TaxTMI 
TaxTMI 
2026 (6) TMI 1139
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....a Private Limited to display sponsored links and digital advertisements for its business. The assessee has deducted TDS @ 2% under the provisions of Section 194C of the Act, treating the transaction as a contract for work (advertising). A survey under Section 133A of the Income-tax Act, 1961, was conducted in the business premises of the assessee on 27.11.2018 to verify compliance of the provisions of Chapter XVII-B of the Income-tax Act, 1961. During the course of survey, it was found that, the assessee had deducted TDS @ 2% on payment made to M/s. Google India Private Limited as against the applicable provisions of Section 194J of the Act, calling for TDS @ 10% on payments. The A.O. passed order under Section 201(1) and 201(1A) of the Act, and treated the assessee as an "assessee in default" in respect of payments made to M/s. Google India Private Limited in respect of advertising expenditure incurred for making payment to M/s. Google India Private Limited. The A.O. observed that, 'Google AdWords' platform involves highly sophisticated, automated algorithmic structures, real-time bidding mechanisms, and data analytics, interfaces and therefore, the services provided by M/s. Googl....
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....f technology or make available technology to the assessee. 4. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of Circular issued by the CBDT, No. 715 dated 08.08.1995 and also by following the decision of ITAT, Bangalore Bench in the case of M/s. Google India Private Limited Vs. DCIT reported in (2022) 143 taxmann.com 302, deleted the addition made by the A.O. towards short deduction of TDS and the consequent interest under Section 201(1) and 201(1A) by holding that the assessee has only used the AdWords program of Google for the purpose of advertisement. There is no transfer of technology from M/s. Google India Private Limited to the assessee nor is there any use of technology held by M/s. Google India Private Limited by the assessee. All the patents along with the requisite technology with respect to the AdWords Program is held by Google Ireland Ltd., Therefore, the Ld. CIT(A) observed that, the payment made by the assessee company to M/s. Google India Private Limited is for the purpose of advertising, as defined under Section 194C of the Act, which attracts TDS @ 2%, as rightly deducted by the assessee, but not payment for manag....
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....Google by human intervention. Therefore, the argument of the assessee that it is a simple advertisement contract falls under Section 194C of the Act, is incorrect. The learned Senior Standing Counsel for the Revenue, further referring to the order of the Ld. CIT(A), submitted that the Ld. CIT(A) completely erred in allowing relief to the assessee by considering the decision of the ITAT, Bangalore Bench in the case of M/s. Google India Pvt. Ltd. Vs. DCIT (supra), because the issue before the ITAT, Bangalore was whether payment made by M/s. Google India Pvt. Ltd. to its parent company, Google LLC, is a 'Royalty' or not in light of the DTAA between India and USA. In the present case, the issue is altogether different and the issue before the Tribunal is whether services provided by M/s. Google India Pvt. Ltd. are technical services falling under the definition of FTS or an advertisement contract, as provided under Section 194C of the Act. Therefore, allowing relief by following the decision in the case of M/s. Google India Pvt. Ltd. Vs. DCIT (supra) is totally incorrect. 8. The learned Senior Standing Counsel for the Revenue further submitted that, the Hon'ble Supreme Court in ....
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....r Technical Services" within the meaning of Explanation 2 to Section 9(1)(vii) contemplates making available technology or technical knowledge to the recipient of services and it does not cover an instance of mere usage of technical knowledge. M/s. Google India Private Limited does not provide any right of access to the server or the program, nor is any technical knowledge transferred to the assessee. Therefore, the application of the provisions of Section 194J of the Act is incorrect. The learned counsel for the assessee further submitted that, for rendering technical services, human intervention is required, but in the present case, going by the Google AdWords program, it is fully automated without any human intervention and therefore, payment made by the assessee to M/s. Google India Private Limited clearly falls under Section 194C of the Act, and the assessee has rightly deducted TDS @ 2%. 10. The learned counsel for the assessee further submitted that there is no failure on the part of the assessee to deduct TDS. The assessee has deducted TDS as per Section 194C. Section 194C specifically covers works contracts which include advertising contracts. Once a specific provision ....
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....r consultancy in nature. It is a well-established judicial proposition from various decisions, including the decision of the Hon'ble Supreme Court in the case of CIT Vs. Bharti Cellular Ltd. (supra), that technical services require the application of human skills, intelligence or direct human intervention. The mere use of a highly sophisticated, automated technology, facility or standard software interface by the consumer does not mean that the service provider is rendering technical services to the customer. In the case of Google AdWords program, the platform is a standard, automated, self-service portal. The advertiser logs in, can select keywords, set budgets and upload ad copy. The matching of keywords to search terms, the auctioning of ad rank and the final publishing of the ad are all managed automatically via Google's complex, packaged algorithm. The presence of a sophisticated algorithm system for automated technology facility does not equate with rendering technical services. The consumer is merely using an automated facility to purchase advertising space. Therefore, going by the services rendered by M/s. Google India Private Limited to the assessee, it can safely ....
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....ertising as the subject matter of Section 194C of the Act, then the same cannot be brought within the ambit of Section 194J of the Act, because if a particular item is specifically characterized in a particular Section of the Act, it will override the provisions of a general section. This fact is further strengthened by the Circulars issued by the CBDT. The CBDT has issued a Circular No. 714 dated 03.08.1995, wherein it was clarified that the provisions of Section 194J of the Act, are applicable with advertising agencies, who make payments for professional services such as payments to Film artists, Cameraman, Director etc. However, when the advertising is made in print media or electronic media, provisions of Section 194C would be applicable. Since the statute has created a specific legislative entry for advertising under section 194C of the Act, it is an elementary principle of statutory interpretation that a specific provision overrides a general provision. Since the advertising is specifically covered under section 194C of the Act, the Revenue cannot bypass this explicit classification to drag a digital advertising contract into the residual basket of Section 194J, simply becaus....