The Karnataka High Court recently rejected a request of the Income Tax Appellate Tribunal (ITAT) imposing royalty tax collection on Google India Private Limited (Google) for 'Adwords program' on the ground of infringement of standards of natural justice (Google India Private Limited v. Official of Income Tax).
This matter was heard by a division bench of Justice Satish Chandra alongside Justice Vishwajith Shetty filed by the company.
Background of case
Google India, was a non-selective distributor of the web-based promoting space under the 'AdWords program' to publicists in India.
This program empowers sponsors to give a significant keyboard. At the point when this term is looked on the Google internet searcher, the ads likewise get shown. The publicist pays if the surfers click on their ads.
In 2004, the litigant organization went into an IT Enables Services agreement with Google Ireland Limited and set up its IT Enabled Services for delivering support services. The appealing party under the said agreement was delivering reevaluated services for which it was independently repaid by Google Ireland Limited.
The assessing official, in a common request, for the appraisal years 2007-08 to 2012-13 passed a request under Section 201(1) and 201(1A) of the IT Act, in this deciding the appealing party as 'assessee in default' in regard of non-deduction of tax at sources for the sums payable to Google Ireland as 'expense for distribution rights'.
Therefore, it was coordinated to pay a measure of Rs. 7. 4 crores.
Submission by parties
Senior Counsel S Ganesh presented that the ITAT didn't investigate the archives documented by the assessee at any point in time. In fact, altogether an alternate methodology was received by the ITAT by leading research.
It was fought by him that it is an all-around settled suggestion of law that if any material/any archive is depended upon, the equivalent must be given to all, else it adds up to infringement of standards of natural justice and fair play.
The counsel additionally asserted that the material gathered behind the back of the assessee was utilized and depended upon by the ITAT and accordingly, similar sums to infringement of standards of natural justice and fair play.
Supporter KV Aravind showing up for the ITAT contended that the material depended upon by the ITAT is accessible on the web and simply because that the material freely accessible was not given to the assessee, would not imply that there was an infringement of natural justice and fair play.
On the material depended upon by the ITAT in passing the request, the Court thought that the request violated standards of natural justice and fair play as the litigant was not managed the opportunity to disprove such new proof.
Further, it said that the details of the material have additionally not been reflected in the request passed by the ITAT.
Therefore, this Court is of the opinion that as there is an infringement of standards of natural justice and fair play, the matter has the right to be remanded back to the Tribunal for hearing it over again as per law."
It likewise coordinated that the parties will show up before the Tribunal on May 3, 2021, and within a time of 15 days the litigant just as the Revenue will be allowed to record the reports/extra archives on the side of their conflicts.