Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 6158 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax (Transfer Pricing) Appeal
Pronouncement Date
01-05-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
2013-2014
Appeal Filed On
14-01-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 [IN IT(TP)A NOS.3430/BANG/2018, IT(IT)A NO.97/BANG/ 2019 AND I T(TP)A 2890/BANG/2017) ASSESSMENT YEAR S : 2014 - 15, 2016 - 17 & 2013 - 14 M/S. GOOGLE INDIA PRIVATE LTD., NO.3, RMZ INFINITY TOWER-E, 4 TH FLOOR, OLD MADRAS ROAD, BENGALURU. PAN: AACCG 0527D VS. THE JT. COMMISSIONER OF INCOME TAX, SPECIAL RANGE 3, BENGALURU. THE DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), CIRCLE 1(1), BENGALURU. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(2), BENGALURU. APP L IC ANT RESPONDENT APPLICANT BY : S/SHRI DEEPAK CHOPRA, ANMOL ANAND & MS. JOMAL JOY, ADVOCA TES. RESPONDENT BY : SHRI K.V. ARAVIND, STANDING COUNSEL DATE OF HEARING : 21 .02 .201 9 DATE OF PRONOUNCEMENT : 21. 02 .201 9 SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 2 OF 8 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THESE ARE STAY PETITIONS FILED BY THE ASSESSEE, M /S. GOOGLE INDIA PVT. LTD. [GIPL], PRAYING FOR AN ORDER OF STAY OF R ECOVERY OF OUTSTANDING DEMAND ARISING OUT OF ORDERS OF ASSESSMENT AND THE FIRST APPELLATE AUTHORITY IN RELATION TO AY 2014-15, 2016-17 & 2013 -14 RESPECTIVELY. 2. THE OUTSTANDING DEMAND ARISES OUT OF THREE ADD ITIONS MADE BY THE ASSESSING OFFICER (AO) /TRANSFER PRICING OFFICER (T PO) WHICH WERE CONFIRMED BY THE CIT(APPEALS) IN AY 2014-15 AND BY THE DISPUTES RESOLUTION PANEL (DR) IN AY 2013-14. THE OUTSTANDI NG DEMAND AS FAR AS AY 2016-17 IS CONCERNED ARISES OUT OF AN ORDER PASS ED U/S.201(1) & 201(1A) OF THE INCOME TAX ACT, 1961 (ACT) FOR ASSES SEES FAILURE TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE TO GOOGLE IRELAND LT D. (GIL), BY GIPL AS DISTRIBUTOR OF ADVERTISEMENTS UNDER ADWORDS PROGRAM OF GIL. 3. THE FIRST ADDITION GIVING RISE TO THE OUTSTANDIN G DEMAND IN AYS 2014-15 & 2013-14 AND THE TAXES PAYABLE ON PAYMENT BY GIPL TO GIL FOR WHICH THE ASSESSEE WAS TREATED AS ASSESSEE IN DEFAU LT IN THE ORDER PASSED U/S.201(1) & 201(1A) OF THE ACT IS UNDER THE FOLLOW ING FACTS AND CIRCUMSTANCES. GIPL WAS A WHOLLY OWNED SUBSIDIARY OF GOOGLE INTERNATIONAL LLC, US. GIPL WAS ENGAGED IN THE BUSI NESS OF PROVIDING INFORMATION TECHNOLOGY (IT) AND INFORMATION TECHNOL OGY ENABLED SERVICES (ITES) TO ITS GROUP COMPANIES. IT ALSO ACTED AS A D ISTRIBUTOR FOR ADWORD PROGRAMMES IN INDIA. 4. UNDER AN ADWORD PROGRAMME DISTRIBUTION AGREEMENT , ENTERED INTO BETWEEN GIPL AND GIL, GIPL WAS GRANTED THE MARKETI NG AND DISTRIBUTION RIGHTS OF ADWORDS PROGRAMME TO ADVERTISERS IN INDIA AND THE GIPL WAS SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 3 OF 8 REMUNERATED ON COST PLUS MARKET BASIS FOR THE DISTR IBUTION SERVICES UNDER ADWORD PROGRAMMES. 5. THE ASSESSING OFFICER NOTICED THAT GIPL HAD CRED ITED/PAID AMOUNTS TO THE ACCOUNT OF GIL WITHOUT DEDUCTION OF TAX AT S OURCE. GIL HAD ALSO NOT OBTAINED THE NIL TAX DEDUCTION CERTIFICATE ON THE S UMS PAYABLE TO IT FROM THE DEPARTMENT AS WAS REQUIRED UNDER SECTION 195. 6. ACCORDING TO THE AO, THE PAYMENTS WERE IN THE NA TURE OF ROYALTY AND CHARGEABLE TO TAX IN THE HANDS OF GIL IN INDIA AND THEREFORE THE ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX AT S OURCE. ON THE OTHER HAND, THE ASSESSEE HAD TAKEN A STAND THAT THE AMOUN T PAYABLE TO GIL WAS NOT IN THE NATURE OF ROYALTY EITHER UNDER THE ACT O R UNDER THE INDIA-IRELAND 'DTAA'. 7. THE AO/CIT(A)/DRP HELD THAT THE PAYMENT WAS IN T HE NATURE OF ROYALTY AND ACCORDINGLY DISALLOWED THE SUM PAID, WH ICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BUSINESS BY I NVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN AYS 2 014-15 & 2013-14 RESPECTIVELY. SIMILARLY FOR AY 2016-17, ORDERS U/S .201(1) & 201(1A) OF THE ACT WERE PASSED TREATING GIPL AS AN ASSESSEE IN DEF AULT. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID ORDERS IN THESE THR EE APPEALS. 8. THE SECOND ADDITION WHICH HAS GIVEN RISE TO THE OUTSTANDING DEMAND IN THE APPEALS FOR AYS 2014-15 & 2013-14 ARISES OUT OF DETERMINATION OF ARMS LENGTH PRICE (ALP) U/S.92 OF THE ACT, IN RES PECT OF INTERNATIONAL TRANSACTIONS OF RENDERING IT SERVICES AND IT ENABLE D SERVICES AND MARKETING AND DISTRIBUTION SERVICES RENDERED BY GIP L TO ITS ASSOCIATED ENTERPRISES (AE). 9. THE THIRD ADDITION WHICH HAS GIVEN RISE TO OUTST ANDING DEMAND IN AYS 2014-15 & 2013-14 IS ON ACCOUNT OF ATTRIBUTION OF PROFITS TO GOOGLE SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 4 OF 8 IRELAND LTD. (GIL). THE AO, IN HIS ORDER, OPINED THAT THE PROFITS ARISING OUT OF ADWORDS PROGRAMME ATTRIBUTABLE TO GOOGLE IRELAND ARE NOT OFFERED TO TAX. THEREFORE, HE PROCEEDED TO COMPUTE THE AMOUNT OF PROFITS ATTRIBUTABLE TO GOOGLE IRELAND. THIS ISSUE HAS ALSO BEEN ADJUDI CATED BY THE ITAT IN THE EARLIER YEARS AND THE ISSUE HAS BEEN RESTORED TO AO FOR FRESH CONSIDERATION. 10. THE OUTSTANDING DEMAND AND THE BREAK-UP OF THE OUTSTANDING DEMAND IN THE THREE ASSESSMENT YEARS REFERRED TO AB OVE ON ACCOUNT OF EACH OF THE ISSUES AND ALSO ON ACCOUNT OF INTEREST FOR AYS 2014-15 & 2013-14 AND ON ACCOUNT OF ORDER PASSED U/S.201(1) & 201(1A) FOR AY 2016-17 IS GIVEN IN ANNEXURE 1 & 2 TO THIS ORDER . 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN RESPECT OF THE FIRST ISSUE AND THE ORDERS U/S.201(1) OF THE AC T, THE TRIBUNAL HAS ALREADY CONFIRMED THE ACTION OF THE REVENUE AUTHORITIES IN THE EARLIER ASSESSMENT YEARS AND THE ISSUE IS NOW PENDING ADJUDICATION BEF ORE THE HONBLE KARNATAKA HIGH COURT. WITH REFERENCE TO THE OTHER TWO ADDITIONS WHICH HAS GIVEN RISE TO THE OUTSTANDING DEMAND, THE LEARNED C OUNSEL POINTED OUT THAT IN THE EARLIER ORDERS OF THE TRIBUNAL THE ISSUE HAS BEEN SET ASIDE TO THE AO FOR FRESH ADJUDICATION AND THEREFORE THE DEMAND ARI SING OUT OF THOSE ADDITIONS SHOULD NOT BE PERMITTED TO BE RECOVERED. HE SUBMITTED THAT IF ON THE ISSUE OF ADDITION ON ACCOUNT OF ROYALTY ALONE I S CONSIDERED FOR CALCULATING OUTSTANDING DEMAND, THEN 50% OF THE OUT STANDING DEMAND FOR ALL THE THREE YEARS WOULD BE ABOUT RS.347 CRORES, A FTER GIVING CREDIT TO RS.375 CRORES ALREADY PAID BY THE ASSESSEE. 12. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT 100% OF THE OUTSTANDING AMOUNT ON ACCOUNT OF TAXES ALONE FOR TH E THREE ASSESSMENT YEARS, IF THE ADDITION ON ACCOUNT OF ROYALTY ALONE IS CONSIDERED FOR CALCULATING OUTSTANDING DEMAND, WOULD BE RS.596 CRO RES AFTER GIVING CREDIT TO RS.375 CRORES ALREADY PAID BY THE ASSESSEE. SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 5 OF 8 13. THE CALCULATION OF OUTSTANDING DEMAND AND SUM W HICH THE ASSESSEE WANTS TO PAY AS A CONDITION FOR GRANT OF STAY AND T HE SUM WHICH THE DEPARTMENT WANTS THE ASSESSEE TO PAY AS A CONDITION FOR GRANT OF STAY ARE AS FOLLOWS: (RUPEES IN CRORES) ASSESSMENT YEAR TOTAL DEMAND * TAXES ALREADY PAID ASSESSEES OFFER DEPARTMENTS DEMAND TAX INTEREST TOTAL 2013 - 14 490 276 766 225 -- 24 2014 - 15 750 400 1150 0 244 365 2016-17 [201(1) & 201(1A)] 357 100 45 150 103 207 347 596 [ * EXCLUDING PREPAID TAXES ] 14. AFTER CONSIDERING THE EXISTENCE OF PRIMA FACIE CASE, BALANCE OF CONVENIENCE, RELATIVE HARDSHIP, THE EARLIER ORDERS OF THE TRIBUNAL AND THE ORDERS OF THE HONBLE HIGH COURT OF KARNATAKA IN TH E CASE OF THE ASSESSEE ON IDENTICAL ISSUE OF GRANT OF STAY, THE OFFER TO P AY BY THE ASSESSEE AND THE DEMAND OF THE DEPARTMENT, WE ARE OF THE VIEW THAT I T WOULD BE JUST AND APPROPRIATE TO GRANT AN ORDER OF STAY OF RECOVERY O F OUTSTANDING DEMAND FOR A PERIOD OF 6 MONTHS FROM THE DATE OF THIS ORDER, O R TILL DISPOSAL OF THE APPEALS OF THE ASSESSEE, WHICHEVER IS EARLIER. THE ASSESSEE SHALL PAY THE FOLLOWING SUMS TOWARDS OUTSTANDING DEMAND VIZ., A S UM OF RS.350 CRORES ON OR BEFORE 31.3.2019 AND ANOTHER SUM OF RS.125 CR ORES IN THREE INSTALMENTS AS FOLLOWS:- RS.25 CRORES ON OR BEFORE 30.4.2019 RS.50 CRORES ON OR BEFORE 31.5.2019 RS.50 CRORES ON OR BEFORE 30.6.2019 SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 6 OF 8 15. THE AFORESAID SUMS SHALL BE PAID FOR THE VARIOU S AYS AS FOLLOWS: AY 2013-14 : RS. 20 CRORES. AY 2014-15 : RS.185 CRORES AY 2016-17 : RS.270 CRORES ----------------- RS.475 CRORES ------------------ 16. THE APPEALS OF THE ASSESSEE ARE POSTED OUT OF T URN FOR HEARING ON 03.07.2019. THE DATE OF HEARING WAS ANNOUNCED IN T HE OPEN COURT AND HENCE NO NOTICE OF HEARING WOULD BE SENT TO THE PAR TIES. 17. IN THE RESULT, THE STAY PETITIONS ARE ALLOWED A S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF FEBRUARY, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESID ENT ENCL : ANNEXURES I & II BANGALORE, DATED, THE 21 ST FEBRUARY, 2019. / D ESAI S MURTHY / COPY TO: 1. APP LICANT 2. RESPONDENT S (3) 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FI LE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE. SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 7 OF 8 ANNEXURE-I SP NOS.286/BANG/2018 AND 18 & 19/BANG/2019 PAGE 8 OF 8 ANNEXURE-II
