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06-09-2019, Google India, Section 274, 271(1)(c), Tribunal Bangalore

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1 week 1 day ago #10728 by amit
Section - 274, 271(1)(c), 195, 40(a)(ia), 145, 9(1)(vi)
Order Date - 06-09-2019
Favouring - Assessee
Court - Tribunal Bangalore
Appellant - Google India Pvt.Ltd.
Respondent - ACIT
Justice - B.R.BASKARAN AM & BEENA PILLAI JM
Citation - 919Taxpundit57
Appeal No. - ITA No.362(Bang)/2013
Asstt. Year - 2008-09

Order

PER : BEENA PILLAI

Present penalty appeal has been filed by assessee against order dated 27/02/13 passed by Ld. CIT (A)-1, Bangalore for assessment year 2008-09 on following grounds of appeal:

“Based on the facts and circumstances of the case, Google India Pvt.Ltd., respectfully submits that the order of the Ld.CIT(A)-I, Bangalore is not correct as it is based on incorrect interpretation of fact and law and therefore, is bad in law and hence, needs to be cancelled. The appellant also submits that each of the grounds hereinafter are independent and without prejudice to one another.

1.The Ld.CIT(A( erred in upholding the levy of penalty u/s 271(1) (c) of the Act on the disallowances and additions made by the Ld.Addl.CIT, Range-11, Bangalore in the assessment order without awaiting the outcome of the quantum appeal proposed to be filed by the appellant before the ITAT

2. The Ld.CIT(A) erred in upholding the levy of penalty u/s 271(1)(c) of the Act by the Ld. AO on the disallowance u/s 40(a)(i) of the Act.

3.The Ld.CIT(A) has erred in upholding the levy of penalty stating that:

- the disallowance made by the Ld.AO in the assessment order does not involve difference in interpretation of law;

-the claim made by the appellant was not based on a bonafide belief; and

- there were no two views possible on the claim of the appellant.

4. The Ld.CIT(A) erred in upholding the levy of penalty u/s 271(c ) of the Act by the Ld.AO on the additions made to the total income of the appellant on an ad hoc basis.

5. The Ld.CIT(A) without appreciating the facts of the appellant, erred in concluding that the appellant has attempted to conceal the true and correct particulars of receipts from the AdWords business and holding that the appellants non withholding of tax amounts to shielding the foreign principal from being made liable to payment of taxes in India.

The appellant craves, to consider each of the above grounds of appeal independently without prejudice to one another and craves leave to add, alter, delete or
modify all or any of the above grounds of appeal”. Assessee has also filed the following additional ground of appeal: Based on the facts and circumstances of the case, the appellant respectfully submits the following additional ground of appeal.

6. The Ld.AO has erred in law by not stating the exact reason in the notice issued under section 274 to the appellant as to whether there was concealment of
income or whether the appellant has furnished inaccurate particulars of income for initiating the penalty proceedings under section 271(1)(c) of the Act, and therefore, the notice u/s 274 dated 30 November 2011 is invalid.

2. Brief facts of the case are as under:

Assessee is a wholly owned subsidiary of Google international LLC, USA and is engaged in business of providing information technology and information technology enabled services to its group companies. It also acted as distributor for AdWord programmes in India. Assessee thus entered into distribution agreement with Ireland PE, whereby assessee was granted marketing and distribution rights of AdWord Program to advertisers in India, and assessee was remunerated on cost plus market basis for distribution services under AdWord Programmes. Ld.AO observed that assessee under agreement acquired marketing and distribution rights over AdWord Programmes for the territory of India from its U.S. AE and that distribution agreement involved three parties being license or the reseller, the distributor and the advertiser. In the instant case AE was the license or, the distributor and reseller was assessee before us and end-users were advertisers. Ld.AO noticed that assessee credited a sum ofRs.1,115 crore to the account of AE without deduction of TDS and also had not obtained ‘nil’ deduction certificate in respect of the same from Department und r section 195 of the Act. Ld.AO thus rejected books of account as per section 145 of the Act, and calculated disallowance under section 40(a)(ia) of the Act for non-deduction of TDS.

3. On the contrary assessee was of the view that amount payable to AE was not in the nature of royalty either under the act or under the India Ireland DTAA.

Before this Tribunal, it was argued that payments made by assessee under AdWord Distributor Agreement were in fact business profits in the hands of U.S.AE as, these were paid on account of purchase of AdWord space, though AdWord advertisement spaces was further sold to different advertisers. It has been submitted that nature of payment remained the same and thus it should be treated as business profit in the hands of U.S.

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