Google India Evaded Tax On Rs 1457 Crore, The Income Tax Tribunal Says
October 27th, 2017
On 24 October, the Income Tax Tribunal ruled that Google India has been evading taxes on Rs 1457 crore. This clearly means that the tech giant has lost its six-year-long battle with Income Tax department in India, reported The Economic Times.
This case would act as a precedent for Multinational Companies which are not present physically in our country but come under the purview of local tax authorities due to income generated in India.
About the case
The rift had started off because of the arrangement and fund flow between Google India and its office in Ireland, a jurisdiction known for its lax tax rules.
The Income-tax (I-T) department found out that for a long time Google India has been sending a large amount of its revenue generated in India to Google Ireland in the form of remittances(a sum of money sent in payment or as a gift).
Hence, the IT department questioned these transactions of Google India; the company was not paying any taxes for the remittances it has been sending to Ireland.
Google India contested the claim, arguing in six appeals over the period of the assessment years 2007-08 to 2012-13. All of them were dismissed on 24 October by the Income-Tax Appellate Tribunal (ITAT).
It reportedly said, “…the intention of the assessee (Google India) as well as of the GIL (Google Ireland) is clear and conspicuous that they wanted to avoid the payment of taxes in India. That is why, despite the duty of the assessee to deduct the tax at the time of payment to GIL, no tax was deducted, nor any permission was sought for paying the amount (sic.).”
The Income Tax Tribunal slammed a tax demand on Rs 1,457 crore which is the total amount that it had remitted to Google Ireland during the period under review.
What is the issue about?
Google India and Google Ireland have an advertisement programme called ‘Adworks’ between them under which Google India is an authorised distributor of the Adwords programme to Indian advertisers by Google Ireland.
Google India has pointed out that it does not have any intellectual property rights over the Adwords programme and that it is only a distributor.
But according to the tax tribunal, Google India has used the information and patented technology from Google Ireland, and the remittance sent to GIL amounts to royalty. Legally, it is to be taxed in the contracting state, India, in this case.
The Bengaluru bench of the tribunal has pointed out Google India was not just using customer data but the money that it was paying GIL was for the use of patent invention, model, design, secret formula, process, etc. Also, the payer is supposed to maintain books of account and deduct TDS (tax deducted at source), which Google India was not doing.
This case would act as a precedent for Multinational Companies which might not be present physically in a country but come under the purview of local tax authorities due to income generated in India.