TaxTMI 
TaxTMI 
2011 (6) TMI 162
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....the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has made a payment of Rs. 34,86,947 to Yahoo Holdings (Hong Kong) Ltd., being cost of services/research material/advertisement media. Yahoo Holdings (Hong Kong) Ltd., is engaged in the business of providing internet services, technological tools and marketing solutions for business to customers in Hong Kong. It provides banner advertisement and microsite hosting services on the Yahoo Hong Kong Portal. The banner advertisement is also known as web banner, which is a form of advertisement on the world wide web. This form of online advertising entails embedding an advertisement into a web page. During the year under consideration, the Department of Tourism of India through an advertisement agency Media Turf Worldwide intended to display a banner advertisement during the period from 18-2-2004 to 15-3-2004 on the portal owned by Yahoo Holdings (Hong Kong) Ltd. For this purpose, it hired the services of the assessee company to approach Yahoo Holdings (Hong Kong) Ltd., to provide uploading and display services for hosting the banner advertisement at Yahoo Hong Kong portal. Accordingly, the asse....
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....e accrued or arisen to the said company in India under the provisions of section 9(1)(i). It was also submitted that Yahoo Holdings (Hong Kong) Ltd., is engaged in the business of providing banner advertisement and microsite hosting services on its portal and the receipts from the impugned transaction of hosing banner advertisement of Department of Tourism of India on the said portal was in the nature of business income. It was submitted that since Yahoo Holdings (Hong Kong) Ltd., had no PE in India, the said amount constituting its business income was not chargeable to tax in India. It was further submitted that the banner Ad hosting services do not involve use or right to use any industrial, commercial or scientific equipment granted by Yahoo Holdings (Hong Kong) Ltd. to the assessee company since the uploading and display of banner advertisement on the Yahoo Holdings (Hong Kong) Ltd. were entirely the responsibility of Yahoo Holdings (Hong Kong) Ltd. It was submitted that assessee company was only required to provide banner Ad to Yahoo Holdings (Hong Kong) Ltd. for uploading the same on the Portal. It was contended that in order to treat any payment as in the nature of equipment....
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.... both the sides and also perused the relevant material on record. It is observed that the disallowance made by the Assessing Officer on account of payment made by the assessee to Yahoo Holdings (Hong Kong) Ltd., for upholding and display of banner advertisement of the Department of Tourism of India on its portal without deduction of tax at source by invoking the provisions of section 40(a) has been confirmed by the learned CIT(A) treating the said payment as in the nature of royalty relying clause (iva) of Explanation 2 to section 9(1)(vi). The said clause inserted by the Finance Act, 2001 with effect from 1-4-2002 provides that "Royalty" includes consideration paid for the use or right to use any industrial, commercial or scientific equipment. At the time of hearing before us, the learned D.R. has also mainly relied on the said clause in support of revenue's case on this issue. He has contended that Legislative intention behind insertion of the said clause in the Statute is to widen the definition of "Royalty". A perusal of the relevant portion of the Board Circular shows that the Legislative intention behind insertion of the said clause is to overcome the situation where no tax a....
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....lise the sophisticated services offered by the portal would be covered by the expression "Royalty" as used in Article 12 of the DTAA as well as section 9(1)(vi) of the Income-tax Act, 1961. In the present case, the amount was paid by assessee to Yahoo Holdings (Hong Kong) Ltd., for the services rendered for uploading and display of the banner advertisement of the Department of Tourism of India on its portal and there was no direct use by the assessee either of the portal or of the server as was there in the case of Cargo Community Network Pte. Ltd. (supra). The decision of the Authority for Advance Rulings in the said case thus is not applicable to the facts of the case of assessee. 7. On the other hand, the decision of the Authority for Advance Rulings in the case of Isro Satellite Centre (ISAC), In re [2008] 307 ITR 59/175 Taxman 97 (New Delhi) and in the case of Dell International Services (India) (P.) Ltd., In re [2009] 308 ITR 37/[2008] 172 Taxman 418 (New Delhi) cited by the learned counsel for the assessee are found to be directly applicable to the issue involved in the present case. In the case of Isro Satellite Centre (supra), the question involved was whether the consi....