2023 (7) TMI 1432 - AT - Income Tax

Assessee wins appeal as books rejection unjustified, Google Ireland payments not taxable, CSR donations qualify for section 80G deduction

M/s. Google India Pvt. Ltd. Versus The Deputy Commissioner of Income Tax, Circle-3 (1) (2), Bangalore And Ors. And (Vice-Versa)

M/s. Google India Pvt. Ltd. Versus The Deputy Commissioner of Income Tax, Circle-3 (1) (2), Bangalore And Ors. And (Vice-Versa) - TMI Issues Involved:1. Transfer Pricing (TP) Issues2. Rejection of Books3. 10A Deduction4. Dependent Agent Permanent Establishment (DAPE) & 40(a)(i)5. Royalty/Fees for Technical Services (FTS) 40(a)(i)6. Attribution7. 80G Deduction8. Representative Assessee9. Claim for Deduction – Proviso to 40(a)(i)10. MAT Credit11. TDS Credit12. Incorrect Refund Calculation13. Education Cess14. Interest u/s 234B, 234D, and Initiation of Penalty Proceedings u/s 271(1)(c)Issue-wise Detailed Analysis:1. Transfer Pricing (TP) Issues:The transfer pricing issues were withdrawn by the assessee due to an Advance Pricing Agreement (APA) with the Central Board of Direct Taxes (CBDT) dated 04.12.2019. Consequently, all grounds related to transfer pricing issues in the assessee's appeals were dismissed as withdrawn, and the transfer pricing issues in the revenue's appeals became infructuous.2. Rejection of Books:The assessee's books of accounts were rejected by the revenue authorities based on conjectures and surmises. However, the tribunal found that there was no discrepancy in the books of accounts for the years under consideration, similar to the facts for A.Y. 2008-09 where the rejection was not upheld. The tribunal allowed the grounds raised by the assessee on the rejection of books of accounts for A.Ys. 2010-11 to 2014-15.3. 10A Deduction:The assessee did not press the 10A deduction issue for A.Ys. 2010-11 and 2011-12. For the revenue’s appeals, the issue was covered in favor of the assessee by the decision of the Hon'ble Supreme Court in CIT vs. HCL Technologies Ltd. The tribunal directed the AO to recompute the eligible profits for deduction u/s 10A as per the directions by the Supreme Court.4. Dependent Agent Permanent Establishment (DAPE) & 40(a)(i):The tribunal held that the assessee could not be treated as a dependent agent PE of Google Ireland and that no disallowance could be made u/s 40(a)(i). This was based on the tribunal's earlier decisions in the assessee's own case and the decision in Google India Pvt. Ltd. vs. DCIT.5. Royalty/Fees for Technical Services (FTS) 40(a)(i):The tribunal held that the payments made by the assessee to Google Ireland could not be considered as royalty or FTS. This decision was based on the tribunal's earlier decisions and the decision in Google India Pvt. Ltd. vs. DCIT. The tribunal followed the view that the payment towards online advertisement paid by the assessee to Google Ireland is not liable to be taxed as royalty.6. Attribution:Since the tribunal held that the assessee could not be treated as a dependent agent PE of Google Ireland, the issue of attribution did not arise and became infructuous. The grounds pertaining to this issue for AY 2012-13 to 2015-16 were dismissed as infructuous.7. 80G Deduction:The tribunal directed the AO to compute the deduction u/s 80G to the extent of eligibility as per the relevant provisions, following the view taken in First American India Pvt. Ltd. vs. ACIT.8. Representative Assessee:Since the tribunal held that the assessee is not a dependent agent PE of Google Ireland, the issue of taxing the profits attributable to the dependent agent PE of Google Ireland did not arise. The grounds raised by the assessee for A.Y. 2015-16 were allowed.9. Claim for Deduction – Proviso to 40(a)(i):This issue became academic due to the decisions taken on Issues 4 and 5. The tribunal did not decide this issue.10. MAT Credit:This issue required verification based on the details filed by the assessee. The grounds raised by the assessee for A.Ys. 2010-11 and 2012-13 were remanded to the AO for necessary verification.11. TDS Credit:This issue required verification based on the details filed by the assessee. The issue raised by the assessee for A.Ys. 2011-12 to 2015-16 was remanded to the AO for necessary verification.12. Incorrect Refund Calculation:This issue required verification based on the details filed by the assessee. The issue raised by the assessee for A.Y. 2010-11 was remanded to the AO for necessary verification.13. Education Cess:The additional ground on this issue for A.Ys. 2013-14 to 2015-16 was not pressed by the assessee as it was decided against the assessee by the Hon'ble Supreme Court. The additional grounds were dismissed as not pressed.14. Interest u/s 234B, 234D, and Initiation of Penalty Proceedings u/s 271(1)(c):These issues were consequential in nature and did not require adjudication.Disposition of Appeals:- The appeals filed by the assessee for the years under consideration were partly allowed or allowed.- The appeals filed by the revenue for the years under consideration were dismissed as infructuous.