TaxTMI 
TaxTMI 
2021 (4) TMI 1044
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s Google India Private Ltd., vs. Addl. Commissioner of Income-tax, Range-11, Bengaluru.) 3. The facts of the case reveal that the appellant - company, Google India Private Ltd., is a company incorporated under the Companies Act, 1956. It has been incorporated for providing back end support services for the foreign Associated Enterprises and as such, is engaged in the business of global outsourced Information Technology and IT Enabled Services. It is also a non-exclusive distributor of the online advertising space under the 'AdWords programme' to advertisers in India. 4. In the year 2004 the appellant-company has entered into an IT Enables Services agreement with Google Ireland Limited and the appellant has established its IT Enabled Services division for provision of IT Enables Services which primarily involved rendering support services in administering the Google editorial guidelines in relation to global advertisements and responding to the queries from customers globally. The appellant under the said agreement has been rendering outsourced services for which the appellant is being separately compensated by the Google Ireland Limited. 5. The assessing officer in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....1190/Bang/2014 (relating to ITA No.502/2018) and has also drawn the attention of this Court towards the extracts of factual submissions dated 19.3.2018 filed before the Tribunal during the course of the hearing of ITA.No.1190/Banga/2014 (relating to ITA.No.502/2018). His contention is that none of the documents produced on record were looked into. 9. Learned Senior Counsel for the appellant has further stated that the documents filed by the assessee were not looked into and altogether a different approach was adopted by the Tribunal by conducting a research and the material after conducting the research on various platforms have been made to be the basis of the judgment delivered by the Tribunal. His contention is that it is a well settled proposition of law that if any material/any document is relied upon, the same has to be given to all the parties, otherwise it amounts to violation of principles of natural justice and fair play. He has vehemently argued before this Court that the material collected behind back of the assessee was used and relied upon by the Tribunal and therefore, the same amounts to violation of principles of natural justice and fair play, hence, the matter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Appellant to GIL constituted 'royalty' under the provisions of the Act and DTAA and more so since the Appellant was not confronted with such material, thereby violating the principles of natural justice? III(4) Whether the Tribunal erred in ignoring that the initiation of proceedings under section 201 of the Act was barred by limitation? III(5) Whether the Tribunal erred in law in applying the amended provisions relating to limitation in section 201 to the period under consideration given that the limitation for completion of such proceedings had already expired and could not be restored by subsequent amendments? III(7) Whether the Tribunal erred in law in not appreciating that the amended provisions of section 201(3) as amended by Finance Act, 2012 (applicable with retrospective effect from 1.4.2010), which bestowed limitation in respect of resident payee's was not applicable for the financial year under consideration and in the absence of any limitation prescribed, a period of 4 years was a reasonable period for initiation of proceedings under section 201 of the Act? 13. Learned Senior Counsel for the assessee while arguing the matter has fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sement is displaying the advertisement as people browse and engaged with the content online. ii. The online advertising is different from the traditional advertising like advertisement in magazine, newspaper and Television as the online advertising is measurable on cost per click basis (CPC) and also gives the advantage to the advertiser to target the particular class into age, sex, language, religion, region etc,. iii. The online advertising (Adwords) is a patent tool used by the advertiser in conjecture with the various sophisticated tools and IPR's of Google. Google gives the platform, techniques, data based, the IPR, I.P. address and also suggest potential user/client of the advertiser. iv. The search advertising with the help of search engine, allows the advertiser to target the people as they search for key words. This technique is being used in the search engine, enable the advertisement pop up if the key words are searched by the people . Advertisement would be shown to the target consumer advertisement with the help of various tools, which include showing of advertisement with keywords, phrase, and broad words with generic or same meaning. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e without giving sufficient opportunity to the assessee to adduce evidence either on points specified by them or not specified by them, the Tribunal, for reasons to be recorded, may allow such document to be produced or witness to be examined or affidavit to be filed or may allow such evidence to be adduced. Rule 30-Mode of taking additional evidence:- Such document may be produced or such witness examined or such evidence adduced either before the Tribunal or before such income-tax authority as the Tribunal may direct. 8. A perusal and consideration of paragraph No.7 of the impugned common order passed by ITAT would disclose that the Tribunal, for reaching the conclusion to confirm the order of the Assessing Officer, has also done its part by doing some research on Google Study. Admittedly, the research done by ITAT in the form of Google study was not put either to the appellant/assessee Company or to the said Revenue. As already pointed out by this Court in the earlier paragraphs, in the absence of any specific rule including the applicability of the natural justice, it is a well settled position of law that adherence to the principles of natural justice, is imp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the order passed by the Tribunal is set aside and all the matters are remanded back to the Tribunal to decide the appeals afresh in accordance with law. 24. The other batch of cases i.e., ITA Nos.502/2018, 505/2018, 549/2018, 550/2018, 504/2018, 503/2018, 507/2018, 560/2018, 562/2018, 561/2018, 563/2018, 564/2018 and 506/2018 are arising out of subsequent orders passed by the Income Tax Appellate Tribunal. 25. It is pertinent to note that in the first batch of matters i.e., ITA 879/2017 and connected matters it was brought to the notice of this Court that other income tax appeals are pending before the Tribunal and this Court has directed the Tribunal to decide the matters without being influenced by its order dated 23.10.2017. 26. The Division Bench of this Court on 15.11.2017 has passed the following order; "Heard Dr. A.M. Singhvi, learned Senior Counsel appearing for Sri Aditya Vikram Bhat, learned counsel for the appellant. The learned Senior Counsel submits that substantial questions of law formulated at paras III(1), III(2), III(3), III(4), III(5) and III(7) in the appeal memorandum require determination by this Court. Sri. K.V. Aravind, learned Sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....purposes? 3. Whether the Tribunal erred in law in not appreciating that the revenues from the Distribution Agreement (superseded by Reseller Agreement) constituted "business income" in the hands of GIL and in the absence of any Permanent Establishment of GIL in India, such receipts could not be brought to tax in India and consequently the provisions of Section 195 and 201 of the Act had no application? 4. Whether the Tribunal completely failed to appreciate that the rights granted under the Distribution Agreement were in the nature of "commercial rights" and did not partake the character of/or grant any right to use any Intellectual Property so as to fall within the ambit of Section 9(1)(vi) of the Act? 5. Whether the Tribunal also erred on facts and in law in concluding that the entire payment made by the Appellant constituted "Royalty" under Section 9(1)(vi) of the Act and Article 12 of the DTAA on the basis that since the Appellant had the right to use brand features, patent, technical know-how, IPRs, trademark, process, derivate work, brand features etc. of GIL? 6. That without prejudice, whether the Tribunal failed to appreciate that there c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....time zone and display time of advertisement is identified and allocated by Appellant to the advertiser with the help of the assistance of the Google Adword program. Adwords Program is more focused and targeted in advertisement campaign which results into more attention, engagement, delivery and conversion, which is only possible on the Google network with the access of tools of search engine and Google analytics." Page 102 page 126 and 27: "Appellant is having the access to IP address at desktop or laptop or IP address of the tablet, photographs, time spent on website, eating habits, wearing preferences. With the help of IP address, Google search engine is having access to various information and data pertaining to the user of the website in the form of name, sex, city, state, country, phone number, religion, etc. Besides the above basic information, Google is also having the access of the history of the user as well as the behaviour of the person searching in google engine." Para 42 page 47: " Appellant/Google is having the access to the I.P. address of the desktop or laptop or I.P address of the tablet, photographs, time spent on a website, eating habits wearing preferences....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioned above and contents of more than two million websites the appellant/ Google was able to provide the effective focused ad campaign to the advertisers. The Adword programs and tools therein give the advertiser to pick up the key words, phrases which are similar in nature and germane, which are in a digitalized tabulated form/ grouped together. The advertiser is having the access to this Google analytics programme (patented and specialized software) through the appellant. Whenever one particular keyword is searched, the targeted consumers will be shown the ad and by clicking on the ad, the consumers will be landed on a web page. The selection and the display of the key word, play a pivotal role in the advertising campaign and for the purpose, Appellant/Google has provided the optimization and technique to the advertiser. Google (appellant as service provider under the agreement) uses its expertise and the information within its domain and control, to suggest the key words based on the recent marketing material and need of the advertiser. The appellant also suggests periodical review of the website home page, product and services which can be bundled together... It also suggests ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llows the advertiser to focus on the optimization phrase on the individual key words and it yield the best result possible. Whereas the phrase match is more processing than the broad match and the broad match provides the greatest possibility of coverage of the advertisement." Para 104 page 129: "The appellant facilitates the advertisers to start the campaign of advertising initially with the help of broad match thereafter with the phrase match and thereafter with the exact match. With the help of keyword management, the Google Adword Program takes care of misspelling, singular, plural, abbreviation, achronynms, stemming, etc. For example, if the advertisement shows the formal shoes then the keywords are the formal plus shows. If it is broad match keywords then the advertisement will show formal shoes, sports shoes, black shoes, party shoes, etc. However, if the advertiser had only opted for exact word match, then search result will show only a formal shoe." Para 46 page 50: "The Appellant facilitate the advertisers to start the campaign of advertising initially with the help broad match thereafter with phrase match and thereafter with exact match. Now with the help of the ke....
X X X X Extracts X X X X
X X X X Extracts X X X X
....who is looking for leather cover for another branch or item may visit the website of the advertiser. For that, negative words can be used to avoid to improve the CTR (clicked through rate) with the help of tools of Google. By using these tools, the Appellant has been giving various suggestions to the advertisers to improve various keywords." Para 48 page 51: " Likewise if the advertiser is selling in leather cover for iphone then the advertiser may not like that the person who is looking for leather cover for another brand may visit the website of the advertiser. Therefore, the negative words can be used to avoid to improve the CTR., with the help of these tools. By using these tools, Appellant had been giving various suggestions to the advertiser to include various key words." Para 106 page 130: " The Google Adword Program is also having Google Analytics which is connected with the Google Adword Program and which is a potential patented tool to target the keywords and the negative keywords. This is the USP of the Google Adword Program, which is maintaining thousands of different keywords used by people to search the website and based on this user behaviour, the Google Analyt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ributor agreement and the service agreement are to be read together as they are interconnected with the navel cord and without resorting to the service agreement the terms and conditions under the Google Adword Distribution Agreement cannot be complied with. Therefore, in order to understand the function of Google Adword program, we have to read both the agreements together." Page 63 page 62: "Therefore, the services rendered under ITES agreement cannot be divorced with the activities undertaken by the assessee under the distribution agreement. Both the agreements are connected with naval chord with each other. The assessee was duty-bound to provide as per the distribution agreement various ITES services, which the assessee had wrongly claimed to have been provided not under the distribution agreement, but under the service agreement. This is only a design/structure prepared by the assessee to avoid the payment of taxes." 31. Sri.Aravind, learned counsel for the department has filed written submissions also and his contention is that the material on the basis of which the subsequent order of the Tribunal dated 11.5.2018 was passed had been supplied to the assessee and was als....