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TMI Blog2023 (7) TMI 1432X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the payments as Royalty / FTS by holding the assessee to be a dependent agent PE of Google Ireland - HELD THAT:- In case of M/s. Google Ireland Ltd. [ 2023 (3) TMI 1304 - ITAT BENGALURU ] , this Tribunal has taken a view that the payment received by the non-resident assessee on sale of online advertisement space directly from the advertisers in India is not taxable in the hands of the non-resident assessee. Thus we hold the payment towards on online advertisement paid by assessee to Google Ireland is not liable to be taxed as Royalty for the years under consideration and therefore no disallowance can be made u/s. 40(a)(i). Applicability of FTS under the Act as well as DTAA - After considering the plethora of decisions, in assessee s own case as well as in the case of the payee being Google Ireland, we do not find that a case has been made out by the revenue to categorise the amounts paid by assessee to Google Ireland to be FTS. Further, it is also held that the assessee is not a dependent agent PE of Google Ireland in order to bring to tax the business profits of Google Ireland in India. Nothing contrary to the observations of the Coordinate Bench of this Tribunal has been bro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 17-20 3-6, 13, 14, 21, 27 19-22, 27, 32, 33, 35, 33A: ADD GROUND 20,22,23 5. Royalty/FTS 40(a)(i) 22-23 20-21 21-22 7-12, 15- 18, 32-33 23-26, 28- 31, 39, 40 17, 18, 19, 21 6. Attribution -- -- 23-25 19-20, 22-26 36-38, 38A Add. Ground 26-31 7. 80G -- -- -- -- -- 37 8. Representative assessee -- -- -- -- 34 24-25 9. Claim for deduction proviso to 40(a)(i) -- -- -- 53-54 (Additional Grounds) 53-54 (Additional Grounds) 38 10. MAT Credit 24 -- 27 -- -- -- 11. TDS Credit -- 22 26 50 41 41 12. Incorrect Refund Calculation 25 -- -- -- -- -- 13. Education Cess -- -- -- 55 (Additional ground) 55 (Additional ground) 43 (Additional ground) 14. Interest u/s. 234B 27 23 28 52 42 39,40 Interest u/s. 234D 26 -- 29 -- -- -- Initiation of penalty proceedings u/s. 271(1)(c). 28 24 30 51 43 42 Revenue s appeals S.No. Issues Asst. Year Grounds Asst. Year Grounds 2010-11 2011-12 1. TP Issues 5-7 2-13 2. Rejection of Books -- -- 3. 10A deduction 2-3 (Covered in favour of GIPL) Last two grounds (Not numbered) (Covered in favour of GIPL) 4. DAPE 40(a)(i) -- -- 5. Royalty/FTS 40(a)(i) -- -- 6. Attribution 4 14 7. 80G -- -- 8. Representative assessee -- -- 9. Claim for deduction proviso to 40(a)(i) -- - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal profits as comparables 3. Erred in selecting certain companies which are earning super normal profits as comparable to the Appellant. Non-provision of adjustment for risk differences 4. a) Erred in not appreciating the fact that the Appellant operates as a risk free service provider and all the key risks associated with the functions performed are borne by the foreign AEs. b) Erred in not providing adjustments taking into account the functional and risk differences between the international transaction of the Appellant and the comparable transactions in accordance with the provisions of Rule 10B(1)(e) of the Income-tax Rules, 1962. Grounds specific to comparability analysis of software services transaction 5. Erred in rejecting the Function Asset and Risk ('FAR') analysis of the international transaction relating to provision of software services and re-characterizing the same as Knowledge Process Outsourcing ('KPO') services. 6. Erred in not undertaking an objective search and selecting the following companies as comparables on an ad-hoc basis: a) Eclerx Services Ltd; and b) Genesys International Corporation. Grounds specific to comparability analysis of ITE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act 16. Erred in concluding that the communication expenses incurred by the Appellant are attributable to delivery of computer software outside India and thereby, reducing the same from export turnover for computing the deduction u/s 10A of the Act. 17. Without prejudice to Ground 16, erred in considering the whole of communication expenses (comprising telephone charges and internet expenses) incurred by the Appellant as attributable to the delivery of computer software outside India for computing the deduction u/s 10A of the Act. Disallowance of payments made to Google Ireland Limited invoking provisions of section 40(a)(i) of the Act 18. Erred in holding that the amounts payable by the Appellant to Google Ireland Limited for purchase of online advertisement space under the AdWords Program were chargeable to tax in India. 19. Erred in holding that the Appellant, in relation to distribution of advertisement space under the AdWords program, create a Dependent Agent Permanent Establishment of Google Ireland Limited under Article 5 of the India-Ireland Double Taxation Avoidance Agreement. 20. Having held that the Appellant was an agent of Google Ireland Limited erred in holding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated hereinabove are considered as under: 3. Issue 1: Transfer pricing issues: 3.1 The Ld. Counsel submitted that the transfer pricing additions for the assessment years under consideration do not survive on account of Advance Pricing Agreement ( APA ) dated 04.12.2019 entered into between the assessee and the Central Board of Direct Taxes ( CBDT ), which covers all the transfer pricing issues involved in the present appeals. It is submitted that the assessee has filed modified tax return(s) in terms of section 92CD of the act, and completion of Transfer pricing proceedings accepting the modified tax returns. Accordingly, the transfer pricing issues for all the years under consideration and the relevant grounds as tabulated hereinabove in assessee s appeals are allowed to be withdrawn. Accordingly, all the grounds related to transfer pricing issues in assessee s appeals are dismissed as withdrawn and the transfer pricing issues in revenue s appeals become infructuous. 4. Issue 2: Rejection of books of accounts: Brief facts of this issue are as under: 4.1 The assessee entered into an agreement with Google Ireland for distribution of advertisement space under the AdWords program to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the action of the AO by rejecting the books to recast the P L with an intention to disallow distribution fee paid by the Assessee to GIL is not tenable. The grounds 2 to 4 with regard to rejection of books of accounts are accordingly held in favour of the assessee. 4.7 Before us, the Ld. Counsel vehemently submitted that for the year under consideration, the revenue authorities did not point out any discrepancy in the books of accounts of the assessee. He also submitted that the facts for A.Y. 2008-09 on this issue are identical with the years under consideration. Before us the revenue has not brought anything contrary on record. 4.8 Respectfully following the view taken by Coordinate Bench of this Tribunal in assessee s own case for A.Y. 2008-09 (supra), we do not find any reason to uphold the rejection of the books of accounts. Accordingly the grounds raised by assessee on rejection of books of accounts for A.Ys. 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15 stands allowed. 5. Issue 3: 10A Deduction The Ld. Counsel at the outset has submitted that 10A deduction is raised by the assessee for A.Ys. 2010-11 and 2011-12 is being not pressed by assessee. Accordingly, the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle Ireland did not have any business connection or permanent establishment in India and therefore the payments made by assessee to Google Ireland could not be subjected to tax provisions in India. In support, the Ld. Counsel relied on the decision of Google Ireland in ITA No. 2845/Bang/2017 passed by the Coordinate Bench for A.Y. 200708 by order dated 28.02.2023. 6.4 The Ld. Counsel submitted that, in assessee s own case for A.Ys. 2009-10 to 2012-13, Coordinate Bench of this Tribunal has held that there is no permanent establishment of Google Ireland in India based on various discussions therein. The said view has been expressed in a decision reported in Google India Pvt. Ltd. vs. DCIT reported in (2022) 143 taxmann.com 302. 37. Therefore, in terms of the international guidance as stated herein, the position regarding taxability of receipts from sale of online advertisement space is clear. Unless the non-resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA. 6.5 This Tribunal in the above decision also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of Royalty / FTS. We notice that the issue of taxing the distribution fees by treating the same as Royalty / FTS has already settled in favour of the assessee by the coordinate bench in assessee s own case from the perspective of applicability of provisions of section 201 and accordingly there cannot be any disallowance u/s. 40(a)(i) on this count. Therefore we in this order will restrict our adjudication to whether the assessee is the DAPE of GIL and whether the assessee is required to deduct tax at source u/s .195 on the impugned payments accordingly. 6.7.1 This Tribunal held that assessee cannot be held to be a dependent agent PE of Google Ireland. This Tribunal further observed as under: 20. To recapitulate the Assessee, during the year under consideration, recorded gross revenue of Rs. 167,32,01,618/- from distributing online advertisement space to advertisers in India, out of which it paid Rs. 119,82,61,984/- to GIL and retained net revenue of INR 47,49,39,634/-. The case of the revenue is that the assessee being the agent of GIL, the distribution fees is taxable in India i.e. assessee being the PE of GIL and therefore the payment is disallowed u/s. 40(a)(i) in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classified as a DAPE of an Irish entity: (i) The Indian entity is broker, general commission agent or any other agent of the Irish entity and is not acting in the ordinary course of its business and is thus not an agent of independent status, (ii) The activities of such Indian entity are carried out wholly or almost wholly for the Irish entity and the conditions made or imposed between the two in their commercial and financial relations differ from those which would been made or imposed if this had not been the case, and (iii) Such Indian entity: (a) has and habitually exercises in India, an authority to conclude contracts in the name of the Irish entity, unless the activities of such Indian entity fall under any of the provision of Article 5(5) of the DTAA, or (b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the Irish entity, or (c) habitually secures orders in India, wholly or almost wholly for the Irish entity itself or the Irish entity or any of its related party. 22. Therefore, all the above conditions must be satisfied, in the present case for the Assessee to be cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same Internal Page 12: The CIT (A) noted the observation of the AO that various clauses of the Distribution Agreement between the Assessee and GIL make it clear that the Assessee is required to run the business on its own account. Para 5.8 at Internal Page 21: The CIT (A) noted the observations of the AO yet again that the AdWords Program was sold by the Assessee for its own account, in its own name, and not as an agent, employee, partner or franchisee of GIL. Para 6.8(iii) at Internal Page 39: The CIT (A) has categorically observed in this para that the Assessee is not a conduit or an agent of GIL. Para 7.6(i) at Internal Page 51: The CIT (A) has observed that the Assessee never brought GIL into the picture for all its transactions and that all the payments had been collected by the Assessee in its own name. 25. It is noticed that inspite of giving the above findings, the CIT (A) upheld the AO s decision by reproducing the AO s observations and without bringing any contrary evidence on record from his end to prove that the Assessee has habitually concluded contracts on behalf of GIL. 26. During the course of hearing the ld AR relied on various judicial pronouncements to submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in assessee s own case. Further, in the decision of Coordinate Bench of this Tribunal in case of Google India Pvt. Ltd. vs. DCIT reported in (2022) 143 taxmann.com 302 this Tribunal has already held the payments made by assessee to Google Ireland cannot be considered to be Royalty as per para 39 of the said order. The same view has been taken by another decision of Coordinate Bench of this Tribunal in case of assessee in ITA No. 1190/Bang/2014 for A.Ys. 2013-14 to 2015-16 by order dated 15.12.2022. The relevant extract of the said order is reproduced as under: 6.1 With respect to the issue regarding payments made by the assessee to Google Ireland Ltd., being held to be Royalty under the Act read with the Treaty and liability to withhold tax fastened on the assessee, the assessee's representatives fairly conceded before the ld CIT (A) that the issue is covered by CIT(A)'s earlier year order for assessment years 2006-07 to 2012-13. Following his earlier decision, the ld CIT (A) confirmed the action of the AO. 7. Further, the AO has observed that M/s. Google Ireland was not beneficial owner of the amount received from the assessee in relation to royalty amount. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y explain / examine the overview of the Google Adword Program, the role of the assessee under Adword Program distribution agreement and the service agreement (ITES). The undisputed fact on record is that Google.com is a search engine developed by Google LLC, USA available freely to the world at large providing information on any subject based on the search made by the user. The link to various websites related to the search are provided in the search result. Additionally, Google LLC, USA has also developed a computerised advertising program known as Google AdWords Program. Google Ireland Ltd (GIL) is the exclusive licensee and principal operator of the computerised advertising program i.e., Google AdWords Program for the whole world outside the USA. The Google AdWords program displays advertisements on Google's search engine. It has a separate website in which the advertisers have to agree to certain terms and conditions including the consideration payable for the targeted Advertisements and provide appropriate keywords on searching of which the websites of the advertisers would be displayed on top of the Google search engine with the abbreviation Ad . For instance, pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proposed advertisement is stored on the servers of Google Ireland Ltd (GIL) located outside India for undergoing a review process. 15. The review process is undertaken by GIL for advertisements uploaded by Advertisers from all around the world including India. Approximately 94% of global advertisements are reviewed by GIL through its automated system located outside India. Remaining global advertisements, which are not successfully reviewed by the automated system, are subjected to a manual review. For carrying out manual review, the balance 6% (approx.) global advertisements are forwarded to one of service centres of GIL's group entities, located in USA, Dublin, China, Korea, Japan, and India. An advertisement in English by an Indian Advertiser may go for manual review to any of these service centres. These service centres carry out the activity of manual review on a cost-plus basis. The assessee also carries out this activity under the ITES segment as per the services agreement dated 1.4.2004 entered into with GIL. The relevant terms and conditions of this agreement are as under: `THIS SERVICES AGREEMENT (''Agreement'') is entered into as of 1st April, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded, electronic or tangible form. Data and information shall be considered to be Confidential Information if (i) Google Ireland has marked them as such; (ii) Google Ireland, orally or in writing, has advised Google India of their confidential nature; or (iii) due to their character or nature, a reasonable person in a like position and under like circumstances would treat them as secret and confidential. Confidential Information does not include information: (i) that is in the public domain through no fault of the receiving party, (ii) that was previously known by receiving party, as established by written records of the receiving party prior to receipt of such information from the providing party or (iii) that was lawfully obtained by the receiving party from a third party without any obligations of confidentiality to Google Ireland. 1.3 Derivative works Work shall mean (i) for copyrightable or copyrighted material, any modification. derivative works work (as defined in 17 USC. 101), translation, abridgment, revision or other form in which such material may be recast, transformed or adapted, (ii) for patentable or patented material, any improvement thereon. and (iii) for materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Derivative works Works and other technical data used by Google Ireland that are required, used or appropriate for the design and development of Products. including the reproduction, use, testing, operation, maintenance and service of such Products. **** **** ***** 2. SERVICES 2.1 Request Google India hereby agrees to perform certain information technology, information technology enabled services and software development services, as requested by Google Ireland from time to time, with respect to Products, utilizing Google Ireland Software Technology and other appropriate technology from Google Ireland or third parties which may be properly used for these purposes. Google Ireland will specify the information technology, information technology enabled services and software development services to be performed, the Products to be worked on or used, the time line for completion and the specific results to be achieved (the Services ). 2.2 Performance. Upon agreement between Google Ireland and Google India as to the Services and completion date for a particular Services project, Google India will perform the Services. Google India agrees to use commercially reasonable efforts to perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the world. Google India shall also promptly make available to Google Ireland all Residuals. If Google India has any rights to Derivative works Works or Software Embodiments that cannot be assigned to Google Ireland under law. Google India hereby waives the enforcement of such rights; and if Google India has any rights which cannot be assigned or waived under law, Google India hereby grants to Google Ireland an exclusive, irrevocable, perpetual, worldwide, transferable, folly paid licence, with rights to sub license and assign, to all such rights. Google India shall enter into agreements with its Representatives sufficient to permit Google India to make the foregoing grant of rights. ****** ****** ***** 6. CONFIDENTIAL INFORMATION 6.1 Access and Use of Confidential Information. During the course of performance of this Agreement, Google Ireland will disclose certain Confidential Information to Google India solely to permit Google India to perform its obligations under this Agreement. Except as otherwise provided in this Agreement, Google India agrees that such Confidential Information shall be kept secret by Google India during the term of this agreement and after the expiration h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Indian Advertiser could get into a contract with GIL only, for purchasing online advertisement space. However, to accommodate Indian Advertiser(s) desirous to pay in Indian Rupees instead of foreign currency, GIL entered into the Google AdWords Program Distribution Agreement dated 12.12.2005 with the-assessee, whereunder the assessee was appointed as a non- exclusive distributor of online advertisement space in India In terms thereof, the assessee set up its Distribution Segment for carrying out purchase and resale of online advertisement space to Indian Advertisers. However, Indian Advertisers who were willing to pay in foreign currency, continued to transact directly with GIL. The Google AdWords Program and its features remains the same whether the Advertiser in India purchases online advertisement space from GIL or its authorised distributor i.e., the assessee. The only difference is where Indian Advertiser purchases from the assessee, it pays in INR whereas where Indian advertiser purchases from GIL, it pays in foreign currency. 17. In a case where the assessee is involved in purchase and re-sale of online advertisement space to Advertiser and if such Advertiser finds it diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;AdWords Program means the advertising program currently offered by Google under the name ''AdWords.'' 1.3 Brand Features means the trade names. trademarks, service marks, logos, domain names, and other distinctive brand features of each party, respectively, as secured by such party from time to time. 1.4 Designated Contact means those contacts designated by each party as the point of contact or contacts for a particular function area related to this Agreement. 1.5 Google Brand Features means the Google trade names, trademarks, service marks, logos, domain names, and other distinctive brand features, with some but not all examples at http://www.google.comipermissionsltrademarks.html (or such other URL that Google may provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google may provide to Distributor for use solely under this Agreement. 1.6 Intellectual Property Rights shall mean any and all rights existing from time to time under patent law, copyright law, semiconductor chip protection law, moral rights law, trade secret law, trademark law, unfair competition law, publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 9.3. 2.3 AdWords Program Sign Up Process. Distributor shall be responsible for uploading all Advertiser information that is required by Google for participation in the AdWords Program. 2.4 Licences; Approvals. Distributor shall be responsible for obtaining all licences and permits and for satisfying all formalities as may be required to enter into this Agreement and to perform its obligations in accordance with then prevailing laws and regulations, including without limitation those necessary to enable Distributor to make payments to Google in US dollars. Distributor will promptly secure all governmental approvals as may be required in the Territory or performance of its obligations under this Agreement. 2.5 Compliance with United States and Other Applicable Law; Conduct of Business. Distributor will comply with all United States and local laws and regulations applicable to the distributor of the goods and services. including but not limited to the Foreign Corrupt Practices Act and US regulations of international boycotts. Distributor shall (a) conduct business in a manner that reflects favorably at all times on the AdWords Program and on Google's goodwill and reputation, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, Distributor agrees to adhere to Google's then- current Brand Features use guidelines, and any content referenced or included therein, which may be found at the following URL: http://www.google.comlpermissionslguidelines.html (or such other URL that Google may provide from time to time) and to such other guidelines or restrictions provided by Google in writing to Distributor in connection herewith. Except as set forth in this Agreement, Distributor shall not acquire any right, title or interest in or to the Google Brand Features. All use by Google of Distributor Brand features (including any goodwill associated therewith shall inure to the benefit of Distributor and all use by Distributor of Go ogle Brand Features (including any goodwill associated therewith) shall inure to the benefit of Google. No party shall challenge or assist others to challenge the Brand Features of the other party (except to protect such party's rights with respect to its own Brand Features) or the registration thereof by the other party, nor shall either party attempt to register any Brand Features or domain names that are confusingly similar to those of the other party. 7. Confidentiality; Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the earlier date to occur of (x) the date that the services provided by Google exhaust any amounts prepaid by Distributor, or (y) the date that is thirty (30) days after expiration or termination of the Agreement. Termination or expiration of this Agreement. in part or in whole. shall not limit either party from pursuing other remedies available to it, nor shall Distributor be relieved of its obligation to pay all charges that have accrued or are otherwise owed under this Agreement. Termination of this Agreement does not prevent Distributor from participating in the AdWords Program pursuant to the general terms and conditions made publicly available by Google from time to time in its sole discretion. ***** ***** ***** EXHIBIT C Service Level Agreement Distributor shall be solely responsible for providing all customer services to Advertisers. according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to contact Distributor directly for support and not to communicate directly with Google. Distributor agrees that it shall provide at least the following minimum levels of service: Business hours phone support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in (the ''Purpose''). The Parties have entered into this Agreement to protect the confidentiality of information in accordance with the following terms: 1. The Effective Date of this Agreement is December 12, 2005. 2. In connection with the Purpose, a Party may disclose certain information it considers confidential and/or proprietary ( Confidential Information '') to the other Party including, but not limited to, tangible, intangible, visual, electronic, present, or future information such as: (a) trade secrets; (b) financial information, including pricing; (c) technical information, including research, development, procedures, algorithms, data, designs. and know- how; (d) business information, including operations, planning, marketing interests, and products; (e) the terms of any agreement entered into between the Parties and the discussions, negotiations and proposals related thereto; and (f) information acquired during any facilities tours. 3. The Party receiving Confidential Information (a Recipient'') will only have a duty to protect Confidential Information disclosed to it by the other Party ( Discloser''): (a) if it is clearly and cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dential Information in response to the Process, or (c) taken no action to protect its interest in the Confidential Information within 14 business days after receipt of notice from the Recipient of its obligation to produce or disclose confidential information in response to the Process ***** ***** ******* 11. No Party acquires any intellectual property rights under II Agreement (including, but not limited to, patent, copyright, and trademark rights) except the limited rights necessary to carry out the Purpose as forth in this Agreement. 0. Each Party acknowledges that damages for improper disclosure Confidential Information may be irreparable; therefore, the injured Party is entitled to seek equitable relief, including injunction and preliminary injunction, in addition to all other remedies available to it. 18. The standard agreement entered into between the assessee and the advertisers is as under:- Google Advertising Agreement Invoicing address Customer Advertising third party Advertiser Name and address Advertising third party Customer will promptly notify Google of any change in address and contact name information for billing purpose. Agreement name. Agreement type Agreement I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the due date indicated on the Invoice(s). In the event of nonpayment, Google reserves the right to immediately terminate this SA upon written notice to Customer and immediately suspend the entire Customer account. Late payments are subject to interest payments as set forth in the Terms and Conditions. Methods of Billing: Monthly Invoicing: Customer will be billed at the end of the month, based on the actual number of clicks or other billing methods Customer may choose to participate in as described in the FAQ (e.g. cost per impression programs). Customer's credit must first be approved by Google in order for this billing method to apply. Prepayment: Customer will pay the total agreement budget prior to any campaign launch. Acceptance and terms of prepayment are at Google's sole discretion. Prepayment does not obligate Google to deliver any Ad Words ads notwithstanding acceptance of prepayment by Google. Unused portions of prepayments will be returned to Customer after the end date to the extent that there are no amounts still due to Google. Right To Reject Advertisement: All advertisements submitted by Customer are subject to Google's approval. Google reserves the right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close to any third party any information from Beta Features, existence of non-public Beta Features or access to Beta Features. Google may, at its sole discretion and without any prior consent from the Customer, modify ads to comply with any Policies. 2. The Program: Customer is solely responsible for all: (a) ad targeting options and keywords (collectively Targets ) and all ad content, ad information, and ad URLs ( Creative ), whether generated by or for Customer; and (b) web sites. services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively Services ). Customer shall protect any Customer passwords and takes full responsibility for Customer's own, and third party, use of any Customer accounts. Ads may be placed on (y) any content or property provided by Google ( Google Property ), and unless opted-out by Customer (z) any other content or property provided by a third party ( Partner ) upon which Google places ads ( Partner Property ). With respect to Adwords online auction-based advertising, Google may send Customer an email notifying Customer it has 72 hours ( Modification Period ) to modify keywords and settings as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aping or data extraction to access, query or otherwise collect Google advertising related information from any Adwords website or property except as expressly permitted by Google; or (c) advertise anything illegal or engage in any illegal or fraudulent business practice. Customer represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent. publicity or other rights) in Creative. Services and Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform. display, reformat. excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ( Use ). Customer represents and warrants that LV) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sements, and (c) Customer shall not disclose Principal's Program information to any other party without Principal's consent. 7. Payment Customer shall be responsible for all charges up to the amount of each 10, or as set in an online account, and shall pay all charges in Indian Rupees or in such other currency as agreed to in writing by the parties. Unless agreed to by the parties in writing, Customer shall pay all charges in accordance with the applicable 10 or Program FAQ. Late payments bear interest at the rate of 1.5% per month (or the highest rate permitted by law, if less). Charges are exclusive of taxes, cesses or other applicable levies. Customer is responsible for paying (y) all applicable taxes, cesses and levies, government charges, and (z) reasonable expenses and attorneys fees Google incurs collecting late amounts. To the fullest extent permitted by law, Customer waives all claims relating to charges unless claimed within 60 days after the charge (this does not affect Customer's credit card issuer rights). Charges are solely based on Google's measurements for the applicable Program, unless otherwise agreed in writing. To the fullest extent permitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utual agreement of the Parties. The arbitrator will not act as amiable compositeur or ex aequo et bono. It is the intent of the parties that, barring extraordinary circumstances, arbitration proceedings will be concluded within 60 days from the date the arbitrator is appointed. The arbitrator may extend this time limit in the interests of justice. Failure to adhere to this time limit shall not constitute a basis for challenging the award. The arbitration will be conducted in English and the place of arbitration will be Bangalore, India. Either party may, without waiving any remedy under this Agreement, apply to the arbitrator and/or any court having jurisdiction any interim, provisional, injunctive or conservatory relief that is necessary to protect the rights or property of that party until the arbitration award is rendered or the Dispute is otherwise resolved. Any decision rendered by the arbitrator will be final and binding on the parties, and judgment thereon may be entered by any court of competent jurisdiction, including, but not limited to, any court that has jurisdiction over either of the parties or any of their assets. The parties expressly agree that the arbitrator will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Customer's account interface). A waiver of any default is not a waiver of any subsequent default. Unenforceable provisions will be modified 10 reflect the parties' intention and only to the extent necessary to make them enforceable, and remaining provisions of the Agreement will remain in full effect. Customer may not assign any of its rights hereunder and any such attempt is void. Google and Customer and Google and Partners are not legal partners or agents, but are independent contractors. In the event that these Terms or an Advertising Program expire or is terminated, Google shall not be obligated to return any materials to Customer. 11. Term: Unless terminated earlier under the terms of this Agreement This Agreement shall have a term of 1 year from the latest of the signature dates below. Customer acknowledges and agrees that if this Agreement expires or is terminated any Customer campaigns in effect as of the date of such expiration or termination or any new campaigns commenced after such expiration or termination shall run thereafter subject to Google's then standard terms and conditions for the Program. 20. Under the Distribution Agreement, the assessee acted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated in these appeals. Similarly, we do not think it is necessary to decide whether the services agreement and distribution agreement are interlinked or complementary to each other. ITES services are enabling the overall business and not directly related to generating revenue from Adword Program in India. Revenue is generated by end customers clicking on link and not because of ITES services. Even if it is interlinked, the internal tools / intangibles / software of Google Ireland are admittedly not transferred to assessee. The assessee has only right to use these for rendering ITES services. Applying ratio of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited (supra), this cannot result in royalty. We proceed to examine whether the definition of 'Royalty' as per Article 12 of India-Ireland DT AA is satisfied in the present case considering the distribution agreement, services agreement and the facts on record. 23. The definition of 'Royalty' as per Article 12(3)(a) of India - Ireland DTAA is as under:- 3. (a) The term royalties as used in this Article means payments of any kind received as a consideration for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as an integrated unit/equipment by foreign nonresident suppliers to Indian distributors or end-users. 25. The Supreme Court made a reference to the relevant provisions of the Copyright Act and on the interpretation of the same, it accepted the difference between a copyright right and copyrighted article. The important observations of the Supreme Court are summarized as follows:- 71. The transfer of all or any rights (including the granting of a licence) in respect of any copyright , in the context of computer software, is referable to sections 14(a), 14(b) and 30 of the Copyright Act. As has been held hereinabove, the expression in respect of' is equivalent to in or attributable to . Thus, explanation 2(v) to section 9(1)(vi) of the Income Tax Act, when it speaks of all of any rights ... in respect of copyright is certainly more expansive than the DTAA provision, which speaks of the use of, or the right to use any copyright. 72. However, when it comes to the expression use of, or the right to use , the same position would obtain under explanation 2(v) of section 9(1)(vi) of the Income-tax Act, inasmuch as, there must, under the licence granted or sale made, be a transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per section 90(2) of the Income-tax Act read with explanation 4 thereof and Article 3(2) of the DTAA. Further, the expression copyright has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems Asia Pacific Pty. Ltd (supra) does not state the law correctly and is thus set aside. ***** ******** ****** 108. Fourthly, the High Court is not correct in referring to section 9(l)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains. [ India-Ireland DTAA'']. Article 12 of the aforesaid treaty defining royalties would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(l)(vi) of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich are ancillary to such use, and cannot be construed as a licence to enjoy all or any of the enumerated rights mentioned in section 14 of the Copyright Act. or create any interest in any such rights so as to attract section 30 of the Copyright Act. (v) The right to reproduce and the right to use computer software are distinct and separate rights, as has been recognized in State Bank of India (supra) (see paragraph 21), former amounting to parting with copyright and the latter, in the context of no exclusive EULAs, not being so. 26. Having considered the above principles in the context of copyright royalty, we proceed to examine the applicability of the above principles to the facts of the present case particularly with reference to distribution agreement, services agreement and other facts on record. As per para 2.1 of the distribution agreement, assessee is appointed as a non exclusive authorised distributor of Google Adwords program to Advertisers. Para 2.2 of the agreement states that the distributor agrees to market and distribute Adwords program to advertisers within the broad guidelines provided by Google with its reasonable commercial expertise and own sales force and cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The advertiser represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent, publicity or other rights) in Creative, Services and Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform, display, reformat, excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ( Use ). The advertiser represents and warrants that (y) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights). Violation of the foregoing may result in immediate termination of this Agreement or customer's account without notice and may subject Customer to legal penalties and consequences. 29. As per the services agreement, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle .com/permissions/trademarks.html (or such other URL that Google may provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google may provide to Distributor for use solely under this Agreement. As per para 6 of the distribution agreement, each party shall own all right, title and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features and Google Irland grants to the assessee / distributor nonexclusive and nonsublicensable licence during the Term to display Google Brand Features solely for the purpose of distributor's marketing and distribution of AdWords Program under the terms and subject to the conditions set forth in this Agreement. It is thus evident that the trademark and other brand features are not used independently or de hors the distribution agreement but they are incidental or ancillary for the purpose of carrying out the marketing and distribution of Adword program. The Delhi High Court in DIT v Sheraton International Inc [2009] 313 ITR 267 held that when the use of trade mark, trade name etc are incidental to the main servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keting, distribution and ITES activities are carried out in India and revenues are generated from India or from Indian Advertisers. As held by the Supreme Court in the case of UOI v Azadi Bachao Andolan [2003] 263 ITR 706, at page 763: We are unable to agree with the submissions that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents. 34. Before concluding, it is to be mentioned that the taxability with respect to payments made for purchase of online advertisement has been decided by the following Coordinate Bench orders of the I.T. Act:- (i) Yahoo (supra): Department of Tourism of India hired the services of Yahoo India for uploading, displaying, and hosting its banner advertisement on the Yahoo portal, which was operated by Yahoo Hong Kong. For the said purposes Yahoo India engaged Yahoo Hong Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non-resident, to be taxable in India. The CIT (A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT (A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty. The CIT (A) upheld the order of the AO. However, while doing so, the CIT (A) relied upon certain functional aspects of advertisement system qua Patent Number US20040059708A1 as well as US7778872B2. These two patents are held by Google LLC., USA in connection with the Google AdWords Program hereto. The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT (A) and held that the payments in question could not be characterised as royalty, while relying on the decisions in Urban Ladder (supra) and Play Games (supra). 35. It is also relevant to point out that in the context of interpreting Article 12(3) of India - Ireland DTAA, it is relevant to take note of the existing international jurisprudence. The Technical Advisory Group ( TAG ) set up by the Organisation for Economic Co-operation and Development ( OECD ), in its Report (2001) on treaty characterisation of electronic commerce payments analysed various e- commerce transactions and suggested suitable characterisation for consideration flowing thereunder. One of the transactions analysed by TAG was adve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 2016 provides for charge of EL at 6% on consideration for specified services. Section 164(i) of Finance Act, 2016 provides that specified service means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf. Thus, online advertisement is now covered under EL. If online advertisement was already covered under definition of royalty, then bringing it as part of EL scheme would not arise. 39. In view of the aforesaid discussion and the judicial pronouncements, cited supra, we hold that the impugned payment cannot be characterized as royalty under the India-Ireland DTAA. It is ordered accordingly. 40. In the result, the appeals filed by the assessee are allowed. 8.1. Respectfully following the above order of the Tribunal, we inclined to decide the assessee's appeal in IT(IT)A No. 1190/Bang/2014 in favour of the assessee. 7.2.1 The above view has been followed by Coordinate Bench of this Tribunal from another decision in assessee s own case for A.Ys. 2009-10 to 2012-13 reported in (2022) 143 taxmann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct r.w. Article 12(3) of the India-Ireland Double Taxation Avoidance Agreement (India-Ireland DTAA) and thus chargeable to tax in India in the hands of GIL. The case of the assessee is that the said payments are in the nature of business profits, which are chargeable to tax in Ireland and not in India. Further, since the Department in these proceedings has never alleged that GIL had a Permanent Establishment (PE) in India in terms of Article 5 and accordingly by virtue of Article 7(1) of the India-Ireland DTAA, the right to tax these profits is solely with Ireland. Consequently, the assessee cannot be held to be an assessee in default u/s 201 of the I.T. Act for not deducting tax at source u/s 195 of the I.T. Act while making the subject payment to GIL. 14. For a proper adjudication of the above issue, it is necessary to briefly explain / examine the overview of the Google Adword Program, the role of the assessee under Adword Program M/s. Google Ireland Ltd. distribution agreement and the service agreement (ITES). The undisputed fact on record is that Google.com is a search engine developed by Google LLC, USA available freely to the world at large providing information on any subje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on the Google AdWords Program to any member of the public, free of M/s. Google Ireland Ltd. charge, to enable him to formulate a suitable draft advertisement for his product or service. The only requirement is that the proposed Advertiser should have a website of his own / or entity giving particulars about his/ its business. The Google AdWords Program itself gives step-by-step and detailed instructions, so that even a person who has a basic knowledge of computers and internet can create a draft advertisement and target it suitably by using the necessary computer commands (or tools). No payment is made for any use of the Google AdWords Program. After formulating the draft advertisement, the Advertiser is required to upload the same for display on Google Search Engine or other online properties using the Google AdWords Program. No payment is made for the same. Thereafter, the proposed advertisement is stored on the servers of Google Ireland Ltd (GIL) located outside India for undergoing a review process. 15. The review process is undertaken by GIL for advertisements uploaded by Advertisers from all around the world including India. Approximately 94% of global advertisements are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this Agreement: NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein the parties agree as follows: 1. DEFINITIONS 1. 1 'Affiliate' shall mean any Person, whether de Jure or de facto, that directly or indirectly participates in the capital. control or management of either party or is under common ownership with a party to this Agreement or other entity actually controlled by, controlling. or under common control with a party to this Agreement. 1.2 Confidential Information' shall mean all data and information of a confidential nature, Including know-how and trade secrets, relating to the business, the affairs, the products. the development or other projects or services of Google Ireland or its-suppliers or its affiliate. including but not limited to Intellectual Property. Confidential Information may be communicated orally, in writing. or in any other recorded, electronic or tangible form. Data and information shall be considered to be Confidential Information if (i) Google Ireland has marked them as such; (ii) Google Ireland, orally or in writing, has advised Google India of their confidential nature; or (iii) due to their characte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation. Formulae, engineering specifications, technical data, testing procedures, drawings and techniques and other proprietary information and materials of any kind; (vi) all software programs in both source code and object code format. including all testing software and software tools: (vii) all documentation, records, databases, drafts, designs, codes, drawings and algorithms: and (viii) all confidential and proprietary information related to any of (i) through (vii) above **** **** ****** 1.10 Software Embodiments shall mean all designs, discoveries, inventions. Products. procedures, improvements, developments, drawings, notes, Documentation. information. materials, Intellectual Property and Derivative works Works made, conceived or developed by Google India alone or with others which result from or relate to the Services 1.11 Software Technology shall mean all Intellectual Property, Confidential Information, Documentation, Derivative works Works and other technical data used by Google Ireland that are required, used or appropriate for the design and development of Products. including the reproduction, use, testing, operation, maintenance and service of such Products. **** **** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia's development of any Derivative works Works and Software Embodiments and hereby irrevocably agrees that all such Derivative works Works and Software Embodiments shall forever be the sole and exclusive property of Google Ireland throughout the world from the date of its creation. As between Google Ireland and Google India no additional action shall be required to vest all right, title and ownership of such Derivative works Works and Software Embodiments in Google Ireland. Google India shall furnish to Google Ireland all such Derivative works Works and Software Embodiments developed by Google India as soon as they become available. From time to-time, promptly upon receipt of Google Ireland's request, Google India shall provide Google Ireland with assignments, in substantially the form of Exhibit B hereto to facilitate Google Ireland's perfection of its rights in the Derivative works Works and the Software Embodiments in any jurisdiction in the world. Google India shall also promptly make available to Google Ireland all Residuals. If Google India has any rights to Derivative works Works or Software Embodiments that cannot be assigned to Google Ireland under law. Google ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ** ********* ****** 12.5 Rights and Duties of Termination. (a) Upon termination or expiration of this Agreement: (i) Google India shall have the right to retain any sums already paid by Google Ireland under this Agreement and Google Ireland shall pay all sums accrued, but not yet paid, that are due under this Agreement as of the date of such termination; (ii) Google India shall discontinue all use of the Confidential Information, Documentation, Intellectual Property and other Software M/s. Google Ireland Ltd. Technology and shall have no further right with respect thereto. (iii) Google India shall (except as specified in subsection (b) below) immediately return to Google Ireland or (at Google Ireland's request) destroy, all copies of the Confidential Information, Documentation and other Software Embodiments, in its possession or control. Google India hereby expressly waives and agrees not to assert any right of detention whatsoever with respect to the foregoing.' 16. Prior to December 2005, an Indian Advertiser could get into a contract with GIL only, for purchasing online advertisement space. However, to accommodate Indian Advertiser(s) desirous to pay in Indian Rupees ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Agreement for its AdWords Program with Distributor; 2. Whereas Google Inc., a Delaware corporation, and Distributor entered into a Google AdWords Program Distribution Agreement, dated as of December 12, 2005.(the Prior Agreement ), and Google Inc. assigned its rights and obligations under the Prior Agreement to Google; and 3. Google and Distributor desire to terminate the Prior Agreement and further desire that this Agreement supersede and replace the Prior Agreement in its entirety; NOW, THEREFORE, in consideration of the promises and the mutual covenants, agreements, representations and warranties hereinafter set forth, Google and Distributor hereby agree as follows 1. Definitions. The following capitalized terms shall have the meanings set forth below. 1.1 ''Advertiser'' means an individual or business resident or having its principal place of business located within the Territory (as defined herein), where principal place of business is determined by the place of an entity's registration. 1.2 ''AdWords Program means the advertising program currently offered by Google under the name ''AdWords.'' 1.3 Brand Features means the trade nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be determined by the place of such entity's registration. All inquiries by any such entity for sale of advertising space shall be referred to the designated Google contact within three (3) business days of receipt by Distributor of such inquiry. 2.2 Distribution Marketing of AdWords Program. Distributor agrees to market and distribute AdWords Program to Advertisers in the designated Territory. within the broad guidelines provided by Google, with its reasonable commercial expertise and own sales force and customer service infrastructure. Distributor shall not subcontract any of its functions or obligations under this Agreement to any third parties. Distributor shall perform its obligations hereunder in a professional and workmanlike manner consistent with reasonably applicable industry standards and in accordance with this Agreement. Distributor will distribute AdWords Program in accordance with the training provided by Google. Failure to do so would constitute a material breach of this Agreement and shall be grounds for termination under section 9.3. 2.3 AdWords Program Sign Up Process. Distributor shall be responsible for uploading all Advertiser information that is require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds Program advertising accounts in order to receive such online information. Google reserves the right, but has no obligation, to send reports about an Advertiser's activity directly to such Advertiser. If an Advertiser makes a request to Distributor to receive a user name and password to access such Advertisers individual AdWords Program account activity, Distributor' will grant such request after approval from Google. ***** ***** ****** 6. Brand features. Each party shall own all right, title and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features. Google grants to Distributor nonexclusive and non sub- licensable licence during the Term to display Google Brand Features solely for the purpose of Distributor's marketing and distribution of M/s. Google Ireland Ltd. AdWords Program under the terms and subject to the conditions set forth in this Agreement. Notwithstanding the foregoing, Distributor will submit all materials of any kind containing the Brand Features) to Google for written approval prior to release to the public. Furthermore, Distributor agrees to adhere to Google's then-current Brand Features use guid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected by Google relating to Advertisers in connection with the provision of the AdWords Program. Distributor shall maintain all User Data in accordance with local law and regulation applicable to such data. and shall implement policies and procedures with respect to the User Data that are at least as protective of the rights of the Advertisers as is provided in the Google Privacy Policy set forth at http://wwvv.qoogle.comlprivacy.html and all relevant policies implied therein ****** ****** ****** M/s. Google Ireland Ltd. 9.4 Effect of Termination. Upon any termination or expiration of this Agreement, (i) all rights and licences granted by one party to the other. including but not limited to rights to use the other party's Brand Features shall cease immediately, (ii) each party shall promptly return to the other party, or destroy and certify the destruction of all Confidential Information as defined in the NDA and Section 7 of this Agreement) of the other party, and (iii) except for a termination pursuant to Section 9.2 or Section 9.3 above. Google will continue to serve advertisements as provided in this Agreement up to the earlier date to occur of (x) the date that the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mail Escalation Limit shall be at Google's sole discretion. Distributor agrees that Google will have the right, to review samples of communications sent to Advertisers to assess the quality of responses and modify communications accordingly. Google shall also have the right to send questionnaires to Distributor's customers to ensure that Distributor is providing an adequate level of service. Mutual Non-Disclosure Agreement This Mutual Non-Disclosure Agreement (''Agreement'') is made and entered into between Google Ireland Limited, for itself and its subsidiaries and affiliates ( Google''), and Participant' identified below, individually referred to as a ''Party'' and collectively referred to as the Parties . The Parties wish to exchange Confidential Information (as defined below in Section 2) for the following purpose(s): a) to evaluate whether to enter into a contemplated business transaction; and b) if the Parties enter into an agreement related to such business transaction, to fulfill each Party's confidentiality obligations to the extent the terms set forth below are incorporated therein (the ''Purpose''). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned an agreement with either of the Parties containing confidentiality provisions substantially similar to those set forth herein. ***** ***** ***** 6. This Agreement imposes no obligation upon a Recipient with respect to Confidential Information that: (a) was known to the Recipient before receipt from the Discloser; (b) is or becomes publicly available through no fault of the Recipient; (c) is rightfully received by the Recipient from a third party without a duty of confidentiality; (d) is independently developed by the Recipient without a breach of this Agreement; (e) is disclosed by the Recipient with the Discloser's prior written approval; or (f) is required to be disclosed by operation of law, court order or other governmental demand ( Process''); provided that (i) the Recipient shall immediately notify the Discloser of such Process; and (ii) the Recipient shall not produce or disclose Confidential Information in response to the Process unless the Discloser has: (a) requested protection from the legal or governmental authority requiring the Process and such request has been denied, (b) consented in writing to the production or disclosure of the Confidential Infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warrants that all client information, including but not limited to credit card information and invoicing information, provided herein is complete and accurate and that no additional information is necessary for payment of Google invoices. Customer's campaign(s) may go live upon posting. at which time Google shall send Customer an email notifying customer it has 72 hours to modify Customers campaign keywords and settings as posted. During those 72 hours, Google is only liable to Customer for keywords or settings discrepancies if Customer can certify to Google by its contemporaneous M/s. Google Ireland Ltd. documental (evidence that Google posted keywords or settings other than those requested by Customer. The account (as modified by Customer, or if unmodified, as initially posted) will be deemed approved by Customer 72 hours after it initially posts. Terms of Payment. If Google, at any time, deems itself insecure with respect to Customer's ability to meet its financial obligations under this SA, Google shall have the right to require pre-payment of the total amount due for the SA in advance of the Target Start Date or as otherwise requested by Google. Customer must remit all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India Private Limited ( Google'~. These Terms govern Google's advertising program(s) ( Program ) as further described in the applicable Program's frequently asked questions at www.google.com (the FAQs') and, as applicable, Customer's participation in any such Program (s), Customer's online management of any advertising campaigns ( Online Management ) and/or any insertion orders ( IO executed by and between the parties (together the Agreement ). Google and Customer hereby agree and acknowledge: 1. Policies. Program use is subject to all applicable Google and Partner ad specification requirements and policies, including without limitation the Editorial Guidelines (adwords google.com/select/guidelines.html) Google Privacy Policy (www.google.com/privacy.html) and Trademark Guidelines www.google.com/permissions/guidelines.html), (collectively, Policies ). Policies may be modified any time. Customer shall direct only to Google communications regarding Customer ads on Partner Properties. Some Program features are identified as Beta, Ad Experiment, or otherwise unsupported ( Beta Features ). To the fullest extent permitted by law, Beta Features are provided as is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nline through Customer's account. if any, or, if such online cancellation functionality is not available, with prior written notice to Google, including electronic mail. AdWords online auction-based advertising cancelled online will cease serving upon cancellation. All other advertising may be subject to Google's ability to reschedule reserved inventory or cancel advertisements already in production. Cancelled advertisements may be published despite cancellation if cancellation of those ads occurs after any applicable commitment date as set forth in advance by the Partner or Google in which case Customer must pay for those ads. Google may cancel immediately any 10, any of its advertising Programs, or these Terms at any time with notice, in which case Customer will be responsible for any ads already run. Google may modify any of its advertising Programs at any time without liability. Sections I, 2, 3,5, 6, 7, 8, and 9 will survive any expiration or termination of this Agreement. 4. Prohibited Uses; License Grant; Representations and Warranties. Customer shall not, and shall not authorize any party to: (a) generate automated, fraudulent or otherwise invalid impressions, inqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PARTIES HEREUNDER AND CUSTOMER'S BREACHES OF SECTION 1, to the fullest extent permitted by law: (a) NEITHER PARTY WILL BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES (INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, REVENUE, INTEREST, GOODWILL, LOSS OR CORRUPTION OF DATA OR FOR ANY LOSS OR INTERRUPTION TO CUSTOMER'S BUSINESS) WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY; AND (b) EACH PARTY'S AGGREGATE LIABILITY TO THE OTHER IS LIMITED TO AMOUNTS PAID OR PAYABLE TO GOOGLE BY CUSTOMER FOR THE AD GIVING RISE TO THE CLAIM. Except for payment obligations, neither party is liable for failure or delay resulting from a condition beyond the reasonable control of the party, including but not limited to acts of God, government, terrorism, natural disaster, labor conditions and power failures. 6. Agency. Customer represents and warrants that (a) it is authorized to act on behalf of and has bound to this Agreement any third party for which Customer advertises (a Principal'') (b) as betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), arising out of Use, Customer's Program use, Targets, Creative and Services and breach of the Agreement. Partners shall be deemed third party beneficiaries of the above Partner indemnity. Without limitation to the generality of the foregoing, Customer shall indemnify Google against any Liabilities or losses arising out of any claim based on any act or allegation of infringement of intellectual property, misrepresentation or defamation. 9. Arbitration. The parties agree that they will try in good faith to settle within thirty (30) days any dispute, controversy or claim arising out of relating to or in connection with this Agreement ( Dispute''). If the Dispute is not resolved within thirty (30) days after such Dispute arose, such Dispute must be referred to and finally resolved by arbitration, to which the Parties hereto expressly agree and submit. The arbitration will be submitted to the International Centre for Dispute Resolution of the American Arbitration Association ( AAA ) and conducted in accordance M/s. Google Ireland Ltd. with the Commercial Arbitration Rules of the AAA in force as of the date of this Agreement ( Rules''). Pre-hearing information exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and replaces any other applicable agreements, terms and conditions applicable to the subject matter hereof Any conflicting or additional terms contained in additional documents (e.g. reference to a purchase order number) or oral discussions are void. Each party shall not disclose the terms or conditions of these Terms to any third party, except to its professional advisors under a strict duty of confidentiality or as necessary to comply with a government law, rule or regulation. Customer may grant approvals, permissions, extensions and consents by email, but any modifications by Customer to the Agreement must be made in a writing executed by both parties. Any notices to Google must be sent to Google India Pvt. Ltd., No. 3, RMZ Infinity - Tower E, Old Madras Road, 4th Floor, Bangalore, 560016, India with a copy to Legal M/s. Google Ireland Ltd. Department, via confirmed facsimile, with a copy sent via first class or air mail or overnight courier, and are deemed given upon receipt. Notice to Customer may be effected by sending email to the email address specified in Custo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect in referring to section 9(1)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains, India-Ireland M/s. Google Ireland Ltd. DTAA . Article 12 of the aforesaid treaty defining royalties would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(1)(vi) of the Income-tax Act, as construed by the High Court. Here again, section 90(2) of the Income-tax Act, read with explanation 4 thereof has not been properly appreciated. 22. Thus, the definition of the term royalty in Article 12(3) of the India - Ireland DT AA override the definition of royalty as provided in Explanation 2 to section 9(l)(vi) of the Act by virtue of section 90(2). Therefore, the definition of the term royalty under the India - Ireland DTAA being more beneficial to the assessee must only be considered in these appeals. The findings of the AO and CIT (A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... storage device and includes any such programme or any customized electronic data. It is not in dispute that the Adwords Program is used by the assessee in the present case be it for the purpose of discharging its functions under the distribution agreement or under the services agreement. However, the question for our consideration is whether the copyright in Google AdWords Program is used by the assessee or not? In order to attract definition of 'Royalty', there has to be use or right to use, inter alia, any copyright. The issue as to whether usage of computer software tantamounts to royalty, is now resolved by the Supreme Court decision in the case of Engineering Analysis Centre of Excellence Private Limited (supra). The Supreme Court grouped the various appeals on the aspect of royalty issue on software payments into four categories as under:- Category 1: Computer software purchased by an end-user, resident in India, from a foreign non-resident supplier/manufacturer. Category 2: Purchase of computer software by resident Indian companies that act as distributors/resellers, from foreign non- resident suppliers for the purpose reselling the same to resident Indian users. Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of' copyright, namely, that there is a parting with an interest in any of the rights mentioned in section 14(b) read with section 14(a) of the Copyright Act. To this extent, there will be no difference between the position under the DTAA and Explanation 2 to section 9(1)(vi) of the Income-tax Act. ***** ******** ****** ........... 97. When, under a nonexclusive licence, an end-user gets the right to use computer software in the form of a CD, the end-user only receives a right to use the software and nothing more. The end-user does not get any of the rights that the owner continues to retain under section 14(b) of the Copyright Act read with sub-section (a)(i)-(vii) thereof Thus, the conclusion that when computer software is licensed for use under an EULA, what is also licensed is the right to use the copyright embedded therein, is wholly incorrect. The licence for the use of a product under an EULA cannot be construed as the licence spoken of in section 30 of the Copyright Act, as such EULA only imposes restrictive conditions upon the end-user and does not part with any interest relatable to any rights mentioned in sections 14(a) and 14(b) of the Copyright Act. **** ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. The transfer of the material substance does not, of itself, serve to transfer the copyright therein. The transfer of the ownership of the physical substance, in which copyright subsists, gives the purchaser the right to do with it whatever he pleases, except the right to reproduce the same and issue it to the public, unless such copies are already in circulation, and the other acts mentioned in section 14 of the Copyright Act. (iv) A licence from a copyright owner, conferring no proprietary interest on the licensee, does not entail parting with any copyright, and is different from a licence issued under section 30 of the Copyright Act, which is a licence which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of M/s. Google Ireland Ltd. the licensed computer software product over which the licensee has no exclusive rights, no copyright is parted with and consequently, no infringement takes place, as is recognized by s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds Program. 27. As per the service level agreement - Exhibit C to distribution agreement, assessee distributor shall be solely responsible for M/s. Google Ireland Ltd. providing all customer services to Advertisers, according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to contact Distributor directly for support, and not to communicate directly with Google Ireland. Distributor agrees that it shall provide minimum levels of service like Business hours phone support to all Advertisers, E-mail queries from Advertisers shall be responded to within one (l) business day with immediate resolution of any issues when possible. It was decided that the issues that cannot immediately be resolved by Distributor based on training and procedures provided under the Agreement must be communicated promptly to Google Ireland by Distributor / assessee, and Google Ireland will assist assessee / Distributor in determining the best solution. It was also agreed that the distributor agrees that Google Ireland will have the right, to review samples of communications sent to Advertisers to assess the quality of responses and mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14(a)/(b) and section 30 of the Copyright Act, 1957 have been transferred by Google Ireland to the assessee in the present case. As held by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT Anr. (supra), mere use of or right to use a computer program without any transfer of underlying copyright in it as per section 14(a)/(b) or section 30 of the Copyright Act, 1957 will not be satisfying the definition of Royalty under the Act / DTAA. Similarly, use of confidential information, software technology, training documents and others are all 'literary work' with copyrights in it owned by the foreign entity and there was no transfer or license of copyrights in favour of the assessee company. Hence, the impugned payments cannot be characterised as 'Royalty' under the DTAA. 31. The lower authorities have held that the assessee has been granted the use of or right to use trademarks, other brand features and the process owned by Google Ireland for the purpose of distribution of Adwords program and consequently the sums payable to Google Ireland are royalty. As per Article 12 of India - Ireland DTAA, consideration for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the copyright it holds in the Adwords program and hence it cannot be said that any kind of technical knowhow has been transferred to the assessee company. The CIT (A) was not in agreement with the AO on the above issue without prejudice to his view in holding that the remitted amount is royalty on different grounds. The revenue has not challenged the said finding of CIT(A). Hence, the impugned payments cannot be regarded as made for 'use of or right to use industrial, commercial or scientific equipment'. The remaining portion of definition of 'Royalty' under the India - Ireland DT AA is consideration for information concerning industrial, commercial or scientific experience. The AO has not characterised the impugned payments as a consideration for the above. In any case, CIT (A) has given a finding that it cannot be said that any kind of technical knowhow has been transferred to the assessee company. This has not been challenged by the revenue. M/s. Google Ireland Ltd. 33. Thus on an overall analysis of the entire facts on record, we hold that the impugned payments cannot be regarded as royalty under the India - Ireland DTAA. It is true that the Google Adword progr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT (A) under section 40(a)(i) of the Act, on the premise that the said payments were taxable in India. While the AO held the said payments to be fees for technical services ( FTS ), the M/s. Google Ireland Ltd. CIT(A) held them to be royalty. The Tribunal relied on the decision in Yahoo (supra) to delete the disallowance. It was also observed by the Tribunal that the said payments were business profits, which were not taxable in India, since GIL did not have a PE in India. (iii) Right Florists (supra): Right Florist was a florist who used Google Search Engine for online advertising, to generate more business for itself. In this case again, the AO had disallowed the payments made by Right Florist for online advertising under section 40(a)(i) of the Act. However, the CIT (A) reversed the said decision on the ground that none of the recipients of the payments had a PE in India. The Tribunal, in Department's appeal, upheld the order of the CIT(A), while observing that the decisions in Yahoo (supra) and Pinstorm (supra) were authorities in support of the proposition that pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., in any manner. It was also observed inter alia that the said servers, which hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In that manner, the Tribunal set aside the order of the CIT (A) and held the payments in question to be neither royalty, nor FTS. (viii) Matrimony.com (supra): Matrimony.com in this case, made payments to Facebook Ireland Ltd. for online advertising. The AO in this case as well, disallowed the said payments under section 40(a)(i) of the Act, which action was upheld by the CIT(A). The Tribunal followed the decision in Urban Ladder (supra), while deleting the said disallowance. (ix) ESPN Digital Media (supra): ESPN India in this case, entered into a re-seller agreement with ESPN UK, for the resale of online advertisement space. In terms thereof, ESPN India purchased online advertisement space for resale to Indian advertisers. For this purchase, it made payments to ESPN UK, which were characterised as royalty by the AO. The CIT (A) upheld the order of the AO. The Tribunal, in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High-Powered Committee ( HPC ) on electronic commerce and taxation, set up by the Central Board of Direct Taxes ( CBDT ) had also accepted the view taken by TAG and recommended taxing consideration flowing for online advertisement under Article 7, and not Article 12 of the relevant DTAA. 37. Therefore, in terms of the international guidance as stated herein, the position regarding taxability of receipts from sale of online advertisement space is clear. Unless the non-resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA. 38. The above view is also supported by insertion of provisions related to Equalisation Levy (EL) by Finance Act, 2016. The root for the emergence of the EL can be traced to the dynamic business models that have the ability to transcend the link between an income producing activity and a specific location since these business are carried in the cyber place. The PE definition presently is based upon the physical presence criteria. The new business models also created challenges in charac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was remitted to Yahoo Hong Kong. The payment remitted by Yahoo India to Yahoo Hong Kong was the subject matter of dispute before the Tribunal. The AO as well as CIT (A) held such payments to be royalty and in that manner, disallowed the expenditure in the hands of Yahoo India under section 40(a) of the Act. The Tribunal, in second appeal, held that banner M/s. Google Ireland Ltd. advertisement hosting services did not involve use or right to use any industrial, commercial, or scientific equipment and no such use was granted by Yahoo Hong Kong. In that manner, the Tribunal set aside the findings of the AO and CIT(A), wherein the subject payments were characterised as royalty. (ii) Pinstorm (supra): Pinstorm was engaged in buying online advertisement space for onward re-sale to an advertiser, much like GIPL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT (A) under section 40(a)(i) of the Act, on the premise that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi) Myntra Designs (supra): Myntra in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty and in the alternate, as FTS. The CIT (A) upheld the order of the AO. The Tribunal followed the decision in Urban Ladder (supra), while setting aside the order of the CIT(A). (vii) Play Games (supra): Play games is engaged in the business of providing a platform for online gaming. It had made payments to Facebook Ireland Ltd. for online advertising. The AO and CIT (A) in this case as well, held that payments to be taxable in India. The Hon'ble Tribunal observed that Play Games did not get any right to modify/ deal with the servers, which belonged to Facebook Ireland Ltd., in any manner. It was also observed inter alia that the said servers, which hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by assessee to Google Ireland is not liable to be taxed as Royalty for the years under consideration and therefore no disallowance can be made u/s. 40(a)(i). 7.4 Regarding applicability of FTS provisions, this Bench had called for submissions from the ld. A.R., which was submitted and is placed on record. In respect of the applicability of FTS under the Act as well as DTAA, it was submitted that the issue of FTS arises only for A.Ys. 2010-11 to 2012-13. It is submitted that the FTS is defined under Article 12(3)(b) of the Double Taxation Avoidance Agreement between India and Ireland ( India Ireland Tax Treaty ), as under: The term 'fees for technical services means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention. 7.5 It is submitted that the definition of FTS under the Act and India-Ireland tax treaty is identically worded and therefore in order to fall within the scope of FTS, the consideration paid ought to be for rendition of managerial or technical o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directions of its predecessors for A.Y. 2009-10, to hold the payments to be in the nature of FTS. However, the Ld. Counsel submitted that, the entire discussions by the DRP is based on characterising the said payment to be in the nature of royalty. 7.9 The Ld. Counsel while arguing against the said payment to be in the nature of FTS, submitted that, in case of certain payees as observed by the Coordinate Bench while considering the issue in the hands of Google Ireland in ITA No. 2845/Bang/2017 vide order dated 28.2.2023 held the payments to be in the nature of business profits. However, this Tribunal further held that as there is no PE, that is established in India of the Google Ireland, such payment could not have been held to be taxable in India. 7.10 The Ld. Counsel referred to the reliance placed by Coordinate Bench of this Tribunal while deciding the issue in case of Google Ireland Ltd. (supra) (which already has been reproduced hereinabove). For the sake of reference and at the cost of repetition, the same is reproduced hereinbelow: 10. As regards receipt of Rs. 51,09,74,532/- on sale of advertisement space from Indian customers other than GIPL we find it is covered in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observing that the decisions in Yahoo (supra) and Pinstorm (supra) were authorities in support of the proposition that payment by the Indian arm of a foreign owner of search engine portal, in connection with online advertising, is not in the nature of royalty as per section 9(1)(vi) of the Act. In this decision, the Tribunal also discussed the modalities involved in the online advertising business, in the context of Google Search Engine. (iv) Inception Business (supra): In this case the assessee was engaged in the business of brand management as well as posting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non-resident, to be taxable in India. The CIT (A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT (A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO M/s. Google Ireland Ltd. held the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the re- seller agreement towards purchase of online advertisement space. It was also observed that a website is not a tangible property and is M/s. Google Ireland Ltd. certainly not a high-tech equipment. It was also observed that the reliance of the AO and CIT (A) on the decision in Verizon Communications Singapore Pte Ltd. v. ITO, (2014) 361 ITR 575 (Madras High Court) was misplaced, since the same had been overruled by the Hon'ble Supreme Court in the decision in Engineering Analysis (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT (A) and held that the payments in question could not be characterised as royalty, while relying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Coordinate Bench of this Tribunal has been brought to our notice. Respectfully following the above, we hold that the payments paid by the assessee to Google Ireland cannot be treated as FTS and therefore no disallowance could have been made u/s. 40(a)(i). Accordingly, this issue for the years under consideration stands allowed in favour of the assessee. 8. Issue 6: Attribution As we have already held while considering Issue 4 that assessee cannot be held to be a dependent agent permanent establishment of Google Ireland, the income earned by Google Ireland cannot be taxed in India as business profits. Under such circumstances, the issue of attribution does not arise and becomes infructuous. Accordingly, the grounds pertaining to this issue for AY 2012-13 to 2015-16 stands dismissed as infructuous. 9. Issue 7: 80G The Ld. Counsel submitted that this issue arises only for A.Y. 2015-16 wherein the Ld.AO denied deduction of eligible donation u/s. 80G of the act amounting to Rs. 1,63,12,282/- incurred by assessee as a part of CSR. It is submitted by the Ld. Counsel that the assessee made donations to eligible educational institutions and medical research institutions for which de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein. 14. From the above it is clear that under Income tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, Income from Business and Profession to those, who pursue corporate social responsibility projects under following sections. Section 30 provides deduction on repairs, municipal tax and insurance premiums. Section 31, provides deduction on repairs and insurance of plant, machinery and furniture Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible assets like know-how, patents, trademarks, licenses. Section 33 allows development rebate on machinery, plants and ships. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f computing Total taxable income . Even if any payments under section 80G forms part of CSR payments( keeping in mind ineligible deduction expressly provided u/s. 80G), the same would already stand excluded while computing, Income under the head, Income form Business and Profession . The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing Total Taxable Income cannot be denied to assessee, subject to fulfillment of necessary conditions therein. 18. We therefore do not agree with arguments advanced by Ld.Sr.DR. 19. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, Income from Business and Profession . It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing Total taxable income , which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing Total Taxable Income . If assessee is denied this benefit, merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not inclined to decide this issue. 12. Issue 10: MAT Credit It is submitted by both sides that this requires verification based on the details filed by assessee. Accordingly the grounds raised by assessee in respect of this issue for A.Ys. 2010-11 and 201213 are remanded to the Ld.AO for necessary verification. 13. Issue 11: TDS Credit It is submitted by both sides that this requires verification based on the details filed by assessee. Accordingly, this issue raised by assessee for A.Ys. 2011-12 to 2015-16 are remanded to the Ld.AO for necessary verification. 14. Issue 12: Incorrect Refund Calculation It is submitted by both sides that this requires verification based on the details filed by assessee. Accordingly, this issue raised by assessee for A.Y. 2010-11 stands remanded to the Ld.AO for necessary verification. In respect of Issues 10 to 12, assessee is directed to file necessary documents in support and Ld. AO shall consider the claim in accordance with law. 15. Issue 13: Educational cess The Ld. Counsel submitted that this issue is no longer resintegra and has been decided by Hon ble Supreme Court against the assessee. The additional ground therefore raised by assessee on th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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