Bad information for the world's favorite search engine. On Tuesday, the Indian tax place of business won an upper hand in its six-year-long combat with Google India in a ruling that may set a priority for some of the other multinational corporations.
The rift owes its foundation to the association and fund drift between Google India and the worldwide large's place of business in Ireland — a jurisdiction known for its lax tax laws.
When the income-tax (I-T) department in Bengaluru spotted that for years Google India were routinely remitting a chunk of the advertisement earnings generated from India to Google Ireland, it put a question mark on the transactions.
According to the tax place of business, since no tax was once deducted by way of Google India while remitting funds to Google Ireland, it was once a transparent case of tax evasion.
Google India contested the declare, popping out with a barrage of arguments in six appeals touching on the evaluate years 2007-08 to 2012-13. All the appeals had been dismissed on Tuesday by way of the Income-Tax Appellate Tribunal (ITAT) which stated, "...the intention of the assessee (Google India) as well as of the GIL (Google Ireland) is clear and conspicuous that they wanted to avoid the payment of taxes in India. That is why, despite the duty of the assessee to deduct the tax at the time of payment to GIL, no tax was deducted nor any permission was sought for paying the amount (sic)."
Google India now stares at a tax call for on Rs 1,457 crore — the whole quantity that it had remitted to Google Ireland throughout the duration below review. The key component of the connection between Google India and Google Ireland is the 'Adwords' programme — a product during which an advertiser is in a position to submit advertisements on the Google website.
Google India, a subsidiary of Google International LLC, US, is an accredited distributor of the Adwords programme to Indian advertisers by way of Google Ireland.
Google India had defined that Google Ireland had not transferred the intellectual property rights to the Indian arm; that it was once just a distributor of promoting area and had no get admission to or control over the infrastructure or the process excited by operating the Adwords programme with the platform operating on servers positioned outdoor India.
But consistent with the tax tribunal, since Google India has used the information and patented generation from Google Ireland, the remittance to the overseas entity is royalty which, below legislation, is to be taxed in the contracting state (India).
The ruling may emerge as a benchmark for MNCs (akin to Google Ireland) which won't have an everlasting establishment or bodily presence in India but nonetheless come below the glare of local tax authorities because of income generated in India.
"...the argument of the assessee (Google India) that it was only using customer data, IPR etc, for rendering the services relating to ITeS (Information Technology-enabled Services) is incorrect...in our view amount was being paid by the assessee to Google Ireland for the use of patent invention, model, design, secret formula, process, etc. Further, the payer is required to maintain books of account and deduct TDS (tax deducted at source) for both resident as well as non-resident. No separate treatment had been envisaged under the Act, for the payer paying to a non-resident," stated the Bengaluru bench of ITAT.
Google India had argued that the volume payable by way of it was once not in the nature of 'royalty' below the legislation and the India-Ireland double taxation avoidance agreement (DTAA). But the tribunal was once not impressed.
"If we go by literal meaning of double taxation avoidance agreement, then unscrupulous persons may misuse the provision and avoid payment of taxes," stated the order.
The rift owes its foundation to the association and fund drift between Google India and the worldwide large's place of business in Ireland — a jurisdiction known for its lax tax laws.
When the income-tax (I-T) department in Bengaluru spotted that for years Google India were routinely remitting a chunk of the advertisement earnings generated from India to Google Ireland, it put a question mark on the transactions.
According to the tax place of business, since no tax was once deducted by way of Google India while remitting funds to Google Ireland, it was once a transparent case of tax evasion.
Google India contested the declare, popping out with a barrage of arguments in six appeals touching on the evaluate years 2007-08 to 2012-13. All the appeals had been dismissed on Tuesday by way of the Income-Tax Appellate Tribunal (ITAT) which stated, "...the intention of the assessee (Google India) as well as of the GIL (Google Ireland) is clear and conspicuous that they wanted to avoid the payment of taxes in India. That is why, despite the duty of the assessee to deduct the tax at the time of payment to GIL, no tax was deducted nor any permission was sought for paying the amount (sic)."
Google India now stares at a tax call for on Rs 1,457 crore — the whole quantity that it had remitted to Google Ireland throughout the duration below review. The key component of the connection between Google India and Google Ireland is the 'Adwords' programme — a product during which an advertiser is in a position to submit advertisements on the Google website.
Google India, a subsidiary of Google International LLC, US, is an accredited distributor of the Adwords programme to Indian advertisers by way of Google Ireland.
Google India had defined that Google Ireland had not transferred the intellectual property rights to the Indian arm; that it was once just a distributor of promoting area and had no get admission to or control over the infrastructure or the process excited by operating the Adwords programme with the platform operating on servers positioned outdoor India.
But consistent with the tax tribunal, since Google India has used the information and patented generation from Google Ireland, the remittance to the overseas entity is royalty which, below legislation, is to be taxed in the contracting state (India).
The ruling may emerge as a benchmark for MNCs (akin to Google Ireland) which won't have an everlasting establishment or bodily presence in India but nonetheless come below the glare of local tax authorities because of income generated in India.
"...the argument of the assessee (Google India) that it was only using customer data, IPR etc, for rendering the services relating to ITeS (Information Technology-enabled Services) is incorrect...in our view amount was being paid by the assessee to Google Ireland for the use of patent invention, model, design, secret formula, process, etc. Further, the payer is required to maintain books of account and deduct TDS (tax deducted at source) for both resident as well as non-resident. No separate treatment had been envisaged under the Act, for the payer paying to a non-resident," stated the Bengaluru bench of ITAT.
Google India had argued that the volume payable by way of it was once not in the nature of 'royalty' below the legislation and the India-Ireland double taxation avoidance agreement (DTAA). But the tribunal was once not impressed.
"If we go by literal meaning of double taxation avoidance agreement, then unscrupulous persons may misuse the provision and avoid payment of taxes," stated the order.
Google loses 6 year-old tax battle
![Google loses 6 year-old tax battle]()
Reviewed by Kailash
on
October 25, 2017
Rating:
