TaxTMI 
TaxTMI 
2022 (10) TMI 404
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Assessing Officer u/s. 40(a)(ib) of the Income Tax Act, 1961 for non-charging of Equalization levy when the conditions prescribed as per the provisions of section 165 were fulfilled. 3. The brief fact as culled out from the records is that assessee is a proprietor of Oan Media and Web Solutions filed his return in ITR-3 declaring total income of Rs. 43,86,210/- on 31.10.2018. The case was selected for complete scrutiny under CASS for " Foreign remittance" and notice u/s. 143(2) was issued on 22.09.2019. The assessee is engaged in the business of providing support services of online advertisement, digital marketing and web designing and receives consultancy charges for such services rendered. 4. On examination of profit & loss account for the year under consideration it was noticed by the assessing officer, that the assessee has debited a sum of Rs. 8,89,35,558/- being online advertisement (adwords) charges paid to M/s. Google Asia Pacific Pte. Ltd., Singapore [ here in after referred to as Google, Singapore ], a non-resident having no permanent enterprise(PE) in India. Since the payment has been made to a non-resident by the assessee for advertisement purposes in the digi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents entered into by the assessee with his clients and stated that the assessee is an agent of Google Singapore whereby the assessee is granted access for the purpose of advertisement to be made on Google. On approaching the assessee, such person gets login credentials, generated by the assessee on the website of google through such credentials such person on its own runs advertisement on google. Such person on its own decides where the advertisement is to be run i.e. on which geographical location, who would be the target audience, for how much duration such advertisement is to be done. All such aspects are decided by the person running the advertisement and not by the assessee. Assessee is merely a means of getting the advertisement run on Google. The aspects as highlighted above w.r.t. the advertisements are not at all decided by the assessee. Thus, in substance assessee is only acting as a conduit for channelizing the funds from the person wanting to advertise to the platform on which such advertisement is to be done i.e. Google. Screenshots w.r.t. the user 10 created for the clients to provide the client access on the website of google through the assessee was submitted. Based....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed into between the assessee and the Google Singapore furnished by the assessee, it is seen that it is a contract between Google Singapore and the assessee who is stated as a customer and not an agent for the purpose of utilising Google's Program for placing digital advertisements on his behalf or on behalf of a third party. As per the Terms & Conditions of the agreement, as per point No.1 of the terms and conditions, the customer (assessee) authorises Google or its affiliates to place customer's advertising materials and related technology on any content or property provided by Google or its affiliates on behalf of itself or as applicable, a third party. 8A. As can be noticed on perusal of the above terms and conditions of the agreement entered into by the assessee and Google Singapore, the agreement is between a Service provider (Google) and its customer (assessee). Nowhere in the agreement is it mentioned that the assessee has been nominated and will act as an agent of Google Singapore. 8B. Further, the terms and conditions mentioned in Point No. 12 Miscellaneous (i) is reproduced here for reference: These Terms do not create any agency, partne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Target at any time for any or no reason. 8D. Clearly indicates the technical aspects that are be provided by the assessee with regard to running of online advertising campaign on the google platform. This clearly establishes the nature services being provided by assessee his customers for effective running of online advertisement campaign behalf of clients which he compensated with consultancy fees. 8E. summary, the contention that he only acting as conduit/agent for channelizing funds from Advertiser (customers of assessee) to Publisher (Google Singapore) not acceptable and backed by factual evidence whatsoever. Contention No.2 Equalisation levy is not applicable if services are provided to persons outside India and the target customers of the advertisements are also outside India On perusal of submissions indicated para 3.2 above, it noticed that the assessee has contended that the payment Rs.8.89 crores to Google Singapore for utilising their services connection with running of online advertisement campaign on behalf of his clients does not attract equalisation levy the assessee's customers from whom revenue is received by him for running the onli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ocation, and permanency must be reconciled with the new digital reality. . "Considering the potential of new digital economy and the rapidly evolving nature of business operations it is found essential to address the challenges in terms of taxation of such digital transactions as mentioned above. In order to address these challenges, it is proposed to insert a new Chapter titled "Equalisation Levy" in the Finance Bill, to provide for an equalisation levy of 6% of the amount of consideration for specified services received or receivable by a non resident not having permanent establishment (PE) in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India." * "Further, in order to reduce burden of small players in the digital domain, it is also provided that no such levy shall be made if the aggregate amount of consideration for specified services received or receivable by a non-resident from a person resident in India or from a non-resident having a permanent establishment in India does not exceed one lakh rupees in any previous year." * "To provide certainty and to avoid interpretational i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or (c) where the payment for the speci service by y the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession. 10. Sec.40(a)(ib) of the Income Tax Act The provisions of Sec.40(a)(ib) of the Act provide that "any consideration paid or payable to non-resident for a specified service on which equalisation levy is deductible under the er vill of the provisions of Chapter VIII of the Finance Act 2016 and such levy has not been deducted or after deduction, has not been paid on or before the due date specified in sub section (1) of Sec.139 of the Act, then 100% of expenditure requires to be disallowed on which tax has of the expenditure require not been deducted or after deduction has not been remitted. 10A. On perusal of the legislative intent behind the Equalisation Levy it is seen that it has been brought in to plug the revenue loss on account of digital transactions being carried outside the national boundaries bereft of a physical location as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of his above claim. 10D. It can be seen from the notes to the Finance Act 2016 it is clearly mentioned that to avoid interpretational issues and to provide certainty, definitions to the terms and expressions used in the provisions relating to Equalisation Levy have been provided. The definitions provided therein clearly indicate that the consideration paid to a non-resident for specified services by a resident in India carrying on business or profession is liable for equalisation levy provided that the transactions do not fall within the exceptions mentioned in Sec.165(2) of the Finance Act 2016. So, the attempt by the assessee to carve out an exception which is not already provided in the statute and bring out an ambiguity is to hide his failure to deduct the equalisation levy on the payment to Google Singapore for the specified services rendered to the assessee for running an online advertisement campaign on behalf of his clients. 10E. In view of the detailed discussion above, the contention of the assessee that the consideration paid to Google Singapore is not amenable to equalisation levy is rejected. 11. Conclusion It is noticed from the fac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of Rs.8,89,35,558/-. 7. Aggrieved from the findings of the ld. AO, assessee moved an appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. As the revenue did not agree to the findings of the ld. CIT(A) has moved this appeal before us only on the solitary ground of deletion of an addition made u/s. 40(a)(ib) for non-charging of Equalization levy when the conditions prescribed u/s. 165 of the Finance Act, 2016 are fulfilled. Before we proceed on the issue it is better to understand the findings of the ld. PCIT, the same is reiterated herein below:- "7.1 Ground of Appeal No. 1- Disallowance u/s 40(a)(ib) Rs.8,89,35,558/-. a) The gist of disallowance made by the AO is outlined in paras 2(a) to 2(f) of this order. b) The undersigned has gone through the assessment order, written submissions filed by Appellant and contentions of Ld.AR of Appellant presented through Video conferencing. This Ground of appeal is discussed and decided in subsequent paras of this order. 7.2 Equalisation levy a) Law in respect of Equalisation levy was introduced pursuant to Base Erosion and Profit Shifting -Action Plan-1(BEPS Acti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....services by person resident in India or the PE in India is not purpose of carrying out business or profession. i) The essential ingredients for Equalisation Levy are as under: * Amount of consideration in excess of Rs.1,00,000/- * Specified Services received or receivable. * Service provided by a Non Resident and does not have PE in India * Services received by - a) Resident in India and carrying on business or profession in India. b) Non resident having PE in India. When all the above ingredients are in a transaction then liability arises for Equalisation levy @ 6% on the amount of consideration received or receivable. 7.3 The next issue to be decided in whether Equalisation levy is applicable in the case of Appellant or not on the transaction of Rs.8,89,35,558/- with Google, Singapore a) The gist of addition/disallowance made by the AO is outlined in paras 2(b) to 2(f) of this order. App The 40 concluded that payment of Rs.8,89,35,558/- made by Appellant to a Non Resident (Google Singapore) for ad purpose in digital mode on behalf of this clients clearly attract the provisions of Section 165....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eir target audience was outside India. Thus, the online ads for which payments were made by Appellant to Google Singapore were for clients located outside India and the target audience for these online ads were also outside India. To support the above contention the Appellant filed the following details/documents, Information was provided in a tabulated manner giving Name of clients for whom ads were run by Appellant, Addresses of such clients (which are out side India), Amount received from these clients for purpose of running such online ads. Amounts subsequently paid to Google Singapore and Target audience for such ads. Copies of FIRC were submitted on sample basis to establish that amount was received by Appellant for purpose of online ad on behalf of clients located outside India. Some samples of campaign reports obtained from Google Singapore in respect of such online ads of such clients. These campaign reports give Targeted locations, campaign details, number of clicks, Impr. etc. It shows that Target location/Target audience for all such online ads was located outside India. e) How online ads are run by Google on behalf of Client....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ary of such online ads and these online ads are not related to Appellant's business perse. * The clients for whom the Appellant acted were all located outside India and they did not have any connection of whatsoever nature to business in India. Neither did these clients carry out any business in India nor did they have any target audience in India. * Section 165A was introduced through Finance Act, 2020. It clearly specifies that services will be taxable in India, only if they are provided to a person in India or to a person who buys such goods or services using IP Address based in India. The intention of this amendment is to bring under purview of Equalisation levy the transactions which have some connection to India in relation to business carried out or services rendered. In the present case, the business of clients is located outside India and their target audience/customers for online ads are located outside India. Thus, these clients have no connection to India in respect of business carried out or services rendered. The invoice was not raised directly by Google Singapore to client of Appellant. It was channelized through the Appellant ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for specified services required by his clients out of the amount received by him from Non Resident having no business in India (clients of Appellant). The clients of Appellant carried out their business outside India. The target audience for whom such online ads were run were located outside India. Nothing on account of such business was carried out from India. Appellant only was a conduit/agent between his Non Resident clients and Google Singapore. The Indian jurisdiction was used only for transfer of funds. In view of the above facts as outlined in paras 7.2 to 7.4 of this order, it is hereby held that as per section 165 of the Act the Appellant had no liability for payment of Equalisation Levy. Hence, the disallowance of Rs.8,89,35,558/- made by the AO u/s 40(a)(ib) of the Act is not sustainable and is hereby deleted. Ground of Appeal No. 1 is allowed. 8. The ld. DR appearing on behalf of the revenue submitted that the assessee is engaged in the business of online advertiser and his activity consist of digital marketing and web designing. Since, the assessee has paid to Google Singapore he is subjected to equalization levy and the disallowance made by the AO u/s. 40(a)(ib) is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gs of the AO. In addition, during the process of hearing the ld. DR called for the detailed copy of the audited accounts so as to reconcile the payment disallowed with that of the income received from foreign client. The same has been supplied and the ld. AR satisfied the ld. DR about the difference of amount and the ld. DR has that the export revenue is only Rs. 7.36Cr and local revenue Rs. 2.39 cr and that payment cannot be considered as export revenue and paid to Google Singapore. The ld. AR of the assessee counters this arguments of the ld. DR and submitted that the said issue is dealt by the AO in his order at page 4 para 6C and based on the submission of the assessee no adverse inference is drawn and in fact the same is also of foreign client and is explained vide submission already placed on the records and the said revenue is related to Buzz Media 32 lakhs and Drive Digital for Rs. 1.49 cr wherein also the nature of services are same and if that amount included then the same is matching with the figure of the remittance paid to Google Singapore. 9. Per contra, the ld. AR of the assessee has relied upon the written submission filed by him. The same is extracted here in be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned factual position/brief factswere submitted before the lower authorities during the course of assessment and appellate proceedings. 2.2. In this regard, the below mention details/documents were put forth before the lower authorities[PB : 1-34]:- 2.2.i. TABLE SUGGESTING (i) Name of the customers/clients for and on behalf of whom advertisement was run by the assessee;(ii) Such Table/factual position established that the clients of the assessee were companies/entities outside India; (iii)Amount for the purpose of running online advertisement was received by the assessee from outside India;(iv) Amount subsequently spent on such advertisement was paid by the assessee to Google Singapore; (v)Advertisements were run outside India or in other words the target audience of such advertisements were outside India. 2.2.ii. FOREIGN INWARD REMITTANCE CERTIFICATES ("FIRCs")were submitted, on sample basis, to establish that the amount was received by the assessee, for the purpose of online advertisement, on behalf of the clients, from outside India only. 2.2.iii. CAMPAIGN REPORT OBTAINED FROM GOOGLE SINGAPORE, on sample basis, establishing the fact that the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he advertisement is to be run can be specified clearly. As a result of which, advertisement can be specifically targeted to the customers/audience who are stationed/based in that location. 2.4.i. For instance, if the client of the assessee wanted that the advertisement should be shown in Washington DC, USA, then specific to that location, the details were filled on the Google portal. 2.4.ii. Thereafter, the advertisements were run only specific to Washington DC. 2.4.iii. Due to this reason, and for establishing that the advertisements were run outside India only, campaign reports were submitted to the lower authorities, which clearly established that the locations of such advertisement were all outside India and not in India. 2.5. Assessee, being stationed in Jaipur, was not fully aware as to for which campaign, which area code was to be specified. For such purposes and for selecting the target audience assessee was completely dependent on his client. The clients were given access to the Google platform, with assessee being the co-user of such platform, Assessee was only responsible for making the campaign to be run, rest everything was done by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervice by the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession..." 3.3. As per Sub-Section (1)of Section 165,Equalization Levy is applicable on consideration for specified servicesreceived or receivable by a person who is a Non-Resident from:- 3.3.i. Person resident in India and carrying on business or profession; or 3.3.ii. Non-Resident having a Permanent Establishment in India. 3.4. For applicability of Section 165(1), following conditions have to be fulfilled:- 3.4.i. Consideration should be received by the non-resident from the person resident in India. * Word "consideration" has not been defined under the ITA or in the Finance Act, 2016; * Consideration is which creates a contractual relationship between the promisorand the promisee, in regard to the performance of promise and in regard to which the parties to the agreement or contract get related to each other; * As per Section 2(d) of the Indian Contract Act, 1872, when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for Google Singapore. 3.6. Law with respect to Equalization Levy was introduced pursuant to the BEPSAction Plan 1,i.e. BASE EROSION AND PROFIT SHIFTING - ACTION PLAN 1 on DIGITAL TAXATION. 3.6.i. From the Indian context, it was felt that lot of payments were remitted outside the India for the purpose of online advertisement. 3.6.ii. The businesses for the purpose of which online advertisements were carried out were located in India and the target customers were from India. 3.6.iii. Thus, the online advertising platforms were deriving lot of value, which was directly in relation to business in India. 3.6.iv. Indian Government was not able to recover the taxes on such online advertisement as no tax at source wasdeducted while remitting funds outside India for online advertisements, for the reasons that such advertising platforms, such as Google/Yahoo were not having any Permanent Establishment in India and all the transactions were done online. 3.6.v. Thus, it was felt that although the income was earned by such online advertisers, from India, from the businesses run in India, however, no tax was collected on such payments by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tention is drawn towards the recent amendment to Section 9 of the ITA, videFinance Act, 2020, w.e.f 1.04.2022, in relation to income deemed to accrue or arise in India. As per Sub- Section (1) of Clause (i) of Section 9 in case of there is any Business Connection on account of Significant Economic Presence, then income generated from such business shall be deemed to accrue or arise in India. 3.11. Meaning of Significant Economic Presence has been provided in Explanation 2A, which is reproduced here under:- "...Explanation 2A.-For the removal of doubts, it is hereby declared that the significant economic presence of a non-resident in India shall constitute "business connection" in India and "significant economic presence" for this purpose, shall mean- (a) transaction in respect of any goods, services or property carried out by a non-resident with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or (b) systematic and continuous soliciting of business activities or engaging in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3.16. It is a settled proposition that under the tax laws, only those transactions can be covered which have territorial nexus with India. In Tata Iron and Steel Co. Ltd. vs. State of Bihar 1958 SCR 1355, while dealing with the levy of sales tax and a challenge to the provisions of the Bihar State Sales Tax Act, 1947, the Hon'ble Apex Court made significant reference to the Territorial Nexus Theory and observed that the issue of sufficiency of the territorial connection involved a consideration of two elements, i.e. (i) that the connection must be real and not illusionary and; (ii) that the liability sought to be imposed must be pertaining to that connection. In this regard, Hon'ble Apex Court in the case of Ishikawajma-Harima Heavy Industries Limited Vs. Director of Income Tax [2007] 3SCC 481 (SC), where the court while dealing with the applicability of Section 9 of the Income Tax Act to the transaction in question, observed that the territorial Nexus doctrine, plays an important part in assessment of tax. It was observed that only such part of the income as is attributable to the operations carried out in India can be tax in India. 3.17. What is to be seen for applicabi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a. 3.17.iii. Also one needs to take care that in Situation I Google Singapore did not earn anything from the Indian jurisdiction but was earning from any other jurisdiction, other than India, from where the funds for online advertisement have originated. In such a scenario, Indian jurisdiction would not have any right to tax this online advertisement and bring it under the purview of Equalization levy. Whereas, in the Situation II, although the funds have been channelized from Bangladesh by XYZ then also Google Singapore would be considered to have been earned income from India and not from Bangladesh in such a scenario the Indian tax authorities would have the right to tax the online advertisement amount paid by ABC to Google Singapore through XYZ. Google Singapore in such a scenario would be considered to have earned this advertisement income from India and not from Bangladesh. 3.17.iv. The present case, of that of the assessee, falls under Situation I. 4. REBUTTAL OF THE CONTENTIONS RAISED BY LD. AO 4.1. Entire factual position was explained to the ld. AO. It was also submitted that assessee is no one else but an agent working on behalf of Goo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he business was carried out outside India. It was not the assessee who was the ultimate beneficiary of the advertisements but was working for and on behalf of his clients. 4.2.ii. In such a scenario no income accrued in India and accordingly there was no liability for payment of Equalization levy. 4.3. Ld. AO stated in his order that the assessee has claimed the amount paid to Google Singapore as part of the expenses. It is submitted that, merely for the purpose of accounting, whatever amount was received by the assessee for the purpose of online advertisement, from his clients, was shown by the assessee as his revenue and whatever corresponding amount was paid by the assessee to Google Singapore was claimed as expenditure. However, such accounting treatment would not make the transaction entered by the assessee with his client or with Google Singapore to be on a Principal to Principal Basis. 4.3.i. It is established principle that entries in the books of accounts are not decisive of the nature and character of expenses. It is not material and relevant how the assessee treated these expenses in its books of accounts but what is material and relevant is th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss related to these online ads was carried out outside India. 5.3.vi. Ultimate beneficiaries of these online ads were non residents having no business in India and the target audience for these online ads were all located outside India. 5.3.vii. Assessee was working on behalf these ultimate beneficiaries who were his clients. 5.3.viii. In this case the assessee made payment to Google Singapore (Non Resident) for specified services required by his clients out of the amount received by him from Non Resident having no business in India (clients of assessee). 5.3.ix. The clients of assessee carried out their business outside India. 5.3.x. The target audience for whom such online ads were run were located outside India. 5.3.xi. Nothing on account of such business was carried out from India. 5.3.xii. Appellant only was a conduit/agent between his Non- Resident clients and Google Singapore. 5.3.xiii. The Indian jurisdiction was used only for transfer of funds. 5.4. Considering the entire factual and legal position, ld. CIT(A) deleted the entire disallowance made by the ld. AO under Section 40(a)(ib). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a wallet on the portal and both this activity has nothing to on the said transactions. There should not be any EL on these payments and there is no jurisdiction to tax and even the legislative intention is not to tax those transaction which are not having the territorial jurisdiction under the EL also. During the course of hearing before the ld. AO and ld. CIT(A) entire modus operandi explained in the video conference hearing process. He explained that the charges that is also based on the number of clicks that the target audience has achieved and these details were also shared with the lower authorities and nothing contrary observed. The target audience and decision to make the advertisement were proved to be outside India and the ld. AO has not objected to this proposition that the ultimate business and benefit to this advertisement both are outside India. The relevant findings of the ld. CIT(A) are relied upon and recorded at page 22 to 24 of the order of the ld. CIT(A). The purpose behind levy is target the Indian business and Indian advertisement market and not the world market as explored by the others in India through digital marketing and for this purpose the target area a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons. As per Sec 165 of Finance Act 2016, a person resident in India or a non-resident having a permanent establishment in India shall deduct EL at 6% on the consideration paid to non-resident towards specified services. Here the consideration and contract is between the foreign client and Google Singapore and the assesse is merely a conduit and agent so the provision is required to be looked into considering that aspects of the case as it is proved based from the FIRC, online screen shot showing the name of client and the area of advertisement displayed along the number of hits that has been generated from that targeted audience and thus, the provision of section 165 is not applicable in the present of the case. Here the EL is to be collected on customer target subjected to Indian targeted customer and not on the company's outside Indian target customer. So, looking to the facts of the case on hand the levy is not applicable. In the present set of fact neither the company, assessee or the Google Singapore has digital or economic presence in India which will attract the levy. The assessee is not carrying out any business activity in India based on the set of facts. The levy is on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s or services or both using internet protocol address located in India. (2) The equalisation levy under sub-section (1) shall not be charged- (i) where the e-commerce operator making or providing or facilitating e-commerce supply or services has a permanent establishment in India and such e-commerce supply or services is effectively connected with such permanent establishment; (ii) where the equalisation levy is leviable under section 165; or (iii) sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in subsection (1) is less than two crore rupees during the previous year. (3) For the purposes of this [section,- (a) "specified circumstances" mean-] (i) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and (ii) sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India] [(b) consideration received or receivable from e-commerce ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....table to the operations carried out in India ; [Explanation 2A.-For the removal of doubts, it is hereby declared that the significant economic presence of a non-resident in India shall constitute "business connection" in India and "significant economic presence" for this purpose, shall mean- (a) transaction in respect of any goods, services or property carried out by a non-resident with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or (b) systematic and continuous soliciting of business activities or engaging in interaction with such number of users in India, as may be prescribed: Here in this case no operation are carried out in India. Only the services of id and wallet creation is rendered for which the assessee has already paid the tax in India and is rendering of the services and its reasonableness is not under dispute. Only the payment made to Google Singapore for which there is no income which accrue or arise in India based on the provision of section 9 and section 165 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ught to be taxed in India must be (1) utilized in India and (ii) rendered in India. In the present case, both these conditions have not been satisfied simultaneously. Thus, it has been proved by the ld. AR of the assessee that in the present set of case neither the services are utilized in India nor rendered in India and thus the levy of EL on the particular transaction does not arise. This detailed finding is appearing on the order of the ld. CIT(A) at page 18 to 22 and then discussing the business model of the assessee at page 23-24 CIT (A) has deleted the addition made by the AO u/s. 40(a)(ib) for an amount of Rs. 8,89,35,558/- 11. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. The bench noted that the only grievance of the revenue is that the assessee has paid a sum of Rs. 8,89,35,558/- on which disallowance u/s. 40(a)(ib) is required to be made, as the assessee fails to deduct equalization levy under the provisions of Chapter VIII of the Finance Act, 2016. The ld. AO made the disallowance of this amount contending that nowhere in the provis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e. Further the assessee's case does not fall within the exception provided u/s 165(2) of the Finance Act. Therefore, the facts present in the assessee case clearly lead to the conclusion that equalization levy is attracted in the payment made by the assessee to Google Singapore. Therefore, the provisions of Sec.40(a)(ib) of the Act which provide that "any consideration paid or payable to non-resident for a specified service on which equalization levy is deductible under the provisions of Chapter VIII of the Finance Act 2016 and such levy has not been deducted or after deduction, has not been paid on or before the due date specified in sub section (1) of section 139 of the Act and thus he disallowed 100 % of the sum paid to Google Singapore, a non-resident having no PE in India. 12. We have also carefully gone through the order of the ld. CIT(A) who has analyzed the contentions raised by the ld. AO and given a detailed and reasoned findings as reiterated here in above. The role of the assessee is that of an agent of Google Singapore whereby the assessee is granted access for the purpose of advertisement to be made on Google. On approaching the assessee, such person gets login....