On October 23, 2017, setting another benchmark regarding MNCs trying to evade taxes, the Income Tax Appellate Tribunal (ITAT) Bengaluru dismissed Google India’s arguments on almost every ground. In 2007, the Income Tax Department, Bengaluru had put a question mark over Google India’s advertisement revenues getting transferred to its Ireland office without paying any taxes. Google India has so far transacted $231 Mn (INR 1457 Cr) to its Google Ireland office without paying any tax to the Indian Income Tax department.
Pronouncing its order in an open court session, the Tribunal, after considering all the common arguments raised in cross-appeals bearing Nos.IT(IT)A.374 & 466/Bang/2013, finally dismissed all the six appeals raised by Google India.
Google India’s Defence
In its submission, tribunal observed that Google India is registered under the provisions of the Companies Act and wholly subsidiary of Google International LLC, US. Google India is appointed as a non-exclusive authorised distributor of Adword programs to the advertisers in India by Google Ireland. Google is specialized in Internet search engines and related advertising services. Google maintains an index of websites and other online content which is made available through its search engine to anyone with an Internet connection. Under the Google Adword Program Distribution agreement dated December 12, 2005, Google India was granted the marketing and distribution rights of Adword program to the advertisers in India.
In its appeal, appellant Google India had raised a number of points in its defence for the assessment years 2007-08 to 2012-13. The company argued that it was merely a reseller of advertisement space. The assessee only performs market-related activities to promote the sales of advertisement space. No right or intellectual properties were transferred by Google to the assessee or to the advertiser. The assessee has no control or access to the software, algorithm and data centre. The server on which the Adword program runs are located outside India over which it does not have control. Google India or the advertisers do not have any right of any use or exploitation or the underlying I.P. and software. The advertisers select keywords and place a bid on the online auction. The assessee periodically raises invoice on advertisers for advertising spend incurred by the advertisers.
The company also submitted that the ITES division of the Appellant is a separate outsourcing business segment, for which it earns revenue under a separate outsourcing service agreement with Google Ireland.
The Judgment Day
Hearing all the 11 grounds that Google India presented during the course of six years and the counter-facts presented by DIT Bengaluru, the tribunal in its 134-page long judgement agreed with counter-facts submitted by DIT.