALREADY CONCLUDED IN THE FOREGOING PARAGRAPHS THAT THOUGH A DWORDS PROGRAMME ALONG WITH ASSOCIATED VIDEOS ARE AVAILAB LE IN PUBLIC PAGE - 70 IT(TP)A.1511 TO 1516/BANG/2013 DOMAIN BUT HOW THIS PROGRAMME FUNCTIONS, FOR TARGE TED MARKETING CAMPAIGN, PROMOTING ADVERTISEMENTS ARE ON LY POSSIBLE WITH THE USE OF SECRET FORMULA, CONFIDENT IAL CUSTOMER DATA ONLY . THIS SECRET PROCESS OF TARGETING THE CU STOMERS, IS NOT IN PUBLIC DOMAIN THEREFORE IN OUR VIEW ALSO THE ASS ESSING OFFICER WAS RIGHT WHEN IT CONCLUDED THAT THE APPELL ANT WAS USING THE SECRET PROCESS FOR MARKETING PROMOTING DI SPLAYING OF THE ADVERTISEMENT. 76. IT WAS SUBMITTED BY LD AR THAT REVENUE EARNED F ROM ADVERTISEMENT IS NOT LIABLE TO BE TAXED AS ROYALTY OR FEES FOR TECHNICAL SERVICES AND IS REQUIRED TO BE TAXED AS BUSINESS PR OFIT AND IN ABSENCE OF ANY PE, REMITTANCE MADE BY GI TO ASSESSEE CANNOT BE TAXED IN INDIA. IN THIS REGARD IT WAS SUBMITTED OECD HAD SET UP A TECHNICAL ADVISORY GROUP ('TAG') TO EXAMINE THE ISS UES ARISING IN CHARACTERIZATION OF ECOMMERCE PAYMENTS. THE TAG HAS CATEGORIZED E-COMMERCE TRANSACTIONS INTO 28 TYPES I NCLUDING INTERNET ADVERTISING. THE TAG HAS CONCLUDED THAT TH E PAYMENTS ARISING FROM ADVERTISEMENTS WOULD CONSTITU TE BUSINESS PROFITS FALLING UNDER ARTICLE 7 RATHER THAN ROYALTI ES. THE RELEVANT EXTRACT OF THE TAG REPORT IS REPRODUCED: 'CATEGORY 17: ADVERTISING DEFINITIONS ADVERTISERS PAY TO HAVE THEIR ADVERTISEMENTS DISSEM INATED TO USERS OF A GIVEN WEBSITE. SO-CALLED 'BANNER ADS' AR E SMALL GRAPHICAL IMAGES EMBEDDED IN A WEB PAGE, WHICH WHEN PAGE - 71 IT(TP)A.1511 TO 1516/BANG/2013 CLICKED BY THE USER WILL LOAD THE WEB PAGE SPECIFIE D BY THE ADVERTISER. ADVERTISING RATES ARE MOST COMMONLY SPE CIFIED IN TERMS OF A COST PER THOUSAND 'IMPRESSIONS' (NUMBER OF TIMES THE AD IS DISPLAYED TO A USER), THOUGH RATES MIGHT ALSO BE ON THE NUMBER OF 'CLICK-THROUGHS' (NUMBER OF TIMES THE AD IS CLICKED BY A USER). ANALYSIS AND CONCLUSIONS 30. ALL MEMBERS OF THE GROUP AGREED THAT THE PAYMEN TS ARISING FROM THESE TRANSACTIONS WOULD CONSTITUTE BU SINESS PROFITS UNDER ARTICLE 7 RATHER THAN ROYALTIES, EVEN UNDER ALTERNATIVE DEFINITIONS OF ROYALTIES THAT COVER PAY MENTS 'FOR USE, OR THE RIGHT TO USE, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT.' 77. FURTHER IT WAS SUBMITTED THAT CENTRAL BOARD OF DIRECT TAXES VIDE F NO 5001 122/ 99 DATED DECEMBER 16, 1999 HAS CONSTITUTED A HIGH POWER COMMITTEE ON 'ELECTRONIC COMMERCE AND TA XATION'. THE COMMITTEE HAS HELD THAT PAYMENTS ARISING FROM ADVER TISEMENTS WOULD CONSTITUTE PROFITS AND GAINS FROM BUSINESS OR PROFE SSION. IT WAS SUBMITTED THAT TECHNICAL ADVISORY GROUP REPORT AND THE HIGH POWERED COMMITTEE REPORT ARE BINDING IN NATURE. IN THIS REGARD, LD AR SUBMITTED THAT INDIA HAD A REPRESENTATIVE AS PART OF THE TECHNICAL ADVISORY GROUP CONSTITUTED BY THE OECD WHICH REPRES ENTATIVE DID NOT EXPRESS ANY DISSENT TO THE VIEW EXPRESSED AND H IGH POWERED COMMITTEE WAS CONSTITUTED BY THE CBDT ITSELF AND AL L THE MEMBERS OF THE COMMITTEE HAVE AGREED WITH THE VIEW TAKEN, INCL UDING MEMBERS FROM THE CBDT .FURTHER IT WAS SUBMITTED THAT COORD INATE BENCH IN THE MATTER OF RIGHT FLORIST (SUPRA) HAS AGREED WITH THE VIEWS OF THE HIGH PAGE - 72 IT(TP)A.1511 TO 1516/BANG/2013 POWERED COMMITTEE AND STATED AS UNDER: '13.1N THE LIGHT OF THE ABOVE DISCUSSIONS, EVEN AS PER THE HIGH POWER COMMITTEE, A WEBSITE PER SE, WHICH IS TH E ONLY FORM OF GOOGLE'S PRESENCE IN INDIA - SO FAR AS TEST OF PRIMARY MEANING I.E. BASIC RULE PE IS CONCERNED, CA NNOT BE A PERMANENT ESTABLISHMENT UNDER THE DOMESTIC LAW. W E ARE I CONSIDERED AGREEMENT WITH THE VIEWS OF THE HPC ON T HIS ISSUE' 78. FURTHER COORDINATE MUMBAI BENCH OF THE ITAT IN THE CASE OF EBAY INTERNATIONAL AG (140 ITD 20) HAS UPHELD TH E RELIANCE PLACED ON THE AFORESAID REPORTS WHILE HOLDING THAT THE INCOME RECEIVED BY THE ASSESSEE IN THE SAID CASE TOWARDS O PERATION OF ITS WEBSITE IS BUSINESS INCOME. RELEVANT EXTRACTS ARE R EPRODUCED BELOW FOR YOUR REFERENCE: '13. THE LD. CIT(A) HAS ALSO REFERRED TO HIGH POWER ED COMMITTEE (HPC) ON 'ELECTRONIC COMMERCE TAXATION' CONSTITUTED BY THE CENTRAL BOARD OF DIRECT TAXES, W HICH HAS STATED IN ITS REPORT THAT SUCH AMOUNT WOULD BE IN T HE NATURE OF PAYMENT FOR BUSINESS ACTIVITIES. HE ALSO REFERRED T O THE TECHNICAL ADVISORY GROUP (TAG) FORMED BY OECD, WHICH, VIDE IT S REPORT ON TAX TREATY CHARACTERIZED ISSUES ARISING FROM E-COMM ERCE ISSUED IN FEBRUARY, 2001, HAS ALSO OPINED THAT REVE NUE EARNED BY OPERATING ONLINE FACILITY ARE IN THE NATURE OF BUSI NESS PROFITS FALLING UNDER ARTICLE 7 OF THE TREATY. THESE FINDIN GS RECORDED BY THE ID. CIT(A) HAVE REMAINED UNCONTROVERTED BY THE ID. DR. 14. IN VIEW OF THE ABOVE DISCUSSION, THERE REMAINS NO DOUBT WHATSOEVER THAT THE FEE RECEIVED BY THE ASSESSEE CA N'T BE DESCRIBED AS 'FEE FOR TECHNICAL SERVICES', BUT IS I N THE NATURE OF 'BUSINESS PROFITS. IN OUR CONSIDERED OPINION THE ID. CIT(A) WAS FULLY JUSTIFIED IN HOLDING ACCORDINGLY. THE GROUNDS RAISED BY REVENUE IN SUPPORT OF THIS SOLITARY ISSUE IN ITS AP PEAL, ARE THUS NOT ALLOWED' PAGE - 73 IT(TP)A.1511 TO 1516/BANG/2013 79. PER CONTRA IT WAS SUBMITTED BY DR THAT REFERENC E MADE BY THE ASSESSEE TO HIGH-POWER COMMITTEE DATED 16/12/1999 A ND TAX TREATY DATED 1/2/2001 WAS MISPLACED. THE FACTS IN T HE PRESENT CASE ARE ALTOGETHER DIFFERENT AND THE SAME HAS NO RELEVA NCE FOR THE DISPUTE IN THE PRESENT CASE. 80. THE READING OF THE DECISION IN RIGHT FLORIST P. LTD (SUPRA), IT IS CLEAR THAT THE COORDINATE BENCH RELIED UPON THE DEC ISION OF HIGH- POWER COMMITTEE ON THE PREMISES THAT THE ADVERTISERS PAYING TO WEBSITE FOR ADVERTISEMENTS DISSEMINATED TO USERS OF A GIVEN WEBSITE AND HAD CONCLUDED THAT THE PAYMENT WOULD BE A BUSI NESS PROFIT AND IS NOT TAXABLE IN INDIA IN THE ABSENCE O F PE. 81. WE HAVE IN DETAIL EXAMINED THE WORKING OF ADWOR DS PROGRAMME HEREIN ABOVE AND COME TO THE CONCLUSION THAT APPELLANT MAKES USE OF THE USER DATA /CUSTOMER DATA ( PERSONAL INFORMATION, GENERAL INFORMATION LIKE USER PROFILE, AGE SEX, LANGUAGE, TYPE OF MOBILE, TIME WHEN CUSTOMER IS VIS ITING PARTICULAR WEB SITE/ SEARCHING ON SEARCH ENGINE , HOW MUCH TIM E IS SPENT ON INTERNET AND ON WHICH WEB SITE ETC FOR THE PURPOSE S OF TARGETED/ FOCUS MARKETING CAMPAIGN FOR THE ADVERTISERS ) AND THE PATENTED TECHNOLOGY , WITH ALGORITHM TO ADVERTISE/ DISSEMIN ATE ADS, WHICH WAS NOT THE CASE EITHER BEFORE THE HIGH POWER ED COMMITTEE OR IN THE MATTER OF RIGHT FLORIST P. LTD (SUPRA). PRESENT CASE IS NOT A CASE OF MERELY DISPLAYING OR EXHIBITING OF PAGE - 74 IT(TP)A.1511 TO 1516/BANG/2013 ADVERTISEMENT BY THE ADVERTISER ON THE WEBSITE, CAS E IN HAND IS A CASE OF USE OF PATENTED TECHNOLOGY, SECRET PROCESS, USE OF TRADE MARK BY THE APPELLANT, THEREFORE DECISION OF COORDI NATE BENCH IN THE CASE OF RIGHT FLORIST PRIVATE LIMITED IS NOT AP PLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. IN THE PRESENT CASE THE GOOGLE INDIA HAS BEEN PROVIDED ACCESS TO THE IPR, G OOGLE BRAND FEATURES, SECRET PROCESS EMBEDDED IN ADWORDS PROGRA MME AS TOOL OF THE TRADE FOR GENERATION OF INCOME. THEREFORE THE P AYMENT MADE BY THE APPELLANT TO GOOGLE IRELAND IS ROYALTY AND NOT THE BUSINESS PROFIT AND THEREFORE CHARGEABLE TO TAX IN INDIA. 82. LD. AR FURTHER RELIED UPON PARA 21 OF THE DECI SION OF THE COORDINATE BENCH IN RIGHT FLORIST PRIVATE LIMITED, (SUPRA),PARA 6 OF PINSTORM TECHNOLOGIES P. LTD (SUPRA) AND PARA 8 OF YAHOO INDIA P. LTD, (SUPRA) TO PROVE THAT THE ISSUE OF ONLINE ADVE RTISEMENT HAD BEEN CONSIDERED IN ALL THE DECISIONS AND IT WAS HELD THA T THE PAYMENT MADE BY THE ADVERTISER TO THE WEBSITE OWNER WAS BUSINESS PROFIT AND IN THE ABSENCE OF ANY BUSINESS CONNECTION AND PE IN INDIA AND NOT THE ROYALTY. THEREFORE, THE SAID PAYMENT MADE TO THE SERVICE PROVIDER WERE NOT CHARGEABLE IN INDIA. 82.1 PER CONTRA, THE LD. DR SOUGHT TO DISTINGUISH T HE FACTS OF THE PRESENT CASE AND OF THE DECISIONS REFERRED IN THE P RECEDING PARAGRAPH. 82.2 WE HAVE GONE THROUGH THE ABOVE SAID DECISIONS. IN PARA 8 OF YAHOO INDIA (SUPRA), COORDINATE BENCH HELD AS UNDE R : PAGE - 75 IT(TP)A.1511 TO 1516/BANG/2013 8. AS ALREADY NOTED BY US, THE PAYMENT MADE BY ASSESS EE IN THE PRESENT CASE TO YAHOO HOLDINGS (HONG KONG) LTD., WAS FOR SERVICES R ENDERED FOR UPLOADING AND DISPLAY OF THE BANNER ADVERTISEMENT OF THE DEPARTME NT OF TOURISM OF INDIA ON ITS PORTAL. THE BANNER ADVERTISEMENT HOSTING SERVICES D ID NOT INVOLVE USE OR RIGHT TO USE BY THE ASSESSEE ANY INDUSTRIAL, COMMERCIAL OR SCIEN TIFIC EQUIPMENT AND NO SUCH USE WAS ACTUALLY GRANTED BY YAHOO HOLDINGS (HONG KONG) LTD., TO ASSESSEE COMPANY. UPLOADING AND DISPLAY OF BANNER ADVERTISEMENT ON IT S PORTAL WAS ENTIRELY THE RESPONSIBILITY OF YAHOO HOLDINGS (HONG KONG) LTD. A ND ASSESSEE COMPANY WAS ONLY REQUIRED TO PROVIDE THE BANNER AD TO YAHOO HOLDINGS (HONG KONG) LTD., FOR UPLOADING THE SAME ON ITS PORTAL. ASSESSEE THUS HAD NO RIGHT TO ACCESS THE PORTAL OF YAHOO HOLDINGS (HONG KONG) LTD. AND THERE IS NOTHIN G TO SHOW ANY POSITIVE ACT OF UTILIZATION OR EMPLOYMENT OF THE PORTAL OF YAHOO HO LDINGS (HONG KONG) LTD., BY THE ASSESSEE COMPANY. HAVING REGARD TO ALL THESE FACTS OF THE CASE AND KEEPING IN VIEW THE DECISION OF THE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF ISRO SATELLITE CENTRE ( SUPRA ) AND DELL INTERNATIONAL SERVICES (INDIA) (P.) LTD. CASE ( SUPRA ), WE ARE OF THE VIEW THAT THE PAYMENT MADE BY ASSESSEE TO YA HOO HOLDINGS (HONG KONG) LTD., FOR THE SERVICES RENDERED FOR UPLOADING AND D ISPLAY OF THE BANNER ADVERTISEMENT OF THE DEPARTMENT OF TOURISM OF INDIA ON ITS PORTAL WAS NOT IN THE NATURE OF ROYALTY BUT THE SAME WAS IN THE NATURE OF BUSINESS PROFIT A ND IN THE ABSENCE OF ANY PE OF YAHOO HOLDINGS (HONG KONG) LTD., IN INDIA, IT WAS N OT CHARGEABLE TO TAX IN INDIA. ASSESSEE THUS WAS NOT LIABLE TO DEDUCT TAX AT SOURC E FROM THE PAYMENT MADE TO YAHOO HOLDINGS (HONG KONG) LTD., FOR SUCH SERVICES AND IN OUR OPINION, THE PAYMENT SO MADE CANNOT BE DISALLOWED BY INVOKING TH E PROVISIONS OF SECTION 40( A ) FOR NON-DEDUCTION OF TAX. IN THAT VIEW OF THE MATTE R WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARN ED CIT(A) UNDER SECTION 40( A ) AND ALLOW THE APPEAL OF THE ASSESSEE. RELYING UPON PARA 8 OF YAHOO INDIA (SUPRA), THE CO ORDINATE IN PARA 6 OF THE DECISION IN PINSTORM (SUPRA) HELD AS UNDER : 6. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE HAD COM E UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF YAHOO INDIA (P.) LTD. V . DY. CIT [2011] 46 SOT 105 / 11 TAXMANN.COM 431 (MUM.)(URO) , THE TRIBUNAL DECIDED THE SAME IN FAVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NO.8 OF ITS ORDER: '8. AS ALREADY NOTED BY US, THE PAYMENT MADE BY ASS ESSEE IN THE PRESENT CASE TO YAHOO HOLDINGS (HONG KONG) LTD. WAS FOR SERVICES RE NDERED FOR UPLOADING AND DISPLAY OF THE BANNER ADVERTISEMENT OF THE DEPARTME NT OF TOURISM OF INDIA ON ITS PORTAL. THE BANNER ADVERTISEMENT HOSTING SERVICES D ID NOT INVOLVE USE OR RIGHT TO USE BY THE ASSESSEE ANY INDUSTRIAL, COMMERCIAL OR S CIENTIFIC EQUIPMENT AND NO SUCH USE WAS ACTUALLY GRANTED BY YAHOO HOLDINGS (HONG KO NG) LTD. TO ASSESSEE COMPANY. UPLOADING AND DISPLAY OF BANNER ADVERTISEM ENT ON ITS PORTAL WAS ENTIRELY THE RESPONSIBILITY OF YAHOO HOLDINGS (HONG KONG) LT D. AND ASSESSEE COMPANY WAS ONLY REQUIRED TO PROVIDE THE BANNER AD TO YAHOO HOL DINGS (HONG KONG) LTD. FOR UPLOADING THE SAME ON ITS PORTAL. ASSESSEE THUS HAD NO RIGHT TO ACCESS THE PORTAL OF PAGE - 76 IT(TP)A.1511 TO 1516/BANG/2013 YAHOO HOLDINGS (HONG KONG) LTD. AND THERE IS NOTHIN G TO SHOW ANY POSITIVE ACT OF UTILIZATION OR EMPLOYMENT OF THE PORTAL OF YAHOO HO LDINGS (HONG KONG) LTD. BY THE ASSESSEE COMPANY. HAVING REGARD TO ALL THESE FA CTS OF THE CASE AND KEEPING IN VIEW THE DECISION OF THE AUTHORITY OF ADVANCE RULIN GS IN THE CASE OF ISRO SATELLITE CENTRE 307 ITR 59 AND DELL INTERNATIONAL SERVICES (INDIA) (P.) LTD. 305 ITR 37, WE ARE OF THE VIEW THAT THE PAYMENT MADE BY ASSESSEE T O YAHOO HOLDINGS (HONG KONG) LTD. FOR THE SERVICES RENDERED FOR UPLOADING AND DISPLAY OF THE BANNER ADVERTISEMENT OF THE DEPARTMENT OF TOURISM OF INDIA ON ITS PORTAL WAS NOT IN THE NATURE OF ROYALTY BUT THE SAME WAS IN THE NATURE OF BUSINESS PROFIT AND IN THE ABSENCE OF ANY PE OF YAHOO HOLDINGS (HONG KONG) LTD . IN INDIA, IT WAS NOT CHARGEABLE TO TAX IN INDIA. ASSESSEE THUS WAS NOT L IABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO YAHOO HOLDINGS (HONG KONG) LTD. FOR SUCH SERVICES AND IN OUR OPINION, THE PAYMENT SO MADE CANNOT BE DISALLOW ED BY INVOKING THE PROVISIONS OF SECTION 40(A) FOR NON-DEDUCTION OF TAX. IN THAT VIEW OF THE MATTER WE DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LEARNED CIT (A) U/S 40(A) AND ALLOW THE APPEAL OF THE ASSESSEE.' SIMILARLY, IN PARA 21 OF THE DECISION IN RIGHT FL ORIST (SUPRA), IT WAS HELD AS UNDER : 21. THAT TAKES US TO THE QUESTION WHETHER SECOND LIMB OF SECTION 5(2)(B), I.E. INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA', C AN BE INVOKED IN THIS CASE. SO FAR AS THIS DEEMING FICTION IS CONCERNED, IT IS SET OUT, AS A COMPLETE CODE OF THIS DEEMING FICTION, IN SECTION 9 OF THE INCOME TAX ACT, 1961, AND SECTION 9(1) SPECIFIES THE INCOMES WHICH SHALL BE D EEMED TO ACCRUE OR ARISE IN INDIA. IN THE PINSTORM TECHNOLOGIES (P.) LTD.'S CASE ( SUPRA ) AND IN YAHOO INDIA (P.) LTD'S CASE ( SUPRA ), THE COORDINATE BENCHES HAVE DEALT WITH ONLY ONE SEGMENT OF THIS PROVISION I.E. SECTION 9(1)(VI) , BUT THERE IS CERTAINLY MUCH MORE TO THIS DEEMING FICTION. CLAUSE (I) OF SE CTION 9(1) OF THE ACT PROVIDES THAT ALL INCOME ACCRUING OR ARISING WHETHE R DIRECTLY OR INDIRECTLY THROUGH OR FROM ANY 'BUSINESS CONNECTION' IN INDIA, OR THROUGH OR FROM ANY PROPERTY IN INDIA OR THROUGH OR FROM ANY ASSET OR S OURCE OF INCOME IN INDIA, ETC SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA. HO WEVER, AS FAR AS THE IMPUGNED RECEIPTS ARE CONCERNED, NEITHER IT IS THE CASE OF THE ASSESSING OFFICER NOR HAS IT BEEN POINTED OUT TO US AS TO HOW THESE RECEIPTS HAVE ARISE ON ACCOUNT OF ANY BUSINESS CONNECTION IN INDIA. THE RE IS NOTHING ON RECORD DO DEMONSTRATE OR SUGGEST THAT THE ONLINE ADVERTISI NG REVENUES GENERATED IN INDIA WERE SUPPORTED BY, SERVICED BY OR CONNECTED W ITH ANY ENTITY BASED IN INDIA. ON THESE FACTS, SECTION 9(1)(I) CANNOT HAVE ANY APPLICATION IN THE MATTER. SECTION 9(1)(II), (III), (IV) AND (V) DEAL WITH THE INCOMES IN THE NATURE OF SALARIES, DIVIDEND AND INTEREST ETC, AND THEREFORE, THESE DEEMING FICTIONS ARE NOT APPLICABLE ON THE FACTS OF THE CAS E BEFORE US. AS FAR AS PAGE - 77 IT(TP)A.1511 TO 1516/BANG/2013 APPLICABILITY OF SECTION 9(1)(VI) IS CONCERNED, COO RDINATE BENCHES, IN THE CASES OF PINSTORM TECHNOLOGIES (P.) LTD. ( SUPRA ) AND YAHOO INDIA (P.) LTD. ( SUPRA ), HAVE DEALT WITH THE SAME AND, FOR THE DETAILED R EASONS SET OUT IN THESE ERUDITE ORDERS - EXTRACTS FROM WHICH H AVE BEEN REPRODUCED EARLIER IN THIS ORDER, CONCLUDED THAT THE PROVISION S OF SECTION 9(1)(VI) CANNOT BE INVOKED. WE ARE IN CONSIDERED AND RESPECT FUL AGREEMENT WITH THE VIEWS SO EXPRESSED BY OUR DISTINGUISHED CO LLEAGUES . (EMPHASIS SUPPLIED BY US ) 82.3. AFTER GOING THROUGH ALL THE ABOVE CITED DECIS IONS OF THE COORDINATE BENCH, WE ARE UNABLE TO PERSUADE OURSELV ES TO AGREE WITH THE REASONING FOR TREATING THE PAYMENT MADE BY THE ADVERTISERS AS A BUSINESS PROFIT AND NOT AS A ROYALTY. AS IN OUR OP INION, THE DETAILED WORKING OF THE ADWORD PROGRAMME OF THE APPELLANT AN D GIL CLEARLY SHOWS THAT THE APPELLANT IS HAVING THE RIGHT TO ACC ESS NOT ONLY TO THE PATENTED TECHNOLOGY BUT ALSO TO THE CUSTOMER DATA, INFORMATION (LIKE TELEPHONE NUMBER, USER BEHAVIORS, REGION, GENDER , LANGUAGE, COLOUR, PHOTOGRAPHS, PLACE OF VISIT, MOBILE DEVICE USED, TI ME SPENT ETC.,) AND WHICH WAS NOT THE CASE IN THE THE DECISIONS IN YAHO O INDIA, PINSTORM AND RIGHT FLORIST (SUPRA). AS CLEAR FROM THE DISTR IBUTION AGREEMENT, THE ASSESSEE IS ALSO HAVING RIGHT, TITLE AND INTERE ST OVER THE INTELLECTUAL PROPERTY RIGHT OF GOOGLE. FURTHER, AS PER THE STAN DARD ADVERTISEMENT WITH THE ADVERTISER, WHICH SPECIFICALLY EMPOWERS TH E APPELLANT TO DELETE / REMOVE / WITHDRAW THE ADVERTISEMENT. THE R ELEVANT PORTION OF THE AGREEMENT READS AS UNDER : PAGE - 78 IT(TP)A.1511 TO 1516/BANG/2013 GOOGLE INDIA P. LTD, ADVERTISING PROGRAM TERMS : 1.. 2. THE PROGRAM :.CUSTOMER GRANTS GOOGLE PERMISSION TO UTILIZE AN AUTOMATED SOFTWARE PROGRAM TO RETRIEVE AND ANALYSE WEBSITES ASSOCIATED WITH THE SERVICES F OR AD QUALITY AND SERVIING PURPOSES, UNLESS CUSTOMER SPECIFICALLY OPTS OUT OF THE EVALUATION IN A MANNER SPECIFIED BY GOOGLE. GO OGLE OR PARTNERS MAY REJECT OR REMOVE ANY AD OR TARGET ANY TIME FOR ANY OR NO REASON. GOOGLE MAY MODIFY THE PROGRAM OR THE SE TERMS AT ANY TIME WITHOUT LIABILITY AND YOUR USE OF THE PROG RAM AFTER NOTICE THAT TERMS HAVE CHANGED INDICATES ACCEPTANCE OF THE TERMS. THIS VESTING OF POWER IN THE APPELLANT, CLEARLY DE MONSTRATE GIVE THE APPELLANT IN INDIA RIGHT TO ACCESS THE PORTAL / GO OGLE ADWORD PROGRAM AT ANY POINT OF TIME. IN VIEW OF THE ABOVE , THE DECISIONS RELIED UPON BY THE LD. AR ARE NOT APPLICABLE TO THE FACTS OF THE CASE. ACCORDINGLY, ALL THE GROUND NOS.1 TO 11 OF THE APPE ALS OF THE ASSESSEE ARE DISMISSED. GROUND NO.12 83. WE WILL DEAL WITH GROUND NO.12 WHICH IS COMMON ONLY IN ASST. YEAR 2007-08 AND 2008-09. 84. LEARNED COUNSEL FOR THE ASSESSEE HAS BROUGHT TO OUR NOTICE THE FOLLOWING DATES AND EVENTS: PAGE - 79 IT(TP)A.1511 TO 1516/BANG/2013 20/11/2012 AO ISSUED NOTICE UNDER SECTION 201 AS UN DER: 20/11/2012 THE ASSESSEE FILED A REPLY TO THE NOTICE ISSUED BY THE AO AND SUBMITTED THAT FEE PAID BY THE ASSESSEE TO GI IS CO VERED UNDER THE DEFINITION OF ROYALTY AS PER EXPLANATION TO S ECTION 9(1)(VI) OF THE ACT AND FURTHER IT WAS SUBMITTED THAT THE AS SESSEE IS A MERE NON- EXCLUSIVE DISTRIBUTOR OF ADWORBS IN INDIA. DISTRIBUTION FEE IS PAYABLE TO GI ON DISTRIBUTION O F ADWORDS IN INDIA AND IS NOT IN RELATION TO ANY TRANSFER OF ANY RIGHT OR USE ANY PATENT, PUBLIC INVENTION. FURTHER IT WAS MENTIONED THAT ALL RIGHTS, TITLE AND INTEREST IN RELATION TO INFORMATI ON ON DATA INCLUDING USER DATA PROVIDED BY THE USER ARE OWNED BY THE GI. FURTHER, THE ASSESSEE RELIED UPON THE REPORT OF TAG SET UP BY THE OECD AND THE REPORT OF THE HIGH POWER COMMITTEE CON STITUTED BY THE CBDT VIDE ORDER DATED 16/12/1999 ON ELECTRON IC COMMUNICATION TAXATION WHEREIN IT WAS HELD THAT PAY MENTS ARISING FROM ADVERTISEMENTS WOULD CONSTITUTE PROFIT S AND GAINS FROM BUSINESS OR PROFESSION OTHER THAN ROYALTY. IT WAS ALSO SUBMITTED THAT NO REMITTANCE HAS BEEN MADE BY THE A SSESSEE TO GI IN RELATION TO REMITTANCE OF DISTRIBUTION FEE TO GI FOR FINANCIAL YEARS 2005-06 TO 2010-11. 18/01/2013 SHOW CAUSE NOTICE WAS ISSUED ASKING THE ASSESSEE TO CONFIRM WHETHER ANY SUM HAS ACTUALLY BEEN CREDITED TO THE A CCOUNT OF GI DURING THE FYS 2005-06 TO 2010-11. 29/01/2013 THE ASSESSEE REPLIED TO SHOW CAUSE NOTIC E DATED 18/1/2013 AND IT PAGE - 80 IT(TP)A.1511 TO 1516/BANG/2013 WAS MENTIONED AS UNDER FURTHER, IT WAS MENTIONED IN PARA.3 (AT PAGE 129 OF PAPER BOOK) THAT AS PER ARTICLE 12 OF THE INDIA-IRELAND DOUBLE TAXATION AVOIDANCE AGREEMENT, INCOME IN NATURE OF ROYALTY IS CHARGEABLE TO TAX IN HANDS OF NON-RESIDENT ONLY ON RECEIPT BAS IS AND THERE IS NO OBLIGATION ON THE ASSESSEE TO WITHHOLD TAX ONLY WHEN THE SAME IS CHARGEABLE TO TAX IN INDIA. FURTHER FEES, IF ANY, WOULD BE REQUIRED ONLY AT THE TIME OF ACTUAL REMITTANCE AND NOT ON CREDIT OF BOOKS OF ACCOUNT. 15/02/2013 THE ASSESSEE REPLIED TO THE QUESTIONNAIR E DATED 31/1/2013 AND IN THE SAID REPLY IN PARA.3, 5, 6, 7, 9, 10 AND 11 MEN TIONED AS UNDER: PAGE - 81 IT(TP)A.1511 TO 1516/BANG/2013 85. AFTER GIVING DETAILS OF THE PROCEEDINGS WHICH T OOK PLACE BEFORE THE AO, IN RESPECT OF GROUND NO.12 FOR ASSESSMENT Y EARS 2007-08 AND 2008-09, IT WAS CONTENDED BY THE LEARNED COUNSEL FO R THE ASSESSEE THAT 8/02/2013 THE REVENUE ISSUED ANOTHER SHOW CAUSE NOT ICE ASKING THE ASSESSEE TO FURNISH FOLLOWING INFORMATION 15/2/2013 ASSESSEE FILED REPLY PAGE 139 22/2/2013 THE AO PASSED ORDER U/S 201(1) AND 201(1A ) OF THE IT ACT FOR ASSESSMENT YEARS 2006-07 TO 2012-13. PAGE - 82 IT(TP)A.1511 TO 1516/BANG/2013 THE NOTICE ISSUED FOR DECLARING ASSESSEE IN DEFAULT WAS BARRED BY LIMITATION AS HELD BY THE HONBLE DELHI HIGH COURT IN CIT VS. NHK JAPAN BROADCASTING CORPORATION (305 ITR 137) WHEREIN IT WAS HELD THAT INITIATION OF PROCEEDINGS U/S 201 AGAINST THE ASSESSEE IN RESPECT OF ASSESSMENT YEAR 1990-91 WAS BARRED BY LIMITATION HA VING BEEN INITIATED BEYOND REASONABLE PERIOD OF 4 YEARS. IN PARAS.18, 19, 20 OF THE JUDGMENT, IT HAS BEEN HELD AS UNDER: 18. INSOFAR AS THE INCOME-TAX ACT IS CONCERNED, OUR ATTENTION HAS BEEN DRAWN TO SECTION 153(1)( A ) THEREOF WHICH PRESCRIBES THE TIME-LIMIT FOR COMPLETING THE ASSESSMENT, WHICH IS TWO YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INCOME WAS FIRST ASSESSABLE. IT IS WELL-KNOWN THAT THE ASSESSMENT YE AR FOLLOWS THE PREVIOUS YEAR AND, THEREFORE, THE TIME- LIMIT WOULD BE THREE YEARS FROM THE END OF THE FINANCIAL YEAR. THIS SEEMS TO BE A REASONABLE PERIO D AS ACCEPTED UNDER SECTION 153 OF THE ACT, THOUGH FO R COMPLETION OF ASSESSMENT PROCEEDINGS. THE PROVISIONS OF RE-ASSESSMENT ARE UNDER SECTIONS 147 AND 148 OF THE ACT AND THEY ARE ON A COMPLETELY DIFFERENT FOOTING AND, THEREFORE, DO NOT MERIT CONSIDERATION FOR THE PURPOSES OF THIS CASE. 19. EVEN THOUGH THE PERIOD OF THREE YEARS WOULD BE A REASONABLE PERIOD AS PRESCRIBED BY SECTION 153 OF T HE ACT FOR COMPLETION OF PROCEEDINGS, WE HAVE BEEN TOL D THAT THE INCOME-TAX APPELLATE TRIBUNAL HAS, IN A SERIES OF DECISIONS, SOME OF WHICH HAVE BEEN MENTIONED IN THE ORDER WHICH IS UNDER CHALLENGE BEFORE US, TAKEN THE VIEW THAT FOUR YEARS WOULD BE A REASONABLE PERIOD OF TIME FOR INITIATING ACTION, IN A CASE WHERE NO LIMITATION IS PRESCRIBED. PAGE - 83 IT(TP)A.1511 TO 1516/BANG/2013 20. THE RATIONALE FOR THIS SEEMS TO BE QUITE CLEAR - I F THERE IS A TIME-LIMIT FOR COMPLETING THE ASSESSMENT THEN THE TIME-LIMIT FOR INITIATING THE PROCEEDINGS MUST BE THE SAME IF NOT LESS. NEVERTHELESS, THE TRIBUNAL HAS GIVEN A GREATER PERIOD FOR COMMENCEMENT OR INITIATION OF PROCEEDINGS. 86. FURTHER OUR ATTENTION WAS DRAWN TO THE DECISION IN THE CASE OF CIT VS. BHARAT HOTELS LTD. (384 ITR 77) WHEREIN THE JURISDICTIONAL HIGH COURT IN PARAS.10, 26, AND 27 HELD AS UNDER: 10. ADMITTEDLY, AT THE RELEVANT TIME RELATING TO ASSESSMENT YEAR 2002-03, THERE WAS NO LIMITATION PROVIDED FOR INITIATING PROCEEDINGS UNDER SECTION 201. THE TRIBUNAL HAS, AFTER CONSIDERING THE VARIOU S DECISIONS OF THE APEX COURT, AS WELL AS THE DELHI, KERALA, PUNJAB & HARYANA HIGH COURTS, HELD THAT THE PROCEEDINGS HAVING BEEN INITIATED BY THE REVENUE BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR, WOULD BE BARRED BY LIMITAT ION. CHALLENGING THE SAME, SRI K V ARAVIND, LEARNED COUNSEL FOR THE REVENUE HAS VEHEMENTLY ARGUED THAT WHEN THERE IS NO LIMITATION PROVIDED UNDER THE ACT, PROCEEDINGS CAN BE INITIATED AT ANY STAGE AND AT AN Y TIME. IN THE ALTERNATIVE, HE SUBMITTED THAT EVEN IF IT IS HELD THAT PROCEEDINGS ARE TO BE INITIATED WITHIN A REASONABLE TIME, THEN TOO, THE PERIOD OF SEVEN YEAR S FROM THE END OF THE FINANCIAL YEAR, AS HAS BEEN PROVIDED FOR BY THE FINANCE ACT, 2014, WOULD BE THE REASONABLE TIME. HE HAS SUBMITTED THAT SECTION 153 OF THE ACT PROVIDES FOR TIME FOR COMPLETION OF ASSESSMENTS AND REASSESSMENTS. SUB-SECTION (1) OF T HE SAID SECTION PROVIDES FOR ASSESSMENT TO BE COMPLETE D WITHIN TWO YEARS FROM THE END OF THE ASSESSMENT YEA R AND ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN PAGE - 84 IT(TP)A.1511 TO 1516/BANG/2013 WHICH THE RETURN WAS FILED. HE RELIES ON SUB-SECTIO N (2) OF SECTION 153 WHICH PROVIDES THAT NO ORDER OF ASSESSMENT, REASSESSMENT OR RECOMPUTATION SHALL BE MADE UNDER SECTION 147 AFTER EXPIRY OF ONE YEAR FRO M THE END OF THE FINANCIAL YEAR IN WHICH NOTICE UNDER SECTION 148 WAS SERVED. ACCORDING TO HIM, SECTION 147 OF THE ACT WOULD APPLY FOR COMPUTING THE REASONABLE PERIOD AND NOT SECTION 153(1) OF THE ACT , AND SINCE NOTICE UNDER SECTION 148 COULD BE SERVED UP TO SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR (IN CASES WHERE THE AMOUNT INVOLVED IS MORE THAN RS.1 LAKH) COUPLED WITH SECTION 153(2) OF THE ACT PROVIDING ONE YEAR TIME FOR PASSING THE ORDER OF ASSESSMENT, REASSESSEMENT OR RECOMPUTATION IN WHICH THE NOTICE UNDER SECTION 148 WAS SERVED, T HE SAME WOULD AMOUNT TO SEVEN YEARS FROM THE END OF THE FINANCIAL YEAR AND HE THUS CONTENDS THAT REASONABLE PERIOD OF LIMITATION UNDER SECTION 201 O F THE ACT SHOULD ALSO BE SEVEN YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR. 26. SRI K V ARAVIND, LEARNED COUNSEL FOR THE REVENUE HAS SUBMITTED THAT SUB-SECTION (1A) OF SECTION 201 OF THE ACT PROVIDES FOR PAYMENT OF INTEREST. THE SUB- SECTION, AS IT STOOD AT THE RELEVANT TIME, PRIOR TO 1.7.2010, READS AS UNDER: '(1A) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECTION (1), IF ANY SUCH PERSON, PRINCIPAL OFFICER OR COMPANY AS IS REFERRED TO IN THAT SUB- SECTION DOES NOT DEDUCT THE WHOLE OR ANY PART OF THE TAX OR AFTER DEDUCTING FAILS TO PAY THE TAX AS REQUIRED BY OR UNDER THIS ACT, HE OR IT SHALL BE LIABLE TO PAY SIMPLE INTEREST AT 'ONE PER CENT FOR EVERY MONTH OR PART OF A MONTH ON THE AMOUNT OF SUCH TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH SUCH TAX IS ACTUALLY PAID AND SUCH INTEREST SHALL BE PAID PAGE - 85 IT(TP)A.1511 TO 1516/BANG/2013 BEFORE FURNISHING THE STATEMENT IN ACCORDANCE WITH THE PROVISIONS OF SUB-SECTION (3) OF SECTION 200.' THE SAID SUB-SECTION CLEARLY PROVIDES THAT INTEREST WOULD BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE, I.E., THE DATE WHEN PAYMENT WAS MADE BY THE ASSESSEE TO THE RECIPIENT; TILL THE DAT E ON WHICH SUCH TAX WAS ACTUALLY PAID, I.E., TAX WAS DEPOSITED BY THE RECIPIENT. 27. THE PROVISION FOR TAX DEDUCTION AT SOURCE IS ONLY A MECHANISM FOR COLLECTION OF TAX BY THE PAYER, EVE N THOUGH THE LIABILITY TO PAY TAX IS THAT OF THE RECI PIENT. THE PROVISION FOR PAYMENT OF INTEREST UNDER SUB- SECTION (1A) OF SECTION 201 OF THE ACT IS ONLY OF COMPENSATORY NATURE. IT CANNOT BE A MEANS TO PENALI SE THE PAYER. THE PROVISION FOR PAYMENT OF INTEREST WOULD ARISE FROM THE DATE WHEN IT OUGHT TO HAVE BEE N DEDUCTED I.E., FROM THE DATE OF PAYMENT BY THE PAYE R TO THE RECIPIENT. THE LIABILITY TO PAY INTEREST WOU LD END ON THE DATE WHEN SUCH TAX HAS BEEN DEPOSITED BY THE RECIPIENT, EITHER BY WAY OF ADVANCE TAX OR ALON G WITH THE RETURN OF INCOME. INTEREST, HEREIN, BEING COMPENSATORY IN NATURE, CANNOT BE THUS CHARGED FOR THE PERIOD BEYOND THE DATE WHEN SUCH TAX HAS ALREAD Y BEEN DEPOSITED BY THE RECIPIENT. IF THE REVENUE IS PERMITTED TO CHARGE INTEREST EVEN AFTER THE RECIPIE NT HAS DEPOSITED THE TAX, THE SAME WOULD AMOUNT TO UNDUE ENRICHMENT OF THE REVENUE, AS EVEN AFTER RECEIVING THE TAX, IT WOULD CONTINUE TO GET INTERES T ON THE AMOUNT WHICH HAS ALREADY BEEN PAID OR DEPOSITED WITH IT. AS SUCH, THE LIABILITY OF THE ASSESSEE HER EIN WOULD NOT BE FOR PAYMENT OF INTEREST AFTER THE PERI OD OF DEPOSIT OF TAX BY THE RECIPIENT. 87. OUR ATTENTION WAS ALSO DRAWN TO THE JUDGMENT OF THE SPECIAL BENCH OF TRIBUNAL IN THE CASE OF MAHINDRA & MAHINDRA LTD., VS. PAGE - 86 IT(TP)A.1511 TO 1516/BANG/2013 DCIT (30 SOT 374) OUR ATTENTION WAS DRAWN TO PARAS.14.1, 14.2, 17.1, 17.5, 17.10, 17.10 AND 17.14. FURTHER OUR ATTENTION WAS ALSO DRAWN TO THE JUDGMENT PASSED BY THE HONBLE AP HIGH COURT IN THE CASE OF CIT VS. ELECTRONIC INSTRUMENTS LTD. (371 ITR 314). 88. ON THE BASIS OF THE JUDGMENTS REFERRED TO ABOVE , IT WAS SUBMITTED BY THE AR FOR THE ASSESSEE THAT INITIATIO N OF PROCEEDINGS COMMENCED FROM THE ISSUE OF SHOW CAUSE NOTICE DATED 20/11/2012 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. HOWEVER, IN LIGHT OF LAW LAID DOWN BY THE AFORESAID JUDGMENTS, NOTICE SHOULD HAVE BEEN ISSUED BY THE AO WITHIN 4 YEARS FROM THE END OF THE FINANC IAL YEAR I.E. FOR THE ASSESSMENT YEAR 2007-08, NOTICE SHOULD HAVE BEEN IS SUED BY THE AO ON OR BEFORE 31/03/2011 AND FOR THE ASSESSMENT YEAR 2008-09 BY 31/03/2012. AS THE NOTICES WERE NOT ISSUED BY THE AO BEFORE THE SAID DATE AND WERE ADMITTEDLY ISSUED ON 20/11/2012, INIT IATION OF PROCEEDINGS BY THE AO WAS BEYOND THE PERIOD OF LIMI TATION AND THEREFORE, THE NOTICE WAS BARRED BY LIMITATION AND THEREFORE, PROCEEDINGS INITIATED ON THE BASIS OF THE ABOVE SAI D NOTICES WERE REQUIRE TO BE DROPPED. 89. PER CONTRA, LEARNED STANDING COUNSEL HAS DRAWN OUR ATTENTION TO THE PROVISIONS OF SECTION 201 AS ON THE DATE OF ISS UANCE OF NOTICE I.E. 20/11/2012. IT WAS SUBMITTED THAT SECTION 201(3) W AS AVAILABLE ON THE STATUTE BOOK AS ON 20/11/2012 TO THE FOLLOWING EFFE CT: PAGE - 87 IT(TP)A.1511 TO 1516/BANG/2013 '201(3) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1 ) DEEMING A PERSON TO BE AN ASSESSEE IN DEFAULT FOR FAILURE TO DEDUCT THE WHOLE OR ANY PART OF THE TAX FROM A PERSON RESIDENT IN INDIA, AT ANY TIME AFTER THE E XPIRY OF (I) TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE STATEMENT IS FILED IN A CASE WHERE THE STATEMENT REFERRED TO IN SECTION 200 HAS BEEN FILED; (II) SIX YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH PAYMENT IS MADE OR CREDIT IS GIVEN, IN ANY OTHER CASE : PROVIDED THAT SUCH ORDER FOR A FINANCIAL YEAR COMMENCING ON OR BEFORE THE 1ST DAY OF APRIL, 2007 MAY BE PASSED AT ANY TIME ON OR BEFORE THE 31ST DAY OF MARCH, 2011. 90. ON THE BASIS OF THE ABOVE, IT WAS SUBMITTED THA T PROCEEDINGS INITIATED BY THE AO WAS WITHIN THE PERIOD OF LIMITA TION AS IT WAS COMMENCED WITHIN 6 YEARS FROM THE END OF THE FINANC IAL YEAR IN WHICH PAYMENT IS MADE OR CREDITED AS IN ANY OTHER CASE. IT WAS FURTHER SUBMITTED THAT THOUGH IN THE AMENDED PROVISION MENT IONED HEREINABOVE, THE LEGISLATURE HAS ONLY MENTIONED PER IOD OF LIMITATION FOR INITIATION OF PROCEEDINGS U/S 201(3) AGAINST TH E RESIDENT IN INDIA BUT IN ABSENCE OF ANY PROVISION FOR LIMITATION FOR INITIATION OF PROCEEDINGS U/S 201, SAME PERIOD SHOULD BE APPLICAB LE FOR INITIATION OF PROCEEDINGS FOR NON- RESIDENT AS WELL. 91. FOR THE PURPOSE OF ABOVE, IT WAS SUBMITTED THAT THE REASONING WHICH WAS GIVEN BY COURTS/TRIBUNAL REFERRED BY THE ASSESSEE ARE NOT PAGE - 88 IT(TP)A.1511 TO 1516/BANG/2013 AVAILABLE AS ALL THE JUDGMENTS REFERRED BY THE LEAR NED COUNSEL FOR THE ASSESSEE WERE FOR THE PERIOD PRIOR TO INTRODUCTION OF AMENDMENT IN SECTION 201(1) OF THE ACT. IT WAS SUBMITTED THAT ON THE ANALOGY AND REASONING GIVEN BY THE SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) IN PARAS.14.2, 17.10 AND 17.11 ARE NO MORE AVAILABLE TO THE ASSESSEE AS THE SAID REASONING WERE GIVEN BY THE SPECIAL BENCH IN THE CASE OF MAHENDRA & MAHENDRA (SUPRA) IN THE ABSENCE OF LIMITATION FOR INITIATION OF PROCEEDINGS OR PASSING OF ORDER U/S 201 OF THE ACT AS APPLICABLE ON SAID DATE AND THEREFORE, T HE SPECIAL BENCH HAS APPLIED THE LIMITATION AS PROVIDED U/S 143(2), 149, 153, 154 AND 263 TO THE PROCEEDINGS UNDER SECTION 201 OF THE ACT. TH E SPECIAL BENCH AFTER DETAILED EXAMINATION IN PARA.14.2, IN THE CAS E MAHINDRA & MAHINDRA HAS CAME TO THE CONCLUSION THAT, AS THERE IS NO LIMITATION PROVIDED UNDER UN-AMENDED SECTION 201, THEREFORE, PERIOD OF 4 YEARS WILL BE THE REASONABLE PERIOD FOR INITIATION OF PRO CEEDINGS. FURTHER IT WAS HELD THAT THE PERIOD OF COMPLETION OF PROCEEDIN GS SHALL BE ONE YEAR FORM THE END OF THE RELEVANT FINANCIAL YEAR. 92. ON THE BASIS OF ABOVE IT WAS SUBMITTED BY THE L EARNED STANDING COUNSEL THAT THE REASONING AS GIVEN BY THE SPECIAL BENCH, HONBLE JURISDICTIONAL HIGH COURT AS WELL AS BY OTHER HIGH COURTS IS NO MORE AVAILABLE FOR INITIATION OF PROCEEDINGS AGAINST NON -RESIDENT FOR PERIOD OF 4 YEARS, IN VIEW OF THE FACT THAT SAME LOGIC AND REASONING IS REQUIRED TO BE FOLLOWED BY THE TRIBUNAL BY LAYING D OWN THE REASONABLE PERIOD OF LIMITATION FOR INITIATION OF PROCEEDINGS AGAINST NON-RESIDENT PAGE - 89 IT(TP)A.1511 TO 1516/BANG/2013 ENTITY. IN THE WRITTEN SUBMISSIONS IT WAS SUBMITTED BY THE DR AS UNDER: 1. SECTION 201(3) OF THE ACT HAS BEEN AMENDED BY PROVIDING LIMITATION ONLY IN RESPECT OF PAYMENTS MA DE TO THE RESIDENT IN INDIA. IN THE CIRCULAR EXPLAININ G THE FINANCE ACT, IT HAS BEEN SPECIFICALLY REFERRED THAT THE PAYMENTS MADE TO THE NONRESIDENTS, NO LIMITATION IS APPLICABLE. IN VIEW OF THE SPECIFIC PROVISION PROVIDING LIMITATION ONLY TO THE PAYMENTS MADE TO T HE RESIDENT IN INDIA AND NOT PROVIDING ANY LIMITATION TO THE PAYMENTS MADE TO THE NON-RESIDENT, NO LIMITATION CAN BE PRESCRIBED OR READ INTO THE SECTION. 2) WITHOUT PREJUDICE TO THE ABOVE CONTENTION IF TH E CONTENTION OF THE ASSESSEE IS TO BE ACCEPTED THAT I N THE ABSENCE OF ANY LIMITATION BEING PROVIDED UNDER THE ACT, REASONABLE TIME LIMIT HAS TO BE READ INTO THE SECTI ON AS HELD BY VARIOUS HIGH COURTS IN THE CASE OF NHK JAPA N, BHARATH HOTELS, THE LIMITATION PROVIDED FOR PAYMENT S TO RESIDENTS HAS TO BE APPLIED(SIX YEARS). OTHERWISE I T AMOUNT TO DISCRIMINATION BETWEEN THE PAYMENTS MADE TO THE RESIDENT AND THE NON-RESIDENT. 3)INSOFAR AS THE JUDGEMENTS RELIED ON BY THE ASSESSEE, ALL THE JUDGEMENTS WERE RENDERED IN RESPECT OF THE ORDERS PASSED PRIOR TO AMENDMENT TO SECTION 201(3) OF THE ACT AND PERIOD OF FOUR YEARS HAS BEEN ARRIVED AT ON THE ANALOGY OF VARIOUS OTHER PROVISIONS UNDER THE ACT. EVEN IN THE ABSENCE OF ANY LIMITATION BEING PROVIDED UNDER SECTION 201(3) OF THE ACT FOR PAYMENTS TO THE NONRESIDENT'S, EVEN CERTAIN LIMITATION IS TO BE PROVIDED, APPLYING THE SAME ANA LOGY AS HELD BY THE VARIOUS COURTS IN THE JUDGEMENTS RELIED ON BY THE ASSESSEE, PERIOD OF SIX YEARS HAS TO BE READ/CONSIDERED IN VIEW OF THE LEGISLATIVE INTERFER ENCE BY INTRODUCTION OF SECTION 201(3) OF THE ACT. IN TH E PAGE - 90 IT(TP)A.1511 TO 1516/BANG/2013 ABSENCE OF SUCH AN ANALOGY AND ANY OTHER LIMITATION OTHER THAN PERIOD OF SIX YEARS WOULD AMOUNT TO DISCRIMINATION IN THE LIMITATION BETWEEN THE PAYMEN T TO RESIDENT AND NON-RESIDENT. 4) THE ASSESSEE HAS RELIED ON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF BHARATHI HOTELS LTD (2016 ) 76 TAXMAN.COM 256 (DELHI) TO CONTEND THAT EVEN AFTER INTRODUCTION OF SECTION 201(3) OF THE ACT AND IN TH E ABSENCE OF ANY LIMITATION PROVIDED BY THE ACT IN RESPECT OF PAYMENTS TO THE NONRESIDENT'S, THE REASONABLE LIMITATION HAS TO BE READ INTO. WITH GRE AT RESPECT, THE DELHI HIGH COURT HAS NOT PROVIDED ANY LIMITATION WITH RESPECT TO PAYMENTS TO NON-RESIDENT 'S. WITHOUT PREJUDICE TO THE ABOVE CONTENTION EVEN IF T HE CONTENTION OF THE ASSESSEE THAT IN THE ABSENCE OF A NY LIMITATION, REASONABLE TIME LIMIT HAS TO BE READ IN TO THE SECTION IS TO BE ACCEPTED, APPLYING THE SAME ANALOGY AS HELD BY THE VARIOUS COURTS RELIED UPON B Y THE ASSESSEE AND CONSIDERED BY THE DELHI HIGH COURT, TH E PERIOD OF SIX YEARS PROVIDED BY THE STATUTE TO THE PAYMENTS MA1E TO RESIDENT IN INDIA UNDER SECTION 20 1(3) OF THE ACT WOULD BE EQUALLY APPLICABLE TO THE PAYMENTS MADE TO THE NONRESIDENT'S. IF ANY LIMITATI ON OTHER THAN SIX YEARS IS READ INTO THE SECTION IN RE SPECT OF PAYMENTS TO NON-RESIDENT, IT WOULD AMOUNT TO DISCRIMINATION AMONG THE PAYMENTS TO RESIDENTS AND THE NONRESIDENT. 93. IN REBUTTAL, LEARNED COUNSEL FOR THE ASSESSEE S UBMITTED THAT PRIOR TO AMENDMENT, THERE WAS NO STATUTORY PERIOD FOR INI TIATION OF PROCEEDINGS AGAINST THE NON-RESIDENT. ONCE THE AME NDMENT CAME INTO FORCE FOR RESIDENT ONLY, IT SHOULD NOT IMPLICITLY A PPLY TO NON-RESIDENT AS IT WAS ONLY RESTRICTED TO RESIDENT. IT WAS SUBM ITTED THAT PRINCIPLE OF PAGE - 91 IT(TP)A.1511 TO 1516/BANG/2013 LITERAL INTERPRETATION IS REQUIRED TO BE INVOKED FO R THE PURPOSE OF INTERPRETING THIS KIND OF PROVISIONS AND THIS TRIBU NAL CANNOT SUPPLY THE WORD WHICH IS NOT INTENDED TO BE SUPPLIED BY THE LE GISLATURE. LASTLY, OUR ATTENTION WAS DRAWN TO THE JUDGMENT PASSED BY T HE HONBLE DELHI HIGH COURT IN THE CASE OF BHARTI AIRTEL VS. UNION OF INDIA (76 TAXMAN.COM.256) AND SPECIAL ATTENTION WAS DRAWN TO PARAS.11,12, 13, 14 & 17. 94. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD AVAILABLE. IN OUR VIEW, BEFORE WE DEAL WITH ISSUE OF LIMITATION, IT WOULD BE RELEVANT TO REPRODUCE THE REASONING GIVEN BY THE SPECIAL BENCH IN THE CASE OF MAHINDRA & MAHINDRA (SUPRA) WHICH IS AS UNDER: 14.2 AFTER CONSIDERING THE RIVAL SUBMISSIONS IN THE LIG HT OF THE MATERIAL PLACED BEFORE US AND THE PRECEDENTS RE LIED UPON IT IS OBVIOUS THAT SUB-SECTIONS (1) AND (1A) O F SECTION 201 DO NOT PRESCRIBE ANY TIME LIMIT FOR THE INITIAT ION OF THE PROCEEDINGS OR THE PASSING OF THE ORDER. WE FIND TH AT FOR THE MOST OF THE ACTIONS UNDER THE ACT, THE PARTICUL AR TIME LIMIT HAS BEEN GIVEN FOR THE COMMENCEMENT AND COMPLETION OF THE PROCEEDINGS. FOR EXAMPLE TIME LIM IT FOR ISSUING OF NOTICE FOR THE PURPOSES OF MAKING ASSESS MENT IS LAID DOWN IN SECTION 143(2). SIMILARLY TIME FOR ISS UING NOTICE OF REASSESSMENT HAS BEEN SET IN SECTION 149. SECTION 153 DEALS WITH THE TIME PROVIDED FOR THE COMPLETION OF ASSESSMENT AND REASSESSMENTS. SIMILARLY TIME LIMIT FOR RECTIFICATION OF ORDER IS GIVEN IN SECTION 154; FOR PASSING REVISING ORDER UNDER SECTION 263 ETC. ETC. IN SUCH A SCENARIO THE QUESTION ARISES THAT IF NO TIME LIMIT IS PROVIDED, THEN CAN ANY TIME LIMIT BE ARTIFICIALLY I MPORTED BY THE AUTHORITIES. THE LD. DR HAS CONTENDED THAT T HE TRIBUNAL IS NOT COMPETENT TO LAY DOWN ANY TIME LIMI T. IF PAGE - 92 IT(TP)A.1511 TO 1516/BANG/2013 THIS CONTENTION IS BROUGHT TO THE LOGICAL CONCLUSIO N IT WILL MEAN THAT THE UNLIMITED TIME WILL BE AVAILABLE TO T HE DEPARTMENTAL AUTHORITIES AT THEIR SWEET-WILL FOR TA KING ACTION UNDER THIS SECTION. IN OUR CONSIDERED OPINIO N THIS CONTENTION RAISED ON BEHALF OF THE REVENUE IS BEREF T OF ANY FORCE FOR THE SIMPLE REASON THAT CERTAINTY IS THE H ALLMARK OF ANY PROCEEDINGS. IT IS BEYOND OUR COMPREHENSION THAT HOW, IN THE ABSENCE OF ANY TIME LIMITATION PROVIDED IN THE SECTION, THE ACTION CAN BE TAKEN IN INDEFINITE PERI OD. IT IS WHOLLY IMPERMISSIBLE TO ARGUE THAT UNLIMITED TIME L IMIT BE GRANTED TO THE REVENUE FOR TAKING ACTION UNDER THIS SECTION. THE SWORD OF TAXING AUTHORITIES CANNOT BE ALLOWED TO HANG, FOREVER, OVER THE HEAD OF THE TAX PAYERS. IF THIS PROPOSITION OF THE LEARNED D.R. IS ACCEPTED THAT WI LL GIVE LICENSE TO THE AUTHORITIES TO TAKE ACTION EVEN AFTE R 30, 40 OR 50 YEARS. THE CANONS OF LIMITATION ARE ORDINARIL Y PROVIDED EXPRESSLY IN THE ACT AND IN THEIR ABSENCE, THEY ARE TO BE IMPLIEDLY INFERRED BY TAKING INTO CONSIDE RATION THE SCHEME OF THE RELEVANT PROVISIONS. THE LD. DR H AS RELIED ON SOME CASES FOR SUGGESTING THAT NO TIME LI MIT BE LAID DOWN BY THE TRIBUNAL FOR THE PURPOSES OF PASSI NG ORDER UNDER SECTION 201(1) OR (1A). IN OUR OPINION BEFORE APPLYING THE RATIO OF ANY JUDGMENT, IT IS IMPERATIV E TO LOOK INTO TEXT AND THE CONTEXT IN WHICH IT IS RENDERED. IT IS EQUALLY IMPORTANT TO BEAR IN MIND THE RELEVANT PROV ISION IN THE BACKGROUND OF WHICH SUCH JUDGMENT WAS RENDER ED. IT IS NOT PERMISSIBLE TO PICK UP A CASE FROM ONE EN ACTMENT AND INSIST FOR THE APPLICATION OF THE RATIODECIDEND I OF THAT CASE TO AN ALTOGETHER DIFFERENT LEGISLATION, WHICH HAS NO RESEMBLANCE WITH THE FORMER. THE HON'BLE RAJASTHAN HIGH COURT IN ARIHANT TILES & MARBLES (P.) LTD. V. ITO [2007] 295 ITR 148/166 TAXMAN 274 HAS HELD THAT THE INTERPRETATION OF ANY EXPRESSION USED IN THE CONTEX T OF ONE STATUTE IS NOT BE AUTOMATICALLY IMPORTED WHILE INTE RPRETING SIMILAR EXPRESSION IN ANOTHER STATUTE. SIMILAR VIEW HAS BEEN EARLIER EXPRESSED BY THE HON'BLE SUPREME COURT PAGE - 93 IT(TP)A.1511 TO 1516/BANG/2013 IN CIT V. VENKATESWARA HATCHERIES (P.) LTD. [1999] 237 ITR 174/103 TAXMAN 503 . 95. IN PARA.14.2 (SUPRA IN MAHINDRA AND MAHINDRA) IT HAS BEEN HELD BY THE SPECIAL BENCH THAT IN SUB-SECTION (1) AND (1 A) OF SECTION 201, NO LIMIT FOR INITIATION OF PROCEEDING OR PASSING OF THE ORDER IS PRESCRIBED. THEREAFTER, THE SPECIAL BENCH NOTICED T HE PERIOD OF LIMITATION PROVIDED FOR ISSUANCE OF NOTICE U/S 143( 2), 149, 153, 154, 263 AND THEREAFTER IT WAS HELD THAT CERTAINTY IN TA XING PROVISION IS HALL- MARK OF ANY PROCEEDING AND IT WAS NOTICED THAT IT IS BEYOND OUR APPREHENSION THAT HOW IN ABSENCE OF TIME LIMIT PROV IDED IN THE SECTION, ACTION CAN BE TAKEN IN INDEFINITE PERIOD. IT IS IMPERMISSIBLE TO ARGUE THAT NO TIME LIMIT BE GRANTED TO REVENUE. 96. THUS IT IS CLEAR FROM READING OF THE ABOVEMENTI ONED PARAGRAPH THAT THE LOGIC AND REASONING GIVEN BY THE SPECIAL B ENCH FOR COMING TO REASONABLE PERIOD OF 4 YEARS WAS BASED ON ANALYSIS OF THE PROVISIONS VIZ., 143, 147, 148, 149 AND 153 AND ABSENCE OF TIM E LIMIT U/S 201(1) OF THE ACT. IN OUR VIEW, THERE IS A CHANGE IN THE POSITION AFTER PASSING OF JUDGMENT BY THE SPECIAL BENCH AS THE SECTION 201 HAS BEEN AMENDED BY THE LEGISLATURE AND NOW SPECIFIC PROVISI ON IS INCORPORATED BY THE LEGISLATURE TO DEAL WITH LIMITATION OR INITI ATION OF PROCEEDINGS U/S 201 OF THE ACT IN THE CASE OF RESIDENT , HOWEV ER NO PERIOD OF LIMITATION IS PROVIDED IN THE CASE OF NON-RESIDENT . 97. RECENTLY ALLAHABAD HIGH COURT IN THE MATTER OF MASS AWASH (P.) LTD. [2017] 83 TAXMANN.COM 306 (ALLAHABAD) HAD OCCASION TO PAGE - 94 IT(TP)A.1511 TO 1516/BANG/2013 DEAL WITH ALL JUDGMENTS REFERRED BEFORE US AND THER EAFTER IT WAS HELD AS UNDER 71. IN THE ENTIRETY OF THE DISCUSSION, WE FIND IT DIFF ICULT TO HOLD THAT PERIOD CONSUMED BY REVENUE IN PROSECUTING MATTER AGAINST MAIN PAYEE WOULD HAVE RESULTED IN ACCRUAL O F A RIGHT UPON ASSESSEE SO AS TO DEPRIVE REVENUE FROM PROCEED ING UNDER SECTION 201(1) AND 201(1A), THOUGH, ADMITTEDL Y, ASSESSEE-PETITIONER HAS COMMITTED DEFAULT BY NOT CO MPLYING SECTION 195 BY NON-DEDUCTION OF TDS ON THE AMOUNT P AID TO SMT. NIDHI RAMAN. DEFENCE OF PETITIONER THAT IT WAS MISREPRESENTED BY SELLER BY NOT DISCLOSING BY ANY O F THEM THAT SHE WAS AN N.R.I. WOULD EQUALLY BE AVAILABLE T O REVENUE ALSO FOR EXPLAINING DELAY AND ALSO THEIR BONAFIDE I S FORTIFIED THAT THEY MAKE ALL POSSIBLE EFFORTS TO RECOVER ENTI RE AMOUNT OF TAX FROM PERSON LIABLE TO PAY TAX AND AS A LAST RESORT THEY HAVE SOUGHT TO EXERCISE POWER UNDER SECTION 201(1) AND 201(1A) AGAINST ASSESSEE. 72. THE VIEW TAKEN BY DELHI HIGH COURT THAT PERIOD OF LIMITATION OF FOUR YEARS, AS APPLICABLE FOR MAKING ASSESSMENT UNDER SECTION 147, SHOULD BE MADE APPLICABLE FOR EX ERCISING POWER UNDER SECTION 201(1) AND 201(1A), WE FIND IT DIFFICULT TO SUBSCRIBE INASMUCH AS WE DO NOT IMPOSE A FIXED T IME AND PRESCRIBE A PERIOD OF LIMITATION, WHICH HAS NOT BEE N PRESCRIBED BY LEGISLATURE IN ITS WISDOM. SUCH LEGIS LATIVE ACTION, BY WAY OF JUDICIAL PRECEDENT, IN OUR VIEW, WOULD NOT BE APPROPRIATE EXERCISE OF JUDICIAL REVIEW UNDER AR TICLE 226 OF CONSTITUTION. AS WE HAVE ALREADY DISCUSSED ABOVE , EVEN SUPREME COURT SAYS THAT IF TIME PERIOD IS NOT PRESC RIBED FOR EXERCISE OF POWER, A REASONABLE TIME WOULD DEPEND U PON THE FACTS OF EACH CASE AND CANNOT BE QUANTIFIED OR PRES CRIBED LIKE A PERIOD OF LIMITATION. 73. IN UTTAM NAMDEO MAHALE (SUPRA), THE JUDGMENT DELIVERED BY THREE JUDGE BENCH, COURT HAS SAID AS U NDER: PAGE - 95 IT(TP)A.1511 TO 1516/BANG/2013 'MR. BHASME, LEARNED COUNSEL FOR THE APPELLANT, CONTENDS THAT IN THE ABSENCE OF FIXATION OF THE RUL E OF LIMITATION, THE POWER CAN BE EXERCISED WITHIN A REA SONABLE TIME AND IN THE ABSENCE OF SUCH PRESCRIPTION OF LIM ITATION, THE POWER TO ENFORCE THE ORDER IS VITIATED BY ERROR OF LAW. HE PLACES RELIANCE ON THE DECISIONS IN STATE OF GUJARA T V. PATIL RAGHAV NATHA; RAM CHAND V. UNION OF INDIA AND MOHD. KAVI MOHAMAD AMIN V. FATMABAI IBRAHIM. WE FIND NO F ORCE IN THE CONTENTION. IT IS SEEN THAT THE ORDER OF REJ ECTMENT AGAINST THE APPLICANT HAS BECOME FINAL. SECTION 21 OF THE MAMLATDAR'S COURT ACT DOES NOT PRESCRIBE ANY LIMITA TION WITHIN WHICH THE ORDER NEEDS TO BE EXECUTED. IN THE ABSENCE OF ANY SPECIFIC LIMITATION PROVIDED THERE UNDER, NE CESSARY IMPLICATION IS THAT THE GENERAL LAW OF LIMITATION P ROVIDED IN THE LIMITATION ACT (ACT 2 OF 1963) STANDS EXCLUDED. THE DIVISION BENCH, THEREFORE, HAS RIGHTLY HELD THAT NO LIMITATION HAS BEEN PRESCRIBED AND IT CAN BE EXECUTED AT ANY T IME, ESPECIALLY WHEN THE LAW OF LIMITATION FOR THE PURPO SE OF THIS APPEAL IS NOT THERE. WHERE THERE IS STATUTORY RULE OPERATING IN THE FIELD, THE IMPLIED POWER OF EXERCISE OF THE RIGHT WITHIN REASONABLE LIMITATION DOES NOT ARISE. THE CITED DEC ISIONS DEAL WITH THAT AREA AND BEAR NO RELEVANCE OF THE FA CTS.' (EMPHASIS ADDED) 74. WE ALSO FIND THAT BOMBAY HIGH COURT HAS TAKEN A DIFFERENT VIEW IN THE MATTER OF PRESCRIBING LIMITAT ION AND CALCUTTA HIGH COURT HAS DECLINED TO PRESCRIBE ANY S UCH LIMITATION. 75. IN OUR VIEW, THE DICTUM LAID DOWN BY APEX COURT IN THE CASES REFERRED ABOVE IS VERY CLEAR. WHILE EXERCISIN G POWER OF JUDICIAL REVIEW IN THE CASE LIKE PRESENT ONE, IT WO ULD BE APPROPRIATE TO CONSIDER WHETHER POWER HAS BEEN EXER CISED BY COMPETENT AUTHORITY WITHIN A REASONABLE PERIOD A ND WHETHER DELAY IS UNJUST, ARBITRARY, WHIMSICAL OR IT IS FOR VALID REASONS. IF COURT FINDS THAT DELAY IN EXERCISE OF P OWER IS FOR VALID AND BONAFIDE REASONS, ALLEGED DELAYED EXERCIS E OF POWER CANNOT BE HELD INVALID. PAGE - 96 IT(TP)A.1511 TO 1516/BANG/2013 98. THE CONTRARY JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE MATTER OF BHARTI AIRTEL LTD V. UNION OF INDIA [(201 6) 76 TAXMANN.COM 256] WAS RELIED UPON BY THE LD. AR. THE DR RELIED U PON BHURA EXPORTS LTD [2011] 13 TAXMANN.COM 162 (CALCUTTA) AN D MASS AWASH (P.) LTD. [2017] 83 TAXMANN.COM 306 (ALLAHABA D) IN OUR VIEW THE DECISION OF THE SPECIAL BENCH AND OTHER JUDGMENTS APPLY WITH EQUAL FORCE IN FAVOUR OF BOTH I.E RESIDENT AS WELL AS NON-RESIDENT PROVIDING PERIOD OF LIMITATION O F FOUR YEARS FROM THE END OF THE FINANCIAL YEAR FOR INITIATION OF PROCEED INGS ON THE ANALOGY AND PRINCIPLE MENTIONED IN SECTION 147, 148, 153 ET C PRIOR TO AMENDMENT IN LAW. HOWEVER THERE ARE CONTRARY JUDGME NTS IN FAVOUR OF THE REVENUE POST AMENDMENT WHICH DOES NOT PROVIDE ANY LIMITATION FOR INITIATION OF PROCEEDINGS U/S.201 OF THE ACT. 99. IN VIEW THEREOF, THERE IS CONFLICT OF JUDGMENTS OF VARIOUS COURTS. ONE SET OF JUDGMENT ARE IN FAVOUR OF THE ASSESSEE A ND THE OTHER SET OF JUDGMENTS ARE IN FAVOUR OF THE REVENUE. THERE IS N O DIRECT JUDGMENT AFTER THE AMENDMENT OF SECTION 201, BY THE JURISDIC TIONAL HIGH COURT WHICH DEALS WITH THE ISSUE OF INITIATION OF PROCEED INGS UNDER THE AMENDED PROVISION OF 201. IN THE ABSENCE OF ANY BI NDING JUDGMENT BY THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE BOUND TO ADOPT THE SAME LOGIC AS UPHELD BY THE JURISDICTIONAL HIGH COURT, B Y TREATING THE RESIDENT AND THE NON-RESIDENT AT PAR AFTER RELYING UPON THE DECISION OF SPECIAL BENCH IN THE MATTER OF MAHINDRA AND MAHINDR A (SUPRA), IN CASE RELATING TO PRE AMENDMENT ASSESSMENT YEAR. IN OUR OPINION, AFTER PAGE - 97 IT(TP)A.1511 TO 1516/BANG/2013 THE AMENDMENT OF LAW SAME LOGIC AND LIMITATION IS R EQUIRED TO BE APPLIED FOR NON-RESIDENT WELL AS RESIDENT THUS TREA TING NON-RESIDENT AT PAR WITH RESIDENT. IN OTHER WORDS, PERIOD OF IMITA TION FOR INITIATION OF PROCEEDINGS FOR RESIDENT AS WELL AS NON-RESIDENT U/ S 201 SHOULD BE 6 YEARS FROM THE END OF THE FINANCIAL YEAR. FURTHER T HE PAYER IS REQUIRED TO MAINTAIN BOOKS OF ACCOUNT AND DEDUCT TDS FOR BOT H RESIDENT AS WELL AS NON-RESIDENT. NO SEPARATE TREATMENT HAD BEEN EN VISAGED UNDER THE ACT, FOR THE PAYER PAYING TO A NON-RESIDENT. 100. FURTHER, THE NONRESIDENT PAYEE CANNOT BE WORS E OFF THAN RESIDENT PAYEE UNDER THE INCOME TAX ACT AND UNDER T HE PROVISIONS OF DTAA. LAW PROVIDES NON-DISCRIMINATION OF NON- RESID ENT WITH RESIDENT AND REQUIRES EQUAL TREATMENT OF NON-RESIDE NT WITH RESIDENT UNDER THE PROVISIONS OF DTAA. IT CANNOT BE SAID T HAT A NON RESIDENT WOULD BE GIVEN SPECIAL AND BENEFICIAL TREATMENT IN COMPARISON TO THE RESIDENT OR TREATED UNEQUALLY BY PROVIDING UNLIMITE D TIME TO INITIATE PROCEEDINGS UNDER SECTION 201 OF THE ACT. IN OUR O PINION, THE CONSTITUTION OF INDIA PROVIDES EQUAL TREATMENT AND EQUAL PROTECTION OF LAW WITHIN THE TERRITORY OF INDIA. IF THE LAW REQU IRES INITIATION OF PROCEEDINGS WITHIN 6 YEARS FROM THE END OF FINANCIA L YEAR FOR THE RESIDENT, SAME TREATMENT IS REQUIRED TO BE GIVEN T O THE NON-RESIDENT. FOR THIS PROPOSITION, WE MAY RELY UPON ON THE JUDGM ENT OF HONBLE SUPREME COURT IN DR. SUBRAMANIAN SWAMY V. DIRECTOR, CBI [2014] 8 SCC 682 (SC) IN PARA 22 . 101. KEEPING IN MIND THE PRINCIPLES SET OUT BY THE HON'BLE SUPREME COURT IN DR. SUBRAMANYIAN SWAMY (SUPRA), IF WE EXAM INE THE SCHEME PAGE - 98 IT(TP)A.1511 TO 1516/BANG/2013 OF SECTION 201 ACT, THE RESIDENT OF INDIA CANNOT BE DISCRIMINATED VIS- -VIS. THE NON-RESIDENT UNDER INCOME TAX ACT AND SIMILARLY UNDER DTAA NON-RESIDENT CANNOT BE DISCRIMINATED VIZ-A-VIZ RESIDENT. IF WE ACCEPT THE ARGUMENT OF THE LD. AR THAT THE LIMITATI ON OF 4 YEARS, AS HELD PROVIDED BY THE SPECIAL BENCH WOULD CONTINUE T O APPLY TO NON- RESIDENT EVEN AFTER POST AMENDMENT TO SECTION 201, IN THAT EVENTUALITY, HOSTILE DISCRIMINATION TOWARDS THE RESIDENT-PAYEE W ILL CREEP IN I.E., THE LIMITATION FOR INITIATION UNDER SECTION 201 AGAINST THE RESIDENT PAYEE WOULD BE SIX YEARS AND AGAINST THE NON-RESIDENT PAY EE IT WOULD BE FOUR YEARS. THIS IS NEITHER THE INTENTION OF THE LEGISL ATURE NOR THE MANDATE OF THE SPECIAL BENCH OR THE JUDGMENT REFERRED HEREI N ABOVE. ON THE CONTRARY, IF WE ACCEPT THE ARGUMENT OF THE LD. DR T HAT THERE IS NO LIMITATION FOR INITIATION OF PROCEEDINGS UNDER 201, IN VIEW OF HONBLE CALTUTTA AND ALLAHABAD HIGH COURT JUDGMENTS (SUPRA) , IF THE PAYEE IS NON-RESIDENT THEN, IT WILL AMOUNT TO DISCRIMINATION AGAINST THE NON- RESIDENT AS THE PROCEEDINGS MAY BE INITIATED AGAINS T THE RESIDENT WITHIN FOUR YEARS AND THERE IS NO LIMITATION FOR INITIATIO N OF PROCEEDINGS AGAINST THE NON-RESIDENT. THEREFORE, THE ARGUMENTS OF BOTH THE ASSESSEE AS WELL AS THE REVENUE CANNOT BE ACCEPTED. IF WE ACCEPT THE ARGUMENT OF ONE IT WOULD TANTAMOUNT TO DISCRIMINATI NG EITHER THE RESIDENT OR THE NON-RESIDENT, WHICH IS NOT PERMISSI BLE IN THE EYES OF LAW. 102. THE ASSESSEE / PAYER IN THE EYES OF LAW WHETHE R MAKING PAYMENT TO RESIDENT OR NON-RESIDENT UNDER THE PRO VISIONS OF SECTION PAGE - 99 IT(TP)A.1511 TO 1516/BANG/2013 201, CONSTITUTES ONE CLASS ONLY. ACCORDINGLY, THE S AME PERIOD OF LIMITATION IS REQUIRED TO BE APPLIED EQUALLY FOR PA YEE I.E RESIDENT OR NON-RESIDENT, LAW ABHOR VACUUM AND UNCERTAINTY. 103. THERE IS NO CLASSIFICATION GIVEN UNDER SECTION 201. SECTION 201(1) ONLY TALKS ABOUT PERSON WHO IS REQUIRED TO D EDUCT ANY SUM FOR THE PAYMENT MADE. THEREFORE, BORROWING THE SAME REA SONING OF THE SPECIAL BENCH, WHEREBY IT HELD THAT THE SAME PERIO D OF LIMITATION SHOULD BE APPLIED TO RESIDENT AS WELL AS NON-RESIDE NT, WE ARE OF THE CONSIDERED VIEW THAT LIMITATION FOR INITIATION OF P ROCEEDINGS FOR NON- RESIDENT PAYEE SHOULD BE 6 YEARS INSTEAD OF NO-LIMI TATION.AS IS THE LIMITATION FOR RESIDENT-PAYEE. IN VIEW OF THE ABOVE GROUND NO.12 IN ASSESSMENT YEAR 2007-08 DESERVES TO BE DISMISSED AN D ACCORDINGLY WE DISMISS THE SAME. GROUND NO -13 -WITHOUT PREJUDICE TO THE ARGUMENT T HAT THE PAYMENTS MADE BY THE APPELLANT TO GOOGLE IRELAND AR E NOT IN THE NATURE OF ROYALTY AS PER ARTICLE 12 OF INDIA IR ELAND DTAA, THE LEARNED ASSESSING OFFICER ('AO') / LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDI NG THAT THE APPELLANT IS LIABLE TO WITHHOLD TAX ON AMOUNTS PAYABLE TO GOOGLE IRELAND DISREGARDING THAT 'ROYALTY' INCOME I N THE HANDS OF NON-RESIDENT IS TAXABLE ONLY ON RECEIPT BA SIS UNDER THE SAID ARTICLE 12 OF INDIA-IRELAND DTAA. 104. IN THIS REGARD AO HELD THAT UNDER SECTION 9(1) (VI) OF THE ACT, ROYALTY IS CHARGED ON ACCRUAL BASIS AND THE ACTUAL RECEIPT OF THE SAME BY THE RECIPIENT IS IMMATERIAL FOR THE PURPOSE OF D EDUCTION OF TAXES. AO RELIED UPON FOLLOWING JUDGMENTS TRISHLA JAIN VS ITO (2009) 310 PAGE - 100 IT(TP)A.1511 TO 1516/BANG/2013 ITR 274 (PUNJAB & HARYANA), AEG KTIENGESSELSCHAFT V INSPECTING ASSISTANT COMMISSIONER 48 ITD 359, ALL IED CHEMICAL CORPORATION V INSPECTING ASSISTANT COMMISSIONER 3 I TD 418 (BOMBAY) AND DANA CORPORATION USA V INCOME TAX OFFI CER 28 ITD 185. FURTHER AO HAS SUPPORT FROM SECTION 43(2) OF T HE ACT WHICH DEFINE 'PAID' AS (2) 'PAID' MEANS ACTUALLY PAID OR INCURRED ACCORDIN G TO THE METHOD OF ACCOUNTING UPON THE BASIS OF WHICH TH E PROFITS OR GAINS ARE COMPUTED UNDER THE HEAD 'PROFI TS AND GAINS OF BUSINESS OR PROFESSION'; ACCORDINGLY, THE AO HAS CONCLUDED THAT THE MEANING OF THE TERM 'PAID' INCLUDES AMOUNT INCURRED I.E. WHERE IT BECOM ES PAYABLE. 105. ON APPEAL TO CIT(A), THE FIRST APPELLATE AUTHO RITY HAS NOT AGREED TO THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE AMOUNT PAYABLE BY THE ASSESSEE TO GOOGLE IRELAND IS ROYALT Y UNDER THE PROVISIONS OF THE ACT, WITHOUT ADJUDICATING ON THE SPECIFIC GROUND RAISED BY THE APPELLANT IN THIS REGARD. 106. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSES SEE HAS RAISED THE FOLLOWING SUBMISSIONS BEFORE US : SUBMISSIONS OF THE ASSESSEE 107. IN THIS REGARD THE LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT PAYABLE BY THE ASSESSEE IS NOT IN THE NA TURE OF 'ROYALTY' PAGE - 101 IT(TP)A.1511 TO 1516/BANG/2013 UNDER THE ACT AND THE INDIA-IRELAND DTAA. HOWEVER, IT WAS SUBMITTED THAT ASSUMING AMOUNT PAYABLE TO GOOGLE IR ELAND IS IN THE NATURE OF 'ROYALTY', THEN IN TERMS OF ARTICLE 12 O F THE INDIA-IRELAND DTAA, INCOME IN THE NATURE OF ROYALTY IS CHARGEABLE TO TAX IN THE HANDS OF THE NONRESIDENT ONLY ON RECEIPT BASIS. 108. OUR ATTENTION IS DRAWN TO ARTICLE 12 OF THE IN DIA-IRELAND DTAA: '1. ROYALTIES OR FEES FOR TECHNICAL SERVICES ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARI SE, AND ACCORDING TO THE LAWS OF THAT STATE... 3. (A) THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF OR THE RIGHT TO USE, ANY COPYRIGHT OF LITERARY, ARTIST IC OR SCIENTIFIC WORK INCLUDING CINEMATOGRAPH FILMS OR FILMS OR TAPE S FOR RADIO OR TELEVISION BROADCASTING ANY PATENT, TRADE MARK, DES IGN OR MODEL PLAN, SECRET FORMULA OR PROCESS OR FOR THE USE OF O R THE RIGHT TO USE INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, OTH ER THAN AN AIRCRAFT OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EXPERIENCE.' 109. ACCORDINGLY IT WAS SUBMITTED SO FAR AS TAXABIL ITY OF ROYALTY IS CONCERNED, TWIN CONDITIONS OF 'ARISING IN INDIA' AS ALSO THE 'PAYMENT' ARE TO BE SATISFIED. THE LD. AR RELIES UP ON THE ORDER PASSED BY THE MUMBAI ITAT IN NATIONAL ORGANIC CHEMICAL INDUSTRIES LID (96 TTJ 765). PAGE - 102 IT(TP)A.1511 TO 1516/BANG/2013 110. FURTHER, IT WAS ALSO SUBMITTED THE TERM 'ROYA LTY' IN ARTICLE 12(3A) OF THE INDIA-IRELAND DTAA IS DEFINED TO MEAN PAYMENT OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OR RIGHT TO USE COPYRIGHT, PATENT, TRADEMARK, ETC. A PLAIN READING OF THE ABOVE PHRASE MEANS THAT AN AMOUNT CAN BE CHARACTERIZED AS ROYALTY UNDER THE DTAA ONLY ON PAYMENT AND NOT MERE LY ON ACCRUAL. IN OTHER WORDS, UNTIL THE AMOUNT IS PAID, THE AMOUNT ACCRUED OR DUE CANNOT PARTAKE THE CHARACTER OF ROYALTY. 111. IF ARTICLE 12(1) IS READ IN JUXTAPOSITION WITH ARTICLE 12(3)(A) WHICH DEFINES ROYALTY, IN THE CONTEXT OF INDIA AS S OURCE COUNTRY, PROVISION WOULD READ AS UNDER: 'ROYALTIES (BEING PAYMENT OF ANY KIND RECEIVED AS A CONSIDERATION FOR THE USE OF IPR ......) ARISING IN INDIA AND PAID TO RESIDENT OF IRELAND MAY BE TAXED IN INDIA.' 112. EVEN IF ONE WERE TO STATE THAT THE POINT OF TA XATION IS THE 'ARISING' OF THE INCOME IN INDIA, THE SAME CAN BE F INALLY TAXED ONLY ON THE BASIS OF THE AMOUNT 'PAID' TO THE NONRESIDENT. THE LD. AR RELIED UPON HON'BLE DELHI TRIBUNAL THE CASE OF PIZZA HUT INTERNATIONAL LLC (33 CCH 95). HENCE, MERE 'ACCRUAL' WITHOUT 'PAYMENT' WOULD NOT CRYSTALLIZE THE CHARGE UNDER THE DTAA IRRESPECT IVE OF THE POSITION UNDER THE ACT AND ACCORDINGLY ROYALTY SHOULD NOT BE TAXABLE IN INDIA. PAGE - 103 IT(TP)A.1511 TO 1516/BANG/2013 113. THE LD. AR SOUGHT TO DISTINGUISH THE FINDING O F AO WHICH WAS BASED ON RULING OF SUPREME COURT IN THE CASE OF ST ANDARD TRIUMPH MOTORS CO. LTD. IT WAS SUBMITTED THE JUDGMENT IS DI STINGUISHABLE. A. THE DECISION DOES NOT TAKE INTO ACCOUNT THE PROVISI ONS OF THE DTAA AS PROBABLY NONE EXISTED AT THAT TIME; B. CSC TECHNOLOGY SINGAPORE PTE LTD VS ADI, NEW DELHI 12012-TII-35-ITAT-DEL-INTLJ, C. THE DECISION OF THE HON'BLE DELHI ITAT IN THE CASE OF PIZZA HUT INTERNATIONAL LLC (SUPRA) FACTORS THE OBSERVATIONS OF THE HON'BLE SUPREME COURT IN THE CA SE OF STANDARD TRIUMPH MOTORS WHILE HOLDING THAT THE ROYA LTY CAN BE CONSIDERED AS TAXABLE IN THE HANDS OF THE RECIPIENT ON A RECEIPT BASIS. 114. FURTHER, RELIANCE IS ALSO PLACED ON A RECENT D ECISION OF THE HON'BLE BOMBAY HIGH COURT RULING IN THE CASE OF SIEMENS AKTIENGESELLSCHAFT ITA NO. 124 OF 2010. THE HON'BLE HIGH COURT WAS DEALING WITH ARTICLE 12 OF INDIA GERMANY DTAA AND H ELD THAT THE ASSESSMENT OF ROYALTY OR FEES FOR TECHNICAL SERVICE S SHOULD BE MADE IN THE YEAR IN WHICH THE AMOUNTS ARE 'RECEIVED' AND NOT OTHERWISE. 115. THE LD. AR SUBMITS IN THE CASE OF BOOZ. ALLEN & HAMILTON (INDIA) LTD (ITA NO. 4505/MUM/2003) IS ALSO RELEVANT IN THE PRESENT CONTEXT. THE HON'BLE ITAT, RELYING ON THE CASE OF S IEMENS AKTIENGESELLSCHAFT (SUPRA) ,AND KEEPING IN VIEW THE LANGUAGE EMPLOYED IN DTAA, HELD THAT THE AMOUNTS RECEIVABLE BY THE NON- RESIDENT FROM ITS AGENT IN INDIA COULD NOT BE BROUG HT TO TAX IN INDIA PAGE - 104 IT(TP)A.1511 TO 1516/BANG/2013 DURING THE YEAR OF CREDIT SINCE THE SAME HAD NOT BE EN PAID BY THE AGENT TO THE SAID ENTITIES. 116. THE LD. AR FURTHER RELIES UPON JOHNSON & JOH NSON (ITA NO. 7865/MUM/2010) AND CSC TECHNOLOGY SINGAPORE PTE LTD (SUPRA). 117. THE LD. AR SUBMITTED THAT THE LIABILITY TO WITHHOLD TAXES IN THE HANDS OF THE PAYER ON PAYMENT BASIS AND NOT ON ACCR UAL BASIS. FOR THAT PURPOSES OUR ATTENTION WAS DRAWN TO SECTION 195(1) TO THE FOLLOWING EFFECT : 'ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDEN T, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTER EST (NOT BEING INTEREST UNDER REFERRED TO IN SECTION 19 4LB OR SECTION 194LC) OR SECTION 194LD OR ANY SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARIES ' ) SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE , WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE IN FORCE:' 118. IT IS SUBMITTED THAT FOR THE PURPOSE OF DETERM INING WHETHER AN AMOUNT IS CHARGEABLE TO TAX IN THE HANDS OF A NON-R ESIDENT, THE PROVISIONS OF THE RELEVANT DTAA WOULD ALSO NEED TO BE FACTORED. IT IS SUBMITTED THAT THE CHARGE UNDER THE DTAA ON ROYA LTY IS TRIGGERED ONLY WHEN THE AMOUNT IS PAID AND NOT WHEN THE AMOUNT IS ACCRUED OR EVEN DUE. ACCORDINGLY, ROYALTY RECEIV ABLE BY GOOGLE IRELAND WOULD BE CHARGEABLE TO TAX UNDER THE INDIA IRELAND DTAA ONLY WHEN ACTUALLY RECEIVED AND ACCORDINGLY, THE LI ABILITY TO WITHHOLD PAGE - 105 IT(TP)A.1511 TO 1516/BANG/2013 UNDER SECTION 195 WOULD ARISE ONLY WHEN THE SUM BEC OMES CHARGEABLE IN THE HANDS OF GOOGLE IRELAND I.E. WHEN THE AMOUNT IS PAID. THE LD. AR RELIED UPON THE ORDER OF THE TRIBUNAL PASSED IN THE CASE OF SAIRA ASIA INTERIORS PVT LTD (ITA NO.673/AHD/2014). THE RELEVANT EXTRACTS OF THE ORDER ARE REPRODUCED BELOW YOUR KIND PERUSAL: '5. IT IS ONLY ELEMENTARY THAT THE TAX DEDUCTION SO URCE LIABILITY UNDER SECTION 195 IS A VICARIOUS LIABILIT Y IN THE SENSE THAT ITS SURVIVAL IN THE HANDS OF TAX-DEDUCTO R IS WHOLLY DEPENDENT ON EXISTENCE OF TAX LIABILITY IN T HE HANDS OF RECIPIENT OF INCOME. WHEN A CREDIT AFFORDED BY, OR A PAYMENT MADE BY, AN INDIAN RESIDENT, TO A NON-RESID ENT, DOES NOT TRIGGER THE TAXABILITY OF THAT INCOME IN T HE HANDS OF RECIPIENT, THE TAX DEDUCTION LIABILITY DOES NOT COME INTO PLAY AT ALL. THIS SCHEME OF THE ACT IS IMPLICIT FRO M THE WORDINGS OF SECTION 195 (1) WHICH STATE THAT 'ANY PERSON RESPONSIBLE FOR PAYING TO A NONRESIDENT, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTEREST (NOT BEING INTEREST ON SECURITIES) OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD 'SALARIES') SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR B Y ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE' (EMPHASIS, BY UNDERLING SUPPLIED BY US). WHEN INCOME EMBEDDED IN A PAYMENT IS NOT TAXABLE UN DER THE INCOME TAX ACT, 1961, THE TAX WITHHOLDING LIABI LITY DOES NOT GET TRIGGERED AT ALL. 10. WE MAY ALSO A DEAL YET ANOTHER ARGUMENT IN FAVO UR OF THE STAND OF THE REVENUE TO THE EFFECT THAT IF TAX LIABILITY OF THE NON-RESIDENT IS TO COMPUTED ON THE BASIS OF DOM ESTIC LAW ANYWAY, WHICH PERMITS TAXATION OF ROYALTIES AT THE PAGE - 106 IT(TP)A.1511 TO 1516/BANG/2013 POINT OF ACCRUAL, THE TAX WITHHOLDING SHOULD HAVE T AKEN PLACE AT THE POINT OF TIME WHEN ROYALTIES ACCRUED I .E. WHEN THE ACCOUNT OF THE NON-RESIDENT WAS CREDITED. HOWEVER, WE ARE UNABLE TO SEE ANY LEGAL MERITS IN T HIS PLEA BECAUSE WHAT IS MATERIAL IS THE TAX LIABILITY OF INCOME EMBEDDED IN THE RELATED PAYMENT AS AT THE PO INT OF TIME WHEN EVENT TRIGGERING TAX WITHHOLDING LIABI LITY TAKES PLACE, I.E. CREDITING THE AMOUNT OR PAYING TH E AMOUNT. WHEN THE INCOME EMBEDDED IN THE PAYMENT IS NOT LIABLE TO BE TAXED AT THE POINT OF TIME WHEN AC COUNT OF THE NON-RESIDENT WAS CREDITED, IN VIEW OF THE FACT THAT, UNDER THE RELATED DTAA, TAX LIABILITY CAN ONLY ARISE AT THE POINT OF A SUBSEQUENT EVENT I.E. PAYMENT. WHEN INCOME EMBEDDED IN THE PAYMENT IS NOT TAXABLE AT TH AT POINT OF TIME OF CREDITING THE AMOUNT, THERE CANNOT BE ANY OCCASION FOR DEDUCTION OF WITHHOLDING THE TAX ON SU CH INCOME. IT IS ONLY AT THE POINT OF TIME WHEN PAYMEN T TAKES PLACE, THAT THE INCOME EMBEDDED IN PAYMENT BECOMES TAXABLE UNDER THE DTAA AS ALSO UNDER THE DOMESTIC LAW, BUT THEN RATE OF TAX PRESCRIBED IN DO MESTIC LAW BEING LOWER, VIS--VIS THE RATE PRESCRIBED IN T HE DOMESTIC LAW, THE ASSESSEE HAS THE OPTION OF ADOPTI NG THE LOWER RATE UNDER THE DOMESTIC LAW.' 119. THEREFORE, IT WAS SUBMITTED WITHHOLDING LIABIL ITY IN THE HANDS OF THE APPELLANT WOULD ARISE ONLY ON PAYMENTS MADE AND NOT ON THE AMOUNTS PAYABLE TO GOOGLE IRELAND. THEREFORE, AS S ECTION 195 OF THE ACT CASTS AN OBLIGATION ON THE PAYER TO WITHHOLD TA X, ONLY WHEN THE SAME IS CHARGEABLE TO TAX IN INDIA, WITHHOLDING OF TAX, IF ANY, WOULD BE REQUIRED ONLY AT THE TIME OF ACTUAL REMITT ANCE AND NOT ON THE CREDIT IN THE BOOKS OF ACCOUNTS. HENCE IN THE I NSTANT CASE, THERE IS NO REQUIREMENT FOR WITHHOLDING OF TAX IN T HE SUBJECT YEARS AS THE AMOUNTS REMAINED UNPAID DURING THE YEARS UNDER CONSIDERATION I.E. UP TO 31 MARCH 2012. PAGE - 107 IT(TP)A.1511 TO 1516/BANG/2013 120. THE LD. DR ALSO ARGUED THAT WHEN THE WITHHOLDI NG TAX LIABILITY IN THE SUBJECT YEAR IS DETERMINED ON PAYM ENT BASIS UNDER THE DTAA, THE APPELLANT MAY CLAIM IN THE YEAR OF RE CEIPT THAT THE TAXABILITY IN THE HANDS OF THE PAYEE WOULD ARISE ON ACCRUAL BASIS AND ACCORDINGLY, LIABILITY TO WITHHOLD WOULD BE THE YEA R OF ACCRUAL. SUBMISSIONS OF THE REVENUE 121. THE ASSESSEE BY READING THE LANGUAGE OF DEFINI TION OF ROYALTY IN THE DTAA HAS CONTENDED THAT THE AMOUNT PAID TO GOOG LE IRELAND IS TAXABLE IN THE YEAR OF RECEIPT AND HENCE NO OBLIGAT ION TO DEDUCT TAX AT SOURCE ON CREDIT BASIS. 121.1 THE SECTION 195(1) IMPOSES OBLIGATION ON THE ASSESSEE TO DEDUCT TAX AT SOURCE IN RESPECT OF THE PAYMENTS MADE TO NON-RESIDENT IF THE SUM IS CHARGEABLE UNDER THE PROVISIONS OF TH E ACT. IT IS FURTHER HELD BY VARIOUS SUPREME COURT IN THE CASE OF GE IND IA AND ELLIE LILLY THAT THE PROVISIONS OF SECTION 195 HAS TO BE READ A LONG WITH CHARGING PROVISIONS I.E. SECTION 4, 5,9 AND 90 OF THE ACT. O N CONJOINT READING OF THE ABOVE PROVISIONS, IT IS CLEAR THAT THE AMOUNTS PAID BY THE ASSESSEE TO GOOGLE IRELAND ARE CHARGEABLE UNDER THE ACT ON ACCR UAL BASIS. HENCE CONTENTION OF THE ASSESSEE THAT AMOUNT IS CHARGEABL E IN THE HANDS OF THE GOOGLE IRELAND ON RECEIPT BASIS IS MISPLACED . PAGE - 108 IT(TP)A.1511 TO 1516/BANG/2013 121.2 IF THE LANGUAGE OF DEFINITION OF ROYALTY UNDE R THE DTAA IS READ ARTICLE 12(3)(A) WITH IRELAND, THE WORDINGS 'T HE TERM 'ROYALTIES' AS USED IN THIS ARTICLE MEANS PAYMENT OF ANY KIND RECE IVED AS CONSIDERATION FOR THE USE-------' WOULD CLEARLY AND UNAMBIGUOUSLY MAKES IT CLEAR THAT PAYMENT RECEIVED AS CONSIDERATION FOR USE WOULD ALONE BE CONSIDERED AS ROYALTY. THE W ORDS 'PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATION F OR THE USE OF' HAS TO BE READ TOGETHER AND IT WOULD ONLY MEAN THE CLASSIFICATION OF THE INCOME AND NOT THE METHOD OF ACCOUNTING. HENCE THE CONTENTION OF THE ASSESSEE IS MISPLACED. 121.3 IT IS SUBMITTED THAT THE ASSESSEE IS PROVIDIN G IT SERVICES AND IT ENABLED SERVICES TO GOOGLE IRELAND IN ADDITION T O MARKETING AND DISTRIBUTION SERVICES FOR THE ADVERTS PROGRAM. THE ASSESSEE WILL BE RECEIVING AMOUNTS FROM IT SERVICES AND IT ENABLE D SERVICES FROM GOOGLE IRELAND. THE ASSESSEE WILL PAY GOOGLE IRELAN D IN VIEW OF MARKETING AND DISTRIBUTION SERVICES FOR ADWORD P ROGRAM. IT IS UNDISPUTED FACT THAT THE ASSESSEE IS WHOLLY-OWNED S UBSIDIARY OF GOOGLE. IN VIEW OF THE CLOSE CONNECTION BETWEEN THE GOOGLE INDIA AND THE GOOGLE IRELAND, THE PAYMENTS T O BE RECEIVED BY THE ASSESSEE PROVIDES IT SERVICS AND IT ENABLED SERVICES CAN BE ADJUSTED TOWARDS PAYMENT TOWARDS MARKETING AND D ISTRIBUTION SERVICES FOR ADWORD PROGRAM. THE FACT THAT THE ASSE SSEE HAS NOT REFLECTED THE AMOUNTS PAID TO GOOGLE IRELAND IN THE P&L ACCOUNT WOULD FURTHER JUSTIFY THE ABOVE ASPECT. PAGE - 109 IT(TP)A.1511 TO 1516/BANG/2013 121.4 IN THE ABOVE CONTEXT IF THE LANGUAGE EMPLOYED IN ARTICLE 12 (3) (A) OF THE DTAA SPECIFICALLY WITH THE WORDS 'MEANS PAYMENT OF ANY KIND RECEIVED' WOULD MEAN THE RECEIPT OF AMOUNT BY VIRTUE OF ADJUSTMENTS/SET OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. FURTHER 'PAYMENT OF ANY KIND RECEIVED' HAS TO BE READ AS ANY MODE OF PAYMENT EITHER BY BOOK ADJUSTMENT/ CREDIT OR ACTUAL PAYMENT. ANY OTHER MEANING WOULD READ THE LANGUAGE REDUNDANT IN VIEW OF THE PROVISIONS OF SECTION 4, 5, 9, 90 AND 195 OF TH E ACT. 121.5 IT IS FURTHER SUBMITTED THAT THE DTAA DOES NO T DETERMINE THE METHOD OF ACCOUNTING AND THE YEAR OF TAXABILITY IN RESPECT OF PARTIES TO THE AGREEMENT. WHAT DTAA PROVIDES FOR IS THE EXTENT OF TAXABILITY OF INCOME AND THE PERCENTAGE OF THE TAX ON THE INCOME LIABLE FOR TAX AND THE DISTRIBUTION OF TAX AMONG THE COUNTRIES PAR TY TO THE DTAA. HENCE THE LANGUAGE EMPLOYED IN DEFINING THE MEANING OF ROYALTY CANNOT BE READ TO MEAN THE METHOD OF ACCOUNTING. TH E DTAA DOES NOT DEAL WITH THE YEAR OF TAXABILITY OR THE METHOD OF A CCOUNTING OF EITHER PARTIES. 121.6 IT IS FURTHER SUBMITTED THAT ONLY SECTION WHI CH HAS IMPOSED OBLIGATION ON THE ASSESSEE IS SECTION 195(1) OF THE ACT. THE SECTION OBLIGATES THE ASSESSEE TO DEDUCT TAX AT SOU RCE IN RESPECT OF THE INCOME CHARGEABLE UNDER THE ACT. THE SECTION DO ES NOT EMPOWER THE PAYER TO EXAMINE THE APPLICABILITY OF THE DTAA TO THE PAYEE. LANGUAGE OF SECTION 90(2) OF THE ACT BEYOND DOUBT I S CLEAR AND UNAMBIGUOUS THAT OPTION TO EXERCISE THE BENEFIT OF EITHER THE ACT PAGE - 110 IT(TP)A.1511 TO 1516/BANG/2013 OR THE DTAA IS CONFERRED ON THE NONRESIDENT. HENCE AT THE STAGE OF PAYMENT WITHOUT THERE BEING ANY INDICATION BY THE R ECIPIENT, THE PAYER CANNOT STEP INTO THE SHOES OF RECIPIENT TO EX ERCISE THE OPTION PROVIDED UNDER SECTION 90(2) AND CLAIM THE BENEFIT OF DTAA. 121.7 IT IS FURTHER SUBMITTED THAT THE APPLICATION OF DTAA IS NOT AUTOMATIC AND IT IS THE SPECIFIC EXERCISE OF OPTION BY THE RECIPIENT SUBJECT TO FULFILLMENT OF CERTAIN CON DITIONS AS CONTEMPLATED UNDER THE DTAA. IN THE ABSENCE OF ANY MATERIAL OR ENQUIRY BY THE ASSESSEE, THE ASSESSEE CANNOT JUMP T O THE CONCLUSION THAT THE AMOUNT IS NOT CHARGEABLE UNDER THE DTAA. 121.8 THE CONTENTION OF THE ASSESSEE THAT RECEIPT I N THE HANDS OF GOOGLE IRELAND IS LIABLE TO BE TAXED ON CASH BASIS IS COMPLETELY BASELESS FOR THE REASON THAT THE GOOGLE IRELAND ITS ELF HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 AND 2008-09 AND HAS ADMITTED THE MERCANTILE SYSTEM OF ACCOUNTING BEING FOLLOWED. COPIES ENCLOSED FOR READY REFERENCE AND CONSIDERATION. 121.9 THE COORDINATE BENCH OF THIS HON'BLE TRIBUNAL IN THE CASE OF VODAFONE SOUTH LTD AT PARA-36, 37 HAS EXAMINED THE SCOPE OF APPLICABILITY OF THE DTAA AND HAS BEEN HELD THAT AP PLICABILITY OF THE DTAA IS NOT AUTOMATIC. IT IS FURTHER HELD BY THIS H ON'BLE TRIBUNAL THAT THE ONLY ONUS UPON THE ASSESSEE IS TO DETERMINE THA T THE PAYMENTS MADE BY IT DID DO NOT INVOLVE THE ELEMENT OF INCOME CHARGEABLE UNDER THE ACT AND THE PROVISIONS OF DTAA WOULD NOT AUTOMATICA LLY ATTRACT IN DEFENCE OF THE PAYER. PAGE - 111 IT(TP)A.1511 TO 1516/BANG/2013 121.10. IN VIEW OF THE DECISION OF THIS HONBLE TR IBUNAL IN THE CASE OF VODAFONE SOUTH LTD, AND THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF GE INDIA EXPLAINING TH E SCOPE OF SECTION 195(1) AND APPLICABILITY OF OTHER CHARGING PROVISIONS LIKE SECTION 4, 5, 9 AND 90 (2) OF THE A CT, WHAT IS TO BE CONSIDERED AT THE TIME OF PAYMENT BY THE ASSESSEE I S ONLY REGARDING THE CHARGEABILITY UNDER THE ACT AND THE A SSESSEE CANNOT BE PERMITTED TO TAKE SHELTER UNDER THE DTAA AS THE BENEFIT OF DTAA IS CONFERRED ONLY ON THE NONRESIDENT RECIPI ENT. 121.11. THE VARIOUS JUDGEMENTS RELIED ON BY THE AS SESSEE IN THE CASE OF SIEMENS, BOOZ ALLEN AND SAIRA ASIA A RE NOT APPLICABLE TO THE PRESENT CASE. FURTHER THE SCOPE O F SECTION 90(2) OF THE ACT AND THE EFFECT OF CHARGING PROVISIONS UNDER SECTION 4, 5 AND 9 HAVE NOT BEEN EXAMINED. FURTHER THE ABOVE JUDGEMENT S HAVE NOT DEAL WITH THE ENTITLEMENT OF THE PAYER TO CLAIM PROTECTI ON UNDER SECTION 90(2) OF THE ACT. PARTICULARLY AND AS ADMITTED BY T HE NON-RESIDENT, THE NON-RESIDENT ASSESSEE IS FOLLOWING MERCANTILE S YSTEM OF ACCOUNTING AND HENCE THE WORD 'RECEIVED' IN THE DTA A CANNOT BE READ TO MEAN THE METHOD OF ACCOUNTING. IN CONTRARY, THE SAME HAS TO READ AS CLASSIFICATION OF INCOME. 121.12. IF THE CONTENTION OF THE ASSESSEE IS TO BE TESTED IN THE CONTEXT OF THE LAW LAID DOWN BY THE SUPREME COU RT WITH RESPECT TO THE SCOPE OF SECTION 195(1) OF THE ACT R.W.S 4, 5, 9 AND 90(2) OF THE ACT, IF THE ASSESSEE CASE IS ACCEPTED THAT LIABILITY TO DEDUCT TAX AT SOURCE PAGE - 112 IT(TP)A.1511 TO 1516/BANG/2013 WOULD ARISE IN THE YEAR OF PAYMENT AS THE SAME IS T AXABLE ON RECEIPT BASIS IN THE HANDS OF THE NON-RESIDENT, IN THE EVEN T OF THE NON-RESIDENT EXERCISING OPTION UNDER SECTION 90(2) OF THE ACT TO CLAIM BENEFIT OF THE PROVISIONS OF THE ACT, AND SPECIFICALLY IN VIEW OF THE MERCANTILE SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE NONRESID ENT, IF THE NON- RESIDENT CLAIMS THAT THE SAME IS TAXABLE ON ACCRUAL BASIS UNDER SECTION 4, 5 AND 9 OF THE ACT, READ WITH THE SPECIF IC LANGUAGE OF SECTION 195(1) OF THE ACT, THE CONTENTION IS CLEARL Y ILLOGICAL AND CONTRARY TO THE SCHEME OF THE ACT. UNDISPUTEDLY IT IS SETTLED POSITION OF LAW THAT WHETHER TO CLAIM BENEFIT UNDER THE ACT OR UNDER THE DTAA IS THE OPTION OF THE NON-RESIDENT. I N THE ABSENCE OF ANY AUTHORITY IN FAVOUR OF THE ASSESSEE, THE ASSESS EE CANNOT PRESUME THAT THE NONRESIDENT WOULD BE CLAIMING BENE FIT UNDER THE DTAA. IF SUCH WAS THE SITUATION, THE ACT HAS PROVIDED MECHANISM FOR THE NON-RESIDENT TO EXPRESS THAT UNDER SECTION 195 OF THE ACT BEFORE THE CONCERNED A SSESSING OFFICER. IN THE ABSENCE OF ANY SUCH EXERCISE ON BEHALF OF TH E NON-RESIDENT, THE CONTENTION OF THE ASSESSEE IS BASELESS AND LIAB LE TO BE REJECTED. 121.13. IF THE TERMS OF THE PAYMENT AS AGREED BETW EEN THE PARTIES IS EXAMINED IT IS CLEAR THAT ON PERIODI C INTERVALS THE AMOUNTS ARE LIABLE TO BE PAID. IN VIEW OF THE ABOVE , THE CONTENTION CONTRARY THAT AMOUNT IS TAXABLE IN THE HANDS OF THE NONRESIDENT ON RECEIPT BASIS IS BASELESS. PAGE - 113 IT(TP)A.1511 TO 1516/BANG/2013 121.14. THE LD COUNSEL FOR REVENUE RELID UPON FOL LOWING JUDGMENTS A TRANSMISSION CORPORATION OF AX LTD & ANR V COMMISSIONER OF INCOME-TAX (239 ITR 587(SC)): B. GE INDIA TECHNOLOGY CENTRE (P) LTD. VS COMMISSIO NER OF INCOME-TAX & ANR (327 ITR 0456 (SC)) C. COMMISSIONER OF INCOME-TAX V ELI LILLY & CO. (IN DIA) (P.) LTD 223 CTR (SC) 20 . D. D. VODAFONE SOUTH LTD. V. DEPUTY DIRECTOR OF INCOME -TAX (INTERNATIONAL TAXATION) (44 ITR(T) 330 (BANG ITAT) E. PALAM GAS SERVICE V. CIT: REBUTTAL AGAINST THE SUBMISSIONS OF THE DR 122. LD AR THAT SECTION 4(1) IS A CHARGING PROVISI ON AND IT LAYS DOWN THAT THE TOTAL INCOME OF THE ASSESSEE SHOULD B E TAXED IN THE RELEVANT ASSESSMENT AT THE RATES IN FORCE. THE TERM 'TOTAL INCOME' IS DEFINED IN SECTION 5 TO INCLUDE ALL INCOME WHICH ACCRUES OR ARISES OR DEEMED TO ACCRUE OR ARISE OR IS RECEIVED OR DEEMED TO BE RECEIVED. HOWEVER, APPLICATION OF THIS PROVISION IS SUBJECT T O OTHER PROVISIONS OF THIS ACT INCLUDING SECTION 90(2) OF THE ACT. SECTIO N 90(2) PROVIDES THAT THE PROVISIONS OF THE ACT MAY BE APPLIED TO TH E EXTENT BENEFICIAL TO THE ASSESSEE. ACCORDINGLY, FOR THE PURPOSE OF AP PLYING SECTION 195(1), THE 'SUM CHARGEABLE' UNDER SECTION 4 WOULD NEED TO BE DETERMINED HAVING REGARD TO THE PROVISIONS OF THE R ELEVANT DTAA. 122.1 IT WAS SUBMITTED BY LD AR THAT DR RELIANC E ON THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASES OF TRANSMISSION PAGE - 114 IT(TP)A.1511 TO 1516/BANG/2013 CORPORATION OF A.P LTD (SUPRA) AND GE INDIA TECHNOLOGIES (P) LTD (SUPRA) WHILE SUBMITTING THAT THE PROVISIONS OF DTA A CANNOT BE APPLIED BY THE PAYER WHILE DETERMINING THE AMOUNTS CHARGEABLE TO TAX IN INDIA IS INCORRECT. LD AR SUBMITTED THAT APPLI CABILITY SECTION 195 OF THE ACT MAY BE EVALUATED IN THREE DIFFERENT CASE S AS ILLUSTRATED BELOW: (I) WHERE THE TOTAL OF THE SUM PAID TO NON-RESIDENT IS CHARGEABLE TO TAX IN INDIA (II) WHERE PART OF THE SUM PAID TO NON-RESIDENT IS CHARG EABLE TO TAX IN INDIA (III) WHERE THE TOTAL SUM PAID TO NON-RESIDENT IS NOT CHA RGEABLE TO TAX IN INDIA 122.2. LD AR SUBMITTED THAT THE HON'BLE SUPREME CO URT IN THE CASE OF TRANSMISSION CORPORATION (SUPRA) HAS ONLY DEALT WITH THE FIRST TWO SCENARIOS, AND HAS NOT DEALT WITH THE THIRD SCENARI O I.E WHERE THE TOTAL SUM PAID TO NON-RESIDENT IS NOT CHARGEABLE TO TAX I N INDIA 122.3. FURTHER LD AR SUBMITTED THAT IN THE CASE OF GE INDIA TECHNOLOGIES (P) LTD (SUPRA) HAS HELD THAT THE PROVISIONS OF SECTION 195 ARE REQUIRED BE READ WITH THE PROVISIONS OF SEC TION 4, 5, 9, AND 90(2). THE HONBLE COURT HAD HELD AS UNDER : 'WHILE DECIDING THE SCOPE OF S. 195(2) IT IS IMPORT ANT TO NOTE THAT THE TAX WHICH IS REQUIRED TO BE DEDUCTED AT SO URCE IS DEDUCTIBLE ONLY OUT OF THE CHARGEABLE SUM. THIS IS THE UNDERLYING PRINCIPLE OF S. 195. HENCE, APART FROM S. 9(1), SS.4, 5, 9, 90, 91 AS WELL AS THE PROVISIONS OF DTAA ARE ALSO RELEVANT, W HILE APPLYING TDS PROVISIONS' PAGE - 115 IT(TP)A.1511 TO 1516/BANG/2013 122.4. FURTHER LD AR SUBMITTED THAT THE CASE OF VOD AFONE SOUTH (SUPRA) IS NOT APPLICABLE AUTOMATICALLY. AS PER AR IN THE CASE OF VODAFONE SOUTH (SUPRA) HAS NOT FACTORED THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA T ECHNOLOGIES (P) LTD (SUPRA). FURTHER LD AR SUBMITTED THAT DECISION OF THE SUPRE ME COURT IN PALAM GAS IS IN A COMPLETELY DIFFERENT CONTEXT AND CANNOT BE RELIED ON TO SUBMIT THAT 'RECEIVED' SHOULD BE INTER PRETED AS 'RECEIVABLE'. 122.5. LD AR SUBMITTED THAT THE AO PROPOSED TO APPL Y THE INDIA IRELAND DTAA TO DETERMINE THE RATE OF WITHHOLDING A ND HAS NOT DISPUTED ON THE APPLICABILITY OF THE TREATY ON THIS ISSUE. DISCUSSION AND FINDING : 123 . AS PER SERVICE AGREEMENT DATED DT.01.04.2014, PAYMENT IS REQUIRED TO BE MADE BY THE GIL WITH 90 DAYS AFTER I T RECEIPT THE INVOICE FROM THE ASSESSEE : PAYMENT : 4.1 AS SALE COMPENSATION FOR THE PERFORMANCE OF THE SERVICES, GOOGLE IRELAND, OR ANY OF THE AFFILIATES, ON BEHALF OF GOOGLE IRELAND, WILL PAY GOOGLE INDIA AN AMOUNT CALCULATED AS SPECIFIED IN EXHIBIT A HERETO (SERVICE FEES). GOOGLE INDIA WILL INVOICE GOOGLE IRELAND ON A PERIODIC BASIS FOR THE SERVICES FEE DUE WITH RESPECT TO SERVICES PERFORMED. EACH INVOICE SHALL BE ACCOMPANIED BY A REPORT PROVIDING AN ACCOUNTING OF ALL SERVICES PROVIDED BY GOOGLE INDIA DURING THE PAYMENT PERIOD; SUCH ALL INFORMATION REASONABLY NECESSARY FOR COMPUTATION AN D / OR CONFIRMATION OF THE PAYMENTS DUE TO GOOGLE INDIA FOR SUCH PAGE - 116 IT(TP)A.1511 TO 1516/BANG/2013 PERIOD. GOOGLE IRELAND WILL PAY EACH SUCH INVOICE NO LATER THAN NINETY (90) DAYS AFTER ITS RECEIPT. ALL PAYMENTS D UE UNDER THIS AGREEMENT SHALL BE PAID IN ACCORDANCE WITH POLICIES ESTABLISHED BY GOOGLE IRELAND FROM TIME TO TIME. 123.1. SIMILARLY AS PER AGREEMENT DATE 12.12.2005. AS PER CLAUSE (4), PAYMENTS RECEIVED AND TAXES ARE REQUIRE D TO BE MADE IN THE FOLLOWING MANNER: 123.2. SIMILARLY IN EXHIBIT A ( PAYMENT TERMS AND C ONDITIONS ) IT IS PROVIDED AS UNDER : 1. DISTRIBUTOR SHALL PAY FEES FOR THE DISTRIBUTION RIG HT TO GOOGLE AN AMOUNT EQUAL TO THE EXCESS OF : (A) REVENUE EARNED BY DISTRIBUTOR AND RECOGNIZED IN ACCORDANCE WITH ACCOUNTING STANDARD IN THE BOOKS OF ACCOUNT OF DISTRIBUTOR PURSUANT TO THIS AGREEMENT. (B) (I) EXPENSES INCURRED UNDER AND RECORDED ON THE BOOKS OF ACCOUNT OF DISTRIBUTOR IN PURSUANT TO THIS AGREE MENT; AND (II) THE SPECIFIED PERCENTAGE OF EXPENSES. XXXX PAGE - 117 IT(TP)A.1511 TO 1516/BANG/2013 6. PAYMENT OF FEES : 6.1 DISTRIBUTOR SHALL MAKE PAYMENTS AT MUTUALLY AGR EED INTERVALS DURING THE YEAR AND MAKE THE FINAL TRUED- UP PAYMENT ON THE BASIS OF DULY AUDITED ACCOUNTS TO GOOGLE. 6.2 PAYMENTS BY DISTRIBUTOR TO GOOGLE SHALL BE IN T HE CURRENCY SPECIFIED BY GOOGLE. 6.3 DOCUMENTATION: GOOGLE SHALL PROVIDE SUCH DOCUMENTATION AS MAY BE REQUIRED BY DISTRIBUTOR TO EVIDENCE THE FEES FOR ITS RECORDS, COMPLIANCES AND AUDIT. 6.4. ALL FEES AND PAYMENTS MAY BE SUBJECT TO INDIAN TAX LAWS OR TAX RULES DEFINED UNDER VARIOUS TAX LAWS OR UNDE R SPECIFIC DTAAS (DOUBLE TAXATION AVOIDANCE AGREEMENTS) AS MAY BE APPLICABLE. 123.3. FROM THE CONJOINT READING OF THE ABOVE TWO P ROVISIONS IT IS ABUNDANTLY CLEAR THAT THE DISTRIBUTION FEES (ROYALT Y) IS PAYABLE DURING THE YEAR AND UP TO FINAL TRUED-UP ON THE BASIS OF T HE DULY AUDITED ACCOUNTS OF GOOGLE. EVEN AS PER CLAUSE 4 OF THE SE RVICE AGREEMENT, THE GOOGLE IRELAND WILL PAY THE INVOICES RAISED BY GOOGLE INDIA (ASSESSEE) WITHIN 90 DAYS OF RECEIPT OF INVOICE. ON THE BASIS OF THE ABOVE, THERE IS NO DOUBT THAT THE PAYMENT IS DUE AN D PAYABLE BY THE ASSESSEE TO GIL WITHIN THE YEAR IT BECAME DUE. THE SAME PRINCIPLE IS APPLICABLE FOR DISTRIBUTION FEES (ROYALTY) AS WELL AS FOR SERVICES RENDERED BY THE ASSESSEE TO GIL. THE ASSESSEE, IN I TS BOOKS OF ACCOUNT HAS DEBITED THE AMOUNT OF RS.1198261982/- FOR AY 20 08-09 TOWARDS THE FEES FOR DISTRIBUTION SERVICES TO GIL. PAGE - 118 IT(TP)A.1511 TO 1516/BANG/2013 123.4. AS PER SECTION 195, THERE IS AN OBLIGATION O N THE PART OF THE PAYER TO DEDUCT THE TDS, IN CASE THE ASSESSEE IS MA KING PAYMENT TO A NON-RESIDENT. THE ARGUMENT THAT THE PAYMENT MADE B Y THE ASSESSEE TO GIL IS NOT BEING THE SUM CHARGEABLE UNDER THE PROVI SIONS OF THE ACT, IS NOT AVAILABLE FOR THE PAYER TO BE RAISED IN THE PRESENT PROCEEDINGS. THE NECESSARY SAFE-GUARDS ARE PROVIDED BY THE ACT I N THE FORM OF SECTION 195(2) WHICH CLEARLY PROVIDES THAT IN CASE THE ASSESSEE IS HAVING ANY DOUBT ABOUT THE CHARGEABILITY TO TAX OF THE PAYMENT, THEN THE ASSESSEE MAY MAKE AN APPLICATION TO THE AO FOR THE PURPOSE OF DETERMINING WHETHER THE SUM IS CHARGEABLE TO TAX OR NOT AND IF YES, ON WHAT PROPORTION. 123.5. IN THE PRESENT CASE, NO SUCH APPLICATION IS MADE U/S.195(2) TO THE AO. THE ASSESSEE ON ITS OWN, WITHOUT HAVING KNOWLEDGE, INFORMATION AND PRIVY TO THE ACCOUNTING STANDARD AN D ACCOUNTING PRACTICE OF GIL, HAS TREATED THE SAID PAYMENT AS A BUSINESS PROFIT OF GIL IN ITS BOOKS OF ACCOUNT. THE UNIFORM POLICY IS REQUIRED TO BE ADOPTED FOR DEDUCTION OF TAXES AT SOURCE IN CASE, B Y THE PERSON RESPONSIBLE FOR PAYING AMOUNT TO A NON-RESIDENT. T HERE IS NO CAVEAT OR CONDITION LAID BY THE ACT ON THE PERSON RESPONSIBLE FOR PAYING TO NON- PAGE - 119 IT(TP)A.1511 TO 1516/BANG/2013 RESIDENT. IN OUR VIEW, WHETHER IT IS BUSINESS PROF IT OR ROYALTY, IN BOTH THE CIRCUMSTANCES, SO FAR AS THE ASSESSEE IS CONCER NED, THE ASSESSEE IS DUTY-BOUND TO DEDUCT THE TDS UNLESS THERE IS AN ADJ UDICATION BY THE AO TO THE CONTRARY U/S.195(2). 123.6 THE ARGUMENT OF THE LD. AR THAT UNDER THE PR OVISIONS OF INDO-IRELAND DTAA, THE ROYALTY IS CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT ON RECEIPT BASIS NEEDS TO BE REJEC TED, AS THE BENEFIT OF DTAA, IS ONLY AVAILABLE TO NON-RESIDENT AND NOT TO THE RESIDENT PAYER. MOREOVER, THE ASSESSEE CANNOT CLAIM THAT THE ROYALT Y IS CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT ON RECEIPT BAS IS AS THE ASSESSEE HAS NO ACCESS TO THE ACCOUNTING METHOD FOLLOWED BY GIL. 123.7 THE LD. STANDING COUNSEL FOR THE REVENUE HAD FILED THE COPY OF THE RETURN OF INCOME FOR AY 2008-09 WHERE THE GIL H AD MENTIONED AGAINST THE COLUMN METHOD OF ACCOUNTING EMPLOYED IN THE PREVIOUS YEAR MERC (MERCANTILE). FOR THE READY REFERENC E WE ARE HEREWITH REPRODUCING THE FIRST PAGE AND SIXTH PAGE OF ITR 6 OF AY 2008-09. PAGE - 120 IT(TP)A.1511 TO 1516/BANG/2013 PAGE - 121 IT(TP)A.1511 TO 1516/BANG/2013 127.8 THUS IT IS CLEAR THAT GIL WAS FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING AND NOT THE CASH METHOD OF ACC OUNTING. AS PER THE MERCANTILE METHOD OF ACCOUNTING, THE GIL SHOULD HAVE SHOWN THE PAGE - 122 IT(TP)A.1511 TO 1516/BANG/2013 DISTRIBUTION FEES (ROYALTY) ON ACCRUAL BASIS AND NO T ON RECEIPT BASIS. THEREFORE THE ARGUMENT OF CHARGEABILITY OF ROYALTY IN THE HANDS OF NON-RESIDENT (GIL), ON RECEIPT BASIS IS REQUIRED TO BE REJECTED. 123.10 THERE ARE ONLY TWO METHODS OF ACCOUNTING PRE VALENT IN THE WORLD, I.E., MERCANTILE METHOD AND CASH METHOD. IN MERCANTILE METHOD, THE TAXABILITY IS DONE ON ACCRUAL BASIS, WHEREAS IN CASH METHOD, THE TAXABILITY IS DONE ON RECEIPT BASIS. I N THE PRESENT CASE, THOUGH IT IS NOT THE CONCERN OF THE ASSESSEE AS TO WHICH METHOD IS BEING FOLLOWING BY THE GIL YET, GIL AS MENTIONED HE REIN ABOVE, IS FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING, THER EFORE, THE CHARGEABILITY OF TAX WOULD BE IN THE YEAR WHEN IT I S ACCRUED AND NOT IN THE YEAR WHEN IT WAS RECEIVED. 123.11. THE ARGUMENT OF CHARGEABILITY TO TAX IN THE HANDS OF NON- RESIDENT ON RECEIPT BASIS, IS ALSO REQUIRED TO BE R EJECTED AS THE SCOPE AND AMBIT OF DTAA (DOUBLE TAXATION AVOIDANCE AGREEM ENT) AS PER SECTION 90 OF THE ACT IS TO GRANT RELIEF FROM DOUBL E TAXATION, TO PROMOTE MUTUAL ECONOMIC RELATIONS, TRADE AND INVEST MENT, FOR EXCHANGE OF INFORMATION FOR PREVENTION OF EVASION O R AVOIDANCE OF INCOME-TAX CHARGEABLE UNDER THIS ACT OR IN OTHER CO UNTRY, OR FOR RECOVERY OF INCOME-TAX UNDER THIS ACT OR UNDER CORR ESPONDING LAWS. IN THE OPINION OF BENCH, THE DTAA CAN ONLY PROVIDE THE CHARACTERIZATION OF THE INCOME, THE COUNTRY WHERE IT IS TO BE PAID A ND AT WHAT RATE THE SAID INCOME IS TO BE TAXED. HOWEVER, IT IS NOT WIT HIN THE SCOPE OF THE PAGE - 123 IT(TP)A.1511 TO 1516/BANG/2013 DTAA TO PROVIDE WHEN (I.E YEAR OF ACCRUAL OR RECEIP T), THE INCOME IS REQUIRED TO BE CHARGED. 123.12 IN OUR VIEW THE LITERAL RULE OF INTERPRETATI ON IS NOT REQUIRED TO BE FOLLOWED AND INSTEAD THEREOF LINGA OR LAKSHAN A PRINCIPLE HAS TO BE FOLLOWED, I.E., WE HAVE TO SEE THE INTENT AND NOT GO BY THE LITERAL RULE AS POINTED OUT BY LORD DENNING IN HIS BOOK, THE DI SCIPLINE OF LAW. IF WE GO BY LITERAL MEANING OF DTAA, THEN UNSCRUPOU LOUS PERSONS MAY MISUSE THE PROVISION AND AVOID PAYMENT OF TAXES . TO ILLUSTRATE THIS, IF A COMPANY IS RENDERING SERVICES TO B COMPA NY, AND B COMPANY IS SUPPLYING SOME TECHNOLOGY TO A COMPANY, THEN THERE IS A MUTUAL OBLIGATION OF PAYING AND RECEIVING THE AMOUN T. IT IS POSSIBLE FOR BOTH A AND B EITHER TO KEEP SEPARATE ACCOUNTS F OR BOTH TRANSACTIONS OR THEY CAN INDULGE INTO ADJUSTMENT OF THEIR ACCOUN TS BY DEBITING AND CREDITING THEIR ACCOUNTS WITHOUT ACTUAL PAYMENT. I N SUCH A SITUATION, THERE WILL NOT BE ANY OCCASION FOR B COMPANY TO REC EIVE THE ACTUAL PAYMENT FROM A COMPANY. 123.13 FURTHER, THE INCOME ARISING ON ACCOUNT OF RO YALTY PAYABLE BY RESIDENT OR NON-RESIDENT IN RESPECT OF A NY RIGHT, PROPERTY OR INFORMATION USED OR SERVICES UTILIZED F OR THE PURPOSES OF BUSINESS OR PROFESSION SHALL BECOME DUE AND PAYABLE AS PER THE PROVISIONS OF THE IT ACT, AS WEL L AS UNDER DTAA WHEN SUCH INFORMATION IS USED OR SERVICE IS UT ILIZED BY THE RECIPIENT. IN THE PRESENT CASE, THE DISTRIBUTI ON FEES WAS CREDITED AS ACCRUED BY THE ASSESSEE AFTER UTILIZING THE BENEFIT PAGE - 124 IT(TP)A.1511 TO 1516/BANG/2013 UNDER THE DISTRIBUTION AGREEMENT TO THE ACCOUNT OF GIL, THEREFORE, THE SAME IS CHARGEABLE TO TAX WHEN IT WA S CREDITED TO THE ACCOUNT OF GIL AND THE APPELLANT IS DUTY-BOUND TO DEDUCT TDS AT THE TIME OF CREDITING IT TO THE ACCOUNT OF G IL. THE APPELLANT WILL NOT SUFFER ANY LOSS ON THIS ACCOUNT IF THE PAYMENT IS MADE TO THE GIL AFTER DEDUCTING THE TAX. IN ANY CASE IF THE GIL PROVES THAT THE AMOUNT IS NOT REQUIRED TO BE TA XED IN INDIA THEN THE GIL CAN CLAIM REFUND IN THE ASSESSMENT PRO CEEDINGS. 123.14. THE ASSESSEE IN THE PRESENT CASE HAS USED THE INFORMATION, PATENTED TECHNOLOGY, ETC., FROM GIL WH ICH IN THE OPINION OF THE BENCH, IS ROYALTY AND THEREFORE, AS PER THE MANDATE OF ARTICLE 12(2), THE ROYALTY IS TO BE TAXE D IN THE CONTRACTING STATE (INDIA) IN ACCORDANCE WITH THE LA WS OF INDIA. CLAUSE (2) OF ARTICLE 12 OF DTAA CLEARLY PROVIDES A S UNDER : 12(2) : HOWEVER, SUCH ROYALTIES OR FEES FOR TECHNIC AL SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE, AND ACCORDING TO THE LAWS OF THAT STATE. FURTHER THE LAWS OF INDIA PROVIDE TAXABILITY OF ROY ALTY ON THE BASIS OF THE ACCRUAL (MERCANTILE METHOD) AND NOT ON RECEIPT (CASH BASIS). THEREFORE, ONCE FIELD IS OCCUPIED BY CLAUS E 2 OF ARTICLE 12, THE ROYALTY PAID BY THE ASSESSEE TO GIL IS TAXA BLE AS PER INDIAN LAW. PAGE - 125 IT(TP)A.1511 TO 1516/BANG/2013 123.15. IN OUR VIEW, THE ASSESSEE HAS USED THE INFO RMATION, PATENTED TECHNOLOGY, ETC., FROM GIL WHICH IN THE OP INION OF THE BENCH, IS ROYALTY AND THEREFORE, AS PER THE MANDATE OF ART ICLE 12(2), THE ROYALTY IS TO BE TAXED IN THE CONTRACTING STATE (IN DIA) IN ACCORDANCE WITH THE LAWS OF INDIA. FURTHER THE LAWS OF INDIA PROVIDE TAXABILITY OF ROYALTY ON THE BASIS OF THE ACCRUAL (MERCANTILE MET HOD) AND NOT ON RECEIPT (CASH BASIS). IN OUR VIEW ONCE THE FIELD I S OCCUPIED BY CLAUSE 2 OF ARTICLE 12, THEN THE SAME IS REQUIRED TO BE APPL IED AND ENFORCED. 123.16. THE RELIANCE PLACED BY THE LD. AR ON PARAGR APHS 7 AND 8 OF THE DECISION OF THE COORDINATE BENCH IN THE MATT ER OF PIZZA HUT INTERNATIONAL LLC (SUPRA ) IS TO SUPPORT ITS CASE, IS OUT OF PLACE AND IS THEREFORE REQUIRED TO BE REJECTED. FOR ARRIVING AT THE CONCLUSION THAT THE ROYALTY IS TAXABLE ON CASH BASIS, THE COOR DINATE BENCH NEITHER GONE INTO THE METHOD OF ACCOUNT NOR CONSIDE RED ARTICLE 12(2) OF DTAA WHICH PROVIDES THAT THE ROYALTY IS TAXABLE IN ACCORDANCE WITH THE LAWS OF INDIA (CONTRACTING STATE/ SOURCE C OUNTRY ) 123.17. AS ADMITTED BY THE ASSESSEE DURING THE COUR SE OF ARGUMENT AS WELL AS IN THE WRITTEN SUBMISSIONS THAT THE ASSE SSEE HAD APPLIED FOR RBI PERMISSION ONLY IN NOVEMBER, 2011. THE FOLLOWI NG WRITTEN SUBMISSIONS WERE MADE IN THIS REGARD. THE DISTRIBUTION FEE PAYABLE BY THE APPELLANT TO GOOGLE IRELAND FOR THE PERIOD DECEMBER 2006 TO JUNE 2009 REMAINED UNPAID UNTIL FY 2011-12. THE APPELLANT HAD APPROACHED THE RESERVE BANK OF INDIA PAGE - 126 IT(TP)A.1511 TO 1516/BANG/2013 THROUGH THE AUTHORISED DEALER BANK IN NOVEMBER 2011 REQUESTING FOR APPROVAL TO REMIT THE AMOUNTS TO GOO GLE IRELAND. PURSUANT TO THE APPROVAL FROM THE RBI ON 1 2 MAY 2014, THE APPELLANT HAS REMITTED THE DISTRIBUTI ON FEE PERTAINING TO AFOREMENTIONED PERIOD IN MAY 2014 . 123.18. IF WE EXAMINE THE CONDUCT OF THE ASSESSEE I T IS CLEAR THAT THE ASSESSEE HAS NOT SOUGHT THE PERMISSION FOR THE DISTRIBUTION FEES TO BE PAID TO ITS AE (GIL) FOR AY 2006-2009, UPTO NOV 2011. 123.19 THUS THE INTENTION OF THE ASSESSEE AS WELL A S OF THE GIL IS CLEAR AND CONSPICUOUS THAT THEY WANTED TO AVOID THE PAYMENT OF TAXES IN INDIA. THAT IS WHY, DESPITE THE DUTY OF THE ASS ESSEE TO DEDUCT THE TAX AT THE TIME OF PAYMENT TO GIL, NO TAX WAS DEDUC TED NOR ANY PERMISSION WAS SOUGHT FOR PAYING THE AMOUNT. IF TH E PERMISSION FOR PAYING THE AMOUNT IS TAKEN IMMEDIATELY AFTER ENTERI NG INTO AGREEMENT, THEN THIS ARGUMENT OF NOT MAKING THE PAYMENT AS LAT E AS MAY, 2014 WOULD NOT HAVE BEEN AVAILABLE TO THE ASSESSEE. THI S IS A CLEAR DESIGN TO SKIP THE LIABILITY BY BOTH THE ASSESSEE AS WELL AS GIL BY HAVING MUTUAL UNDERSTANDING. 123.20 THEREFORE IN OUR VIEW THE LD. DR WAS RIGHT I N HIS SUBMISSION THAT THE ASSESSEE DELIBERATELY NOT SOUGH T PERMISSION FOR MAKING THE PAYMENT TO GIL AND IS TAKING CHANCE TO A VOID TAXES WITHIN THE FOUR CORNERS OF IT ACT. THE JUDGMENT REFERRED BY THE ASSESSEE IN THE CASE OF PIZZA HUT INTERNATIONAL LLC (SUPRA) AND CSC TECHNOLOGY (SUPRA), MENTIONED ABOUT THE MISUSE AND DELIBERATE PAGE - 127 IT(TP)A.1511 TO 1516/BANG/2013 ATTEMPT TO DELAY THE PAYMENT OF TAXES WHEN THE TRAN SACTION IS BETWEEN THE AE. IN THE CASE ON HAND CONDUCT OF THE TWO PA RTIES, WHICH ARE ASSOCIATED ENTERPRISES (AES) CLEARLY SHOW THAT BOTH ARE TRYING TO MISUSE THE PROVISION OF DTAA BY STRUCTURING THE TRA NSACTION WITH THE INTENTION TO AVOID PAYMENT OF TAXES. THE SAME IS N OT PERMISSIBLE IN LAW. THE PROVISO IS BEING ABUSED BY THEM AS A DEVI CE TO DEFER THE TAX FOR ANY LENGTH OF TIME BY MUTUAL UNDERSTANDING OF T HE PARTIES, PARTICULARLY WHEN BOTH THE PARTIES ARE UNDER AN OBL IGATION TO PAY AND RECEIVE THE PAYMENT FOR THE SERVICES RENDERED AND F OR DISTRIBUTION FEES (ROYALTY). THEREFORE, WE HAVE NO HESITATION TO HOL D THAT THE JUDGMENT RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE TO TH E FACTS AND CIRCUMSTANCES OF THE CASE, RATHER IT SUPPORTS THE C ASE OF THE REVENUE.. 123.21 LD AR HAD SUBMITTED THAT FOR THE PURPOSE OF DETERMINING WHETHER AN AMOUNT IS CHARGEABLE TO TAX IN THE HANDS OF A NON-RESIDENT, THE PROVISIONS OF THE RELEVANT DTAA WOULD ALSO NEED TO BE FACTORED AND ROYALTY WOULD TRIGGERED ONLY WHEN THE AMOUNT IS PAID AND NOT WHEN THE AMOUNT IS ACCRUED OR EVEN DUE ACCORDINGLY, THE LIABILITY TO WITHHOLD UNDER SECTION 195 WOULD ARISE ONLY WHEN TH E SUM BECOMES CHARGEABLE IN THE HANDS OF GOOGLE IRELAND I.E. WHEN THE AMOUNT IS PAID. IN SUPPORT THE LD AR RELIED UPON THE ORDER OF COORDINATE BENCH IN THE MATTER OF SAIRA ASIA INTERIORS PVT LTD (ITA NO.673/AHD/2014) REFERRED HEREIN ABOVE. 123.22 IN OUR VIEW THE FINDING RECORDED BY THE COO RDINATE BENCH WAS ON THE FACTS BEFORE IT, HOWEVER SAID ORDER IS NOT APPL ICABLE TO THE PRESENT SET OF PAGE - 128 IT(TP)A.1511 TO 1516/BANG/2013 FACTS AND IS DISTINGUISHABLE FOR VARIOUS REASONS I NCLUDING THE FOLLOWING REASONS : AS THERE IS NO MECHANISM AVAILABLE WITH T HE REVENUE TO KNOW WHETHER THE ACTUAL AMOUNT WAS PAID OR CREDITED IN T HE HAND OF GOOGLE IRELAND OR NOT IN THE ASSESSMENT YEARS UNDER CONSI DERATION OR NOT OR EVEN BEFORE THE LAPSE OF TIME LIMIT TO DEDUCT AND DEPOSI T THE TAX , SECONDLY THE APPELLANT HAVE NOT SOUGHT PERMISSION FOR REMITTANC E TILL NOV 2011THOUGH THE AGREEMENT WAS ENTERED ON 12.12.2005, THIRDLY P RESENT CASE IS A CASE OF COLLUSION BETWEEN THE PAYER AND PAYEE . FURTHER WHE N GOOGLE IRELAND ITSELF IS FOLLOWING THE MERCANTILE METHOD OF ACCOUN TING THEN THERE IS NO OCCASION TO TREAT THE CASH METHOD OF ACCOUNTING AND CONCLUDING THAT THE ROYALTY WOULD TRIGGER ONLY ON ACTUAL PAYMENT OF AMO UNT LASTLY THE ROYALTY PAID TO GOOGLE IRELAND IS TAXABLE AS PER INCOME TAX ACT , WHICH PROVIDES FOR MAINTAINING THE ACCOUNTS AS PER MERCAN TILE METHOD AS PER SECTION 145 OF INCOME TAX. FURTHER THE COORDINATE B ENCH HAD NOT FOLLOWED THE BINDING JUDGMENT OF HONBLE SUPREME CO URT IN THE MATTER OF TRANSMISSION CORPORATION OF AP (SUPRA). 123.23 THE CONTENTION OF THE LD. AR THAT THE JUDGM ENT PASSED BY THE HONBLE APEX COURT IN THE CASE OF TRANSMISSION CORPORATION OF AP (SUPRA) IS APPLICABLE TO THE FACTS IS NOT CORREC T. IN FACT, SECTION 195 DEALS WITH A SITUATION WHERE ANY PERSON IS MAKI NG THE PAYMENT OR PART OF THE PAYMENT, TO A NON-RESIDENT WHICH IS CHA RGEABLE TO TAX UNDER THE PROVISION OF THE ACT. IN CASE ANY PERSON RESP ONSIBLE FOR MAKING THE PAYMENT IS HAVING ANY DOUBT ABOUT CHARGEABIL ITY TO TAX UNDER THE PAGE - 129 IT(TP)A.1511 TO 1516/BANG/2013 PROVISIONS OF THE ACT, THEN AN APPLICATION IS TO BE MADE U/S.195(2) OF THE ACT. THERE WAS NO OCCASION FOR THE HONBLE SUP REME COURT TO DEAL WITH THE ARGUMENT THAT THE SUM PAID TO NON-RES IDENT IS NOT CHARGEABLE TO TAX IN INDIA. IN OUR VIEW, ONCE THE HONBLE SUPREME COURT HAS DEALT AND DECIDED THE ISSUE OF PAYMENT BY ANY PERSON TO A NON-RESIDENT FOR A SUM CHARGEABLE TO TAX IN INDIA, THE NEGATIVE ALSO STOOD AUTOMATICALLY ADJUDICATED BY THE HONBLE COUR T. AS HELD HEREINABOVE, THE QUESTION OF CHARGEABILITY OF THE S UM PAID BY THE ASSESSEE TO THE GIL WOULD APPROPRIATELY BE DECIDED IN THE PROCEEDINGS OF GIL AND THE ASSESSEE CANNOT SHIRK FROM ITS DUTY TO DEDUCT THE TAX AT THE TIME OF MAKING THE PAYMENT. IF APPELLANT WAS H AVING ANY DOUBT ABOUT CHARGEABILITY THEN THE ASSESSEE SHOULD HAVE F ILED AN APPLICATION U/S.195(2).ONCE THE HONBLE SUPREME COURT HAS HELD THAT THE PERSON RESPONSIBLE TO DEDUCT THE TAX AT SOURCE ON THE PAYM ENT TO A NON- RESIDENT, WHICH IS CHARGEABLE TO TAX IN INDIA, THEN THERE IS NO SCOPE FOR FURTHER INTERFERENCE. 124 THE LD. AR CONTRADICTED THE SUBMISSIONS OF THEL D. DR WHEREBY IT WAS SUBMITTED BY HIM THAT SECTION 195 THE PROVIS IONS OF 4, 5, 9 AND 90 (2) AND NOT WITH THE PROVISIONS OF THE DTAA BY REFERRING TO FOLLOWING PARAGRAPH IN THE MATTER OF GE INDIA TECH NOLOGY CENTRE P. LTD (SUPRA). 'WHILE DECIDING THE SCOPE OF S. 195(2) IT IS IMPORT ANT TO NOTE THAT THE TAX WHICH IS REQUIRED TO BE DEDUCTED AT SO URCE IS DEDUCTIBLE ONLY OUT OF THE CHARGEABLE SUM. THIS IS THE UNDERLYING PRINCIPLE OF S. 195. HENCE, APART FROM S. 9(1), SS .4, 5, 9, 90, 91 AS PAGE - 130 IT(TP)A.1511 TO 1516/BANG/2013 WELL AS THE PROVISIONS OF DTAA ARE ALSO RELEVANT, WHILE APPLYING TDS PROVISIONS' 125 IN OUR OPINION, THE SCOPE AND AMBIT OF SECTIO N 195(2) IS CLEAR AND UNAMBIGUOUS, WHICH MANDATES THE AO TO DECIDE WH ETHER ANY PAYMENT( ROYALTY ) PAID BY THE APPELLANT TO GIL IS CHARGEABLE TO TAX ON CASH / RECEIPT BASIS OR NOT. HOWEVER, TO TRIGGE R 195(2), THE PAYER (ASSESSEE) WAS DUTY-BOUND TO MAKE AN APPLICATION WI TH THE AO. UNLESS AN APPLICATION IS MADE TO THE AO, THERE WOUL D NOT BE ANY OCCASION FOR HIM TO DETERMINE THE CHARGEABILITY OF PAYMENT OF ROYALTY TO TAX BY REFERRING TO DTAA OR UNDER THE ACT. THER EFORE, THE FINDING GIVEN BY THE HONBLE SUPREME COURT GE INDIA TECHNOL OGY CENTRE P. LTD (SUPRA) DOES NOT COME TO THE RESCUE OF THE ASS ESSEE. THE APPLICABILITY OF DTAA CANNOT BE SUO-MOTO BE DETERM INED BY AO WITHOUT THERE BEING ANY APPLICATION UNDER SECTION 1 95( 2) OF THE ACT FOR THE PURPOSES OF DEDUCTING THE TAX AT SOURCE. THE COORDINATE BENCH IN THE MATTER OF VODAFONE SOUTH LTD. [2015] 5 3 TAXMANN.COM 441 (BANGALORE - TRIB.) AFTER REFERRING AND DEALIN G GE INDIA TECHNOLOGY CENTRE P. LTD (SUPRA) HELD AS UNDER : 36 . THE NEXT PERIPHERAL ISSUE IS, CAN THE PAYER CLAIM FULL PROTECTION OF DTAA AS IS AVAILABLE TO THE PAYEE IN RESPECT TO THE PAYMENT S PAYEE HAD RECEIVED. THE DTAAS ARE NOT MORE THAN THE ALLOCATION OF THE TAXES , THEY DO NOT PROVIDE ANY OTHER MODE, HOW THE TAXES ARE TO BE COLLECTED WHETH ER BY ADVANCE DEDUCTION ETC. THIS IS AN AREA OF THE DOMESTIC LAW, THE SUM CHARGE ABLE TO TAX IS TO BE CONSIDERED, WITH AN ANGLE OF THE DOMESTIC LAW, UNLE SS THE PAYEE IS THERE TO DEMONSTRATE THAT HE IS NOT CHARGEABLE UNDER THE DTA A EITHER BY HIMSELF OR THROUGH A PAYER. THE PAYEE NEVER COMES U/S 195 (3) OF THE I.T. ACT. IT IS NOT AVAILABLE ON THE RECORD THAT PAYEE HAD EVER INFORME D THE PAYER ABOUT THE HOLDING OF THEIR TAX RESIDENCY CERTIFICATE AND ALSO WHETHER THEY WANT THE BENEFIT OF DTAA. ACCORDING TO THE LEARNED COUNSEL FOR THE REVE NUE THE TAX RESIDENCY CERTIFICATE GIVEN BY THE SOVEREIGN OF THE STATE OR STATE(S) WOULD SATISFY THAT PAYEE PAGE - 131 IT(TP)A.1511 TO 1516/BANG/2013 IS A TAXABLE ENTITY IN THAT STATE AND IT IS ENTITLE D FOR THE BENEFIT OF DTAA, IF THE PROVISIONS ARE MORE BENEFICIAL THAN THE DOMESTIC LA W. CONTRARY TO THIS CONTENTIONS, IT WAS POINTED OUT BY THE LEARNED COUN SEL FOR THE ASSESSEE THAT THE ASSESSEE HAS COMPLIED WITH THE PROCEDURAL REQUIREME NT CONTEMPLATED UNDER RULE 37BB OF THE ITR 1962. IT HAD SUBMITTED THE DETAILS OF THE PAYEE RELEVANT CLAUSES OF THE DTAA. ACCORDING TO HIM THE ENTIRE LITERATURE S, COMMENTARIES AND JUDICIAL DECISIONS RUN COUNTER TO THE ARGUMENTS OF THE REVEN UE. THE JUDGMENT OF THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HOLDINGS ( SUPRA ), WAS BROUGHT TO OUR NOTICE DURING THE COURSE OF H EARING. THE HON'BLE COURT HAS MADE A REFERENCE WITH REGARD TO T HE BACKGROUND GIVING RISE TO TAX TREATIES AND HOW THE TREATIES AND DOMESTIC LAW CO-EXISTS FOR ADMINISTERING THE TAXATION OF ANY ASSESSEE. THE FINDINGS OF THE HON'B LE COURT EXPLAINING THE SCOPE AND ROLE OF THE DTAA IS WORTH TO NOTE HERE, IT READ AS UNDER: 'DOUBLE TAX TREATIES ARE INTERNATIONAL AGREEMENTS, THEIR CREATION AND CONSEQUENCES DETERMINED ACCORDING TO THE RULES CONT AINED IN THE VIENNA CONVENTION ON THE LAW OF TREATIES, 1969 (VCLT). THE CONCLUSION OF A TREATY/CONVENTION IS PRECEDED BY NEGOTIATIONS. STAT ES INTENDING TO CONCLUDE A TREATY ARE REPRESENTED BY THE APPROPRIATE LEVEL OF EXECUTIVE, POLITICAL OR DIPLOMATIC EXPERTISE ACCORDING TO INDIVIDUAL PRACTI CES AND JUDGMENT OF THE PARTICIPANT STATES. THERE ARE SEVERAL STEPS IN THE NEGOTIATIONS PHASE EVENTUALLY LEADING TO CONCLUSION OF THE TREATY. TREATIES OR CONVENTIONS ARE THUS INSTRUMENTS SIGNAL ING SOVEREIGN POLITICAL CHOICES NEGOTIATED BETWEEN STATES. THE EFFICACY OF A TREATY OVER DOMESTIC LAW TURNS UPON EITHER STATE SPECIFIC CONVENTIONS OPER ATING TO GOVERN THE SOVEREIGN PRACTICES, OR WHERE THERE IS A WRITTEN CONSTITUTION PROVISIONS OF THAT CHARTER. 'DOUBLE TAXATION TREATY RULES DO NOT 'AUTHORIZE' OR 'ALLOCATE' JURISDICTION TO TAX TO THE CONTRACTING STATE NOR ATTRIBUTE THE 'RIGHT TO T AX'. AS IS RECOGNIZED BY PUBLIC INTERNATIONAL LAW AND CONSTITUTIONAL LAW, STATES HA VE THE ORIGINAL JURISDICTION TO TAX, AS AN ATTRIBUTE OF SOVEREIGNTY. WHAT DOUBLE TA XATION TREATIES DO IS TO ESTABLISH AN INDEPENDENT MECHANISM TO AVOID DOUBLE TAXATION THROUGH RESTRICTION OF TAX CLAIMS IN AREAS WHERE OVERLAPPING TAX CLAIMS ARE EXPECTED, OR AT LEAST THEORETICALLY POSSIBLE. ESSENTIALLY THEREFORE, THRO UGH THE MECHANISM OF A TREATY THE CONTRACTING STATES MUTUALLY BIND THEMSELVES NOT TO LEVY TAXES, OR TO TAX ONLY TO A LIMITED EXTENT, IN CASES WHERE THE TREATY RESE RVES TAXATION FOR THE OTHER CONTRACTING STATES, EITHER WHOLLY OR IN PART. CONTR ACTING STATES THUS AND QUA TREATY PROVISIONS, WAIVE TAX CLAIMS OR DIVIDE TAX SOURCES AND/OR THE TAXABLE OBJECT. UNLIKE RULES OF PRIVATE INTERNATIONAL LAW TAX TREAT Y NORMS ASSUME THAT BOTH CONTRACTING STATES TAX ACCORDING TO THEIR OWN LAW. TREATY RULES DO NOT LEAD TO THE APPLICATION OF FOREIGN LAW. WHAT TREATY RULES DO IS TO LIMIT THE CONTENT OF THE TAX LAW OF BOTH THE CONTRACTING STATES TO AVOID DOUBLE- TAXATION. IN EFFECT, DOUBLE TAXATION AVOIDANCE TREATY RULES MERELY ALTER THE LE GAL CONSEQUENCES DERIVED FROM THE TAX LAWS OF THE CONTRACTING STATES, EITHER BY E XCLUDING APPLICATION OF PROVISIONS OF THE DOMESTIC TAX LAW WHERE THESE APPL Y OR BY OBLIGING ONE OR BOTH OF THE CONCERNED STATES TO ALLOW A CREDIT AGAINST T HEIR DOMESTIC TAX FOR TAXES PAID PAGE - 132 IT(TP)A.1511 TO 1516/BANG/2013 IN THE OTHER STATE. KLAUS WOGEL (SUPRA) EXPLAINS TH AT RULES OR DOUBLE TAXATION ARE THUS NOT CONFLICT RULES, SIMILAR TO THAT IN PRIVATE INTERNATIONAL LAW BUT ARE RULES OF LIMITATION OF LAW, COMPARABLE TO THOSE OF INTERNATI ONAL ADMINISTRATIVE LAW'. 37 . ACCORDING TO THE LEARNED COUNSEL FOR THE REVENUE, THE TREATY IS NOT TO BE APPLIED AUTOMATICALLY. SECTION 90(2) OF THE INCOME TAX ACT MANDATES APPLICATION OF TREATY AND IT IS APPLICABLE IN RELAT ION TO AN ASSESSEE UPON WHOM SUCH AGREEMENTS ARE APPLICABLE. IN THE PRESENT CASE IT IS APPLICABLE IN THE CASE OF PAYEE, IF AT ALL IS APPLICABLE, HE HAS HIGHLIGHTED THAT ARTICLE-1 IN ALL THE TREATIES SPECIFIES THE TYPE OF PERSON TO WHOM TREATY WOULD B E APPLICABLE. THE TREATY WOULD BE APPLICABLE TO A PERSON WHO IS RESIDENT OF STATE (R) OR SOURCE OF INCOME IN A STATE(S). IT DOES NOT MEAN THAT IT IS APPLICAB LE ACCORDING TO THE DOMICILE. HE ALSO QUESTIONED WHO WILL MAKE INQUIRY ABOUT THE RES IDENTIAL STATUS OF THE PAYEE UNDER ARTICLE-4. HE ALSO POINTED THAT DTAA IS NOT A PARALLEL CODE AND NOT A COMPLETE CODE. IT ONLY ALLOCATES TAXING RIGHTS. THE HON'BLE ANDHRA PRADESH HIGH COURT HAS SPECIFICALLY OBSERVED THAT TREATY RU LES DO NOT FORCE OR 'ALLOCATE JURISDICTION' TO TAX TO THE CONTRACTING STATE, NOR ATTRIBUTE THE 'RIGHT TO TAX'. ACCORDING TO THE HON'BLE COURT IT IS RECOGNIZED BY PUBLIC INTERNATIONAL LAW AND CONSTITUTIONAL LAW, STATES HAVE THE ORIGINAL JURISD ICTION TO TAX AS AN ATTRIBUTE OF SOVEREIGNTY, THE RULE OF DOUBLE TAXATION TREATIES I S TO ESTABLISH AN INDEPENDENT MECHANISM TO AVOID DOUBLE TAXATION THROUGH RESTRICT ION OF TAX CLAIMS IN AREAS WHERE OVERLAPPING TAX CLAIMS ARE ACCEPTED. THE LEAR NED COUNSEL FOR THE REVENUE HAS NOT RAKED UP ANY NEW CONTROVERSY IN HIS SUBMISS IONS. HE HAS JUST HIGHLIGHTED THE PROCEDURAL LIMITATIONS OF THE INQUI RY REQUIRED TO BE CONDUCTED U/S 195 R.W.S 201. TO OUR MIND ONUS IS UPON THE ASSESSE E TO DETERMINE THAT PAYMENTS MADE BY IT DO NOT INVOLVE THE ELEMENT OF INCOME. TH E ROLE OF THE ASSESSING OFFICER WHILE CONDUCTING THE INQUIRY U/S 201 WOULD BE TO DEMOLISH THE FORMATION OF THIS OPINION AT THE END OF THE ASSESSEE. THE ASS ESSING OFFICER HAS TO INDICATE THAT THE PAYMENTS MADE BY THE ASSESSEE ARE THE SUMS CHARGEABLE TO TAX AND BELIEF HARBOURED BY THE ASSESSEE THAT IT IS NOT CHARGEABLE TO TAX AND THEREFORE IT DID NOT DEDUCT THE TAX WAS AN ERRONEOUS BELIEF. WE WILL CON SIDER THE EVIDENCE AVAILABLE ON RECORD IN SUPPORT OF THE ASSESSEE'S CONCLUSIONS IN THE LATER PART OF THIS ORDER, BUT ANALYSIS OF THE SCHEME OF INCOME TAX ACT, NAMEL Y RECOVERY OF TAXES IN ADVANCE BY WITHHOLDING UNDER CHAPTER XVII, PROCEDUR E U/S 195(2) AND 195(3) AND PROCEDURE FOR ASSESSMENT PERSUADE US TO SAY THA T CERTAINLY THE RIGHTS AS AVAILABLE TO THE PAYEE TO DEFEND ITSELF IN AN INCOM E TAX ASSESSMENT PROCEEDINGS ARE NOT AVAILABLE TO THE ASSESSEE AS PAYER IN EQUAL FORCE. THE LEARNED COUNSEL FOR THE REVENUE HAS RIGHTLY POINTED THAT PROVISIONS OF DTAA WOULD NOT AUTOMATICALLY ATTRACT IN THE DEFENSE OF THE PAYER. THERE MAY BE NUMBER OF REASONS FOR NOT ASSESSING THE INCOME IN THE HANDS O F THE PAYEE. THE PAYEE MAY BE ENTITLED FOR SOME DEDUCTIONS, SOME EXEMPTION ETC . THE CUMULATIVE SETTING OF ALL THESE PERIPHERAL FACTOR AND THEIR BEARING IN UL TIMATE DECISION MAKING PROCESS WILL BE CONSIDERED BY US IN LATER PART OF THE ORDER . 126 RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE SC IN THE MATTER OF TRANSMISSION CORPORATION OF AP LTD. V. CIT [1999] 239 ITR PAGE - 133 IT(TP)A.1511 TO 1516/BANG/2013 587, ORDERS OF THE COORDINATE BENCHES IN THE MATTER OF VODAFONE SOUTH LTD. [2015] 53 TAXMANN.COM 441 (BANGALORE - TRIB.) AND ALSO FOR THE REASONS MENTIONED HEREIN ABOVE GROUND 13 OF THE AP PEALS IS DISMISSED . WE MAY ALSO MENTION HERE THAT WE HAVE CONSIDERED THE COMMON ARGUMENTS RAISED IN CROSS APPEALS BEARING NOS.IT(IT )A.374 & 466/BANG/2013 WHILE ADJUDICATING THE PRESENT SIX AP PEALS. 127. IN THE RESULT, ALL THE SIX APPEALS OF THE ASSE SSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD OCT OBER, 2017 SD/- SD/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PLACE : BENGALURU D A T E D : 23/10/2017 MCN* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)- 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL BANGALORE PAGE - 134 IT(TP)A.1511 TO 1516/BANG/2013