Lekha G
Karnataka High Court has set aside the order of Royalty Taxation for ‘Adwords program’ on Google India and repealed the matter to the Tribunal for fresh consideration.
A division bench of Justice Satish Chandra Sharma and Justice S Vishwajith Shetty allowed the appeal filed by the company and directed the parties to appear before the Tribunal on 3rd May, 2021.
Facts of the Case in brief:
Google India Private Ltd., a company incorporated under the Companies Act,1956 was engaged in global outsourcing of IT and IT Enabled Services. It was also a non-exclusive distributor of the online advertising space under the ‘AdWords programme’ to advertisers in India.
In the year 2004 the appellant-company had entered into an IT Enables Services agreement with Google Ireland Limited and under such agreement it has been rendering outsourced services for which it is being separately compensated by Google Ireland Limited.
The assessing officer passed an order on 22.2.2013 under Section 201(1) and 201(1A) of the IT Act determining the appellant as ‘assessee in default’ in respect of non-deduction of tax for sums payable to Google Ireland as ‘fee for distribution rights’ and consequently attached liability of INR 7,40,47,853 for the assessment year 2007-08.
Aggrieved by the order the company appealed before Commissioner of Income-tax but the appeal was dismissed by the appellate authority dated 20.9.2013.
The appellant-assessee thereafter preferred the Tribunal which by order dated 23.10.2017, dismissed the appeal.
Senior Counsel S Ganesh, representing Google, laid down that the Tribunal has not looked into the documents filed by the assessee and has altogether adopted a different approach by conducting a research on various platforms to form a base for its judgment, thereby violating the principles of natural justice and fair play.
Thus, the matter must be considered by Tribunal permitting parties to raise all possible grounds while arguing the matter afresh.
Advocate K.V Aravind on behalf of the Income Tax department argued that the material referred by the Tribunal was available on the internet and does not amount to violation of natural justice and fair play on grounds that it was not given to assessee. He opposed remanding the matter to the tribunal.
Considering the order passed by Tribunal and relevant provisions of Income Tax Court the bench said, “ In the considered opinion of this court, keeping in view Rule 29 of the Income Tax( Appellate Tribunal) Rules, 1963 and also keeping in view the fact that the material on the basis of which the order has been passed was not furnished to the appellant at any point of time, the order passed by the Tribunal is certainly violative of principles of natural justice and fair play as the appellant was not afforded an opportunity to rebut fresh evidence especially when such evidence was based on Google study”.
It also added that the details of the material have not been reflected in the order passed by Tribunal and therefore there has been a violation of natural justice and fair play. Thus, the matter deserves to be remanded back to the Tribunal.
The order passed by the Tribunal is set aside and the appeal is allowed. The parties must appear before the Tribunal on May 3 and within a period of 15 days both the parties shall be free to file documents in support of their contentions respectively.
In case of any other material relied upon by the Tribunal, the same shall be made available to both the parties before passing a final order.