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TMI Blog2019 (3) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee had also challenged the action of the revenue authorities in bringing to tax a sum of Rs. 51,08,74,532 from other advertisers/direct advertisers towards sale of online advertisement space under AdWords program was in the nature of royalty. The Assessee had also challenged validity of initiation of reassessment proceedings u/s.147 of the Act. 3. The above appeal being ITA No.2845/Bang/2017 being appeal by GIL for AY 2007-08 was heard along with other appeals filed by GIPL for AY 2008-09 to 2015-16. In the assessment of GIPL the payments made towards sale of online advertisement space under ADWords Program was held to be in the nature of royalty chargeable to tax in India as "Royalty" and since GIPL did not deduct tax at source on such payment, the sums so paid were disallowed u/s.40(a)(ia) of the Act and added to the total income of the Assessee. 4. By a common order dated 11.5.2018, the appeals of the Assessee on the above points was dismissed by the Tribunal. 5. In this petition, the revenue has contended that the Tribunal accepted the stand of the revenue that payment by GIPL to GIL constituted 'royalty' chargeable to tax in India in paragraph-190 of its order whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stand of the revenue as contained in the M.P. The learned counsel for the Assessee brought to our notice that in the appeal by GIPL the stand taken by GIPL was that the payments made by it to GIL were in the nature of business profits and not royalty. Since GIL did not have a PE in India, the same is not taxable in India. GIPL in support of such contention has relied on decisions of various Benches of Tribunal in the case of ITO Vs. Right Florist Pvt.Ltd. (2013) 25 ITR (Tri.)639 (Kol), Pinstrom Technology Ltd. Vs. ITO (2012)54 SOT 78 (Mum.-Trib) and Yahoo India Pvt.Ltd. Vs. CIT 140 TTJ 195(Mum.-Trib). The Tribunal however rejected the claim of GIPL by observing that the facts of GIPL's case and that of the decisions relied by GIPL were different in paragraphs-116 & 117 of its order which reads thus: "116. In all these cases, the assessee was either an advertiser or act on behalf of some other advertiser and has purchased space from the owner of search engine to display its advertisements online. Therefore, the payment made by the assessee to the owner of the search engine was considered to be business receipt / business profit in the hands of the owner of search engine who is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the grounds of appeal in the appeal filed by GIL, which reads thus:- "15. On the facts and in the circumstances of the case and in law, the Ld. AO/ Hon'ble DRP erred in holding that the income from other advertisers amounting to INR 510,874,532 in India towards sale of online ad space is chargeable to tax as 'Royalty' under the Act and the DTAA and without following the decisions by the Hon'ble Kolkata Tribunal in the case of ITO vs. Right Florists (P.) Ltd. (154 TTJ 142) and Hon'ble Mumbai Tribunal in the case of Pinstorm Technologies vs ITO (54 SOT 78) squarely applicable to the facts of the present case. 16. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in holding that the payment received from direct advertisers pertains to the use or right to use of Copyright in the computer programme and therefore, taxable as royalty in India." 9. His submission was that the decision of the Tribunal is that GIPL is a distributor of advertisement space of AdWord program for GIL and was bound to provide pre sale and after sale services with the help of ITES division and in doing so it had access to intellectual property rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other 14 appeals relating to GIPL. GIL received payments on sale of online advertisement space under AdWords program from two sources viz., (1) from GIPL and (2) Direct Advertisers. In the appeals of GIPL, the nature of payment received by GIL from other advertisers/direct advertisers towards sale of online advertisement space under AdWords program was not in issue at all. In the proceedings in the case of GIPL the dispute was only with regard to non- deduction of tax at source on payments by GIPL to GIL towards sale of online advertisement space under the AdWords program by GIPL and consequent disallowance to be made u/s.40(a)(ia) of the Act. While deciding the appeal of GIL, the tribunal has followed its decision rendered in the case of GIPL that payments made by GIPL to GIL towards sale of online advertisement space under ADWords Program was in the nature of royalty chargeable to tax in India as "Royalty" and since GIPL did not deduct tax at source on such payment, the sums so paid were disallowed u/s.40(a)(ia) of the Act and added to the total income of the Assessee. This conclusion was reiterated while deciding the appeal of GIL. As far as receipts by GIL directly from adverti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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