GOOGLE INDIA PRIVATE LIMITED,BANGALORE vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-11(3), BANGALORE

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER IT(TP)A No.69/Bang/2014 Assessment Year: 2009-10 M/s. Google India Pvt. Ltd. No.3, RMZ Infinity Tower-E The Deputy 4th Floor, Old Madras Road Commissioner of Income Vs. Bangalore 560 016. Tax, Circle-11(3) PAN NO : AACCG0527D Bangalore. APPELLANT RESPONDENT

IT(TP)A No.191/Bang/2014 Assessment Year: 2009-10

The Deputy Commissioner of M/s. Google India Income Tax, Vs. Pvt. Ltd. Circle-11(3), Bangalore 560 016. Bangalore. APPELLANT RESPONDENT

Shri Deepak Chopra, A.R., Appellant by : Shri Anmol Anand, A.R. & Ms. Priya Tandon, A.R. Respondent by : Ms. Neera Malhotra, CIT-DR. Date of Hearing : 14.11.2023 Date of Pronouncement : 22.12.2023 O R D E R PER BEENA PILLAI, JUDICIAL MEMBER: Present cross appeals arises out of the final assessment orders dated 31.01.2014 passed by DCIT Circle-11(3), Bangalore for assessment year 2009-10.

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IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 3 of 155 capital of the Appellant vis-a-vis the comparables selected. 8. (a) Erred in not allowing the option under the proviso to section 92C(2) of the Act in limiting the adjustment at a variation of 5 percent to the arm's length price (b) Erred in not appreciating the fact that the amendment to section 92C(2) of the Act is not applicable for the relevant AY under consideration Grounds specific to TP adjustments to provision of software services 9. Erred in rejecting the FAR analysis and re-characterizing the activities performed by the Appellant as Knowledge Process Outsourcing ('KPO') services instead of software services. 10. Erred in adopting an approach different from its predecessors in assessment years up to assessment year 2008-09, without any change in facts or circumstances of the case from earlier years. 11. Erred in not undertaking an objective search and selecting of the following companies as comparables on an ad-hoc basis; a) Acropetal Technologies; b) Eclerx Services Ltd; and c) Genesys International Corporation. Grounds specific to TP adjustments to provision of ITES 12. Erred in rejecting the contemporaneous data (i.e., data existing before the due date of filing of return of income) and in undertaking a fresh comparable search during the course of assessment proceedings, using information/data which was not available to the Appellant at the time of satisfying the mandatory documentation requirements. 13. Erred in inter-alia using of the following additional filters in undertaking the comparative analysis for rejecting comparable companies having: a) Diminishing revenue; and b) Different year end. 14. Erred in not undertaking an objective comparative analysis and inter-alia selecting the following companies as comparable to the ITES services of the Appellant; a) Accentia Technologies Ltd; b) Eclerx Services Ltd; c) Infosys BPO Ltd; and d) Informed Technologies India Ltd. 15. Erred in not undertaking an objective comparative analysis and inter-alia rejecting the following comparable companies: e) Lee & Nee Software Ltd; and f) Microland Ltd (Call Centre segment).

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 4 of 155 Grounds specific to TP adjustments relating to payment for purchase of advertisement space under the AdWords program. 16. Erred in not undertaking an objective Functions Assets and Risks ('FAR') analysis and concluding that the Appellant owns marketing intangibles. 17. Erred in not appreciating the fact that the Appellant performs a limited role in the provision of web based advertisement and that the AEs undertake all the economically significant functions. 18. Erred in adopting an approach different from its predecessors in assessment years up to assessment year 2008-09 in selection of most appropriate method, without any change in facts or circumstances of the case from earlier year. 19. Erred in rejecting Transaction Net Margin Method ('TNMM') and determining the ALP by applying Profit Split Method ('PSM') as the most appropriate method. 20. Erred in not applying PSM in accordance with the provisions of Rule 10B of the Income Tax Rules, 1962 and following an erroneous methodology. 21. Erred in applying PSM, not determining the correct contribution made by the AE in earning the revenue in accordance with the FAR analysis of the transactions. 22. Erred in not providing requisite adjustment for the contribution made by the AE in the form of credit granted for the amount payable by the Appellant to the AE towards purchase of the advertisement space 23. Erred in not following a consistent approach in considering the nature of provision for bad debts in determination of the ALP .B. Corporate Tax Issues Rejection of Books of accounts 24. Erred In holding that the duly audited books of account of the Appellant are incomplete and incorrect based on conjectures and surmises without appreciating the complete disclosures made in the books of accounts maintained by the Appellant. C. Disallowance of payments made to Google Ireland Ltd., invoking provisions of section 40(a)(i) of the Act 25. Erred in holding that the amounts payable by the Appellant to Google Ireland Limited for purchase of advertisement space under the AdWords Program were chargeable to tax in India. 26. Erred in holding that the Appellant, in relation to distribution of advertisement space under the AdWords program, create a Dependent Agent Permanent Establishment of Google Ireland Ltd under Article 5 of the India-Ireland Double

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 5 of 155 Taxation Avoidance Agreement and the receipts are taxable as business profits in India. 27. Having held that the Appellant was an agent of Google Ireland Ltd. erred in holding that Appellant 'was a person responsible for paying' any amount to Google Ireland Ltd. within the meaning of section 195 of the Act and that the Appellant gas failed to deduct tax at source on the amounts payable to Google Ireland Limited. 28. Having held that the Appellant creates a Dependent Agent Permanent Establishment of Google Ireland Limited in India, erred in attributing business profits, ignoring the fact that the Ld.TPO has determined the arm's length remuneration for the Appellant and hence there was no additional income chargeable to tax in India in the hands of Google Ireland Ltd requiring any deduction of tax at source under Section 195 of the Act and hence no disallowance under section 40(a)(i) of the Act is warranted. 29. Having held that the Appellant was an agent of Google Ireland Ltd. erred in holding that Appellant 'was a person responsible for paying' any amount to £3oogle Ireland Ltd. within the meaning of section 195 of the Act. 30. Erred in alternatively holding the amount payable towards purchase of advertisement space under the Agreement as either Royalties or Fees for Technical Services under Article 12 of the India-Ireland Double Taxation Avoidance Agreement. 31. Erred in upholding that the Appellant was required to deduct tax at source from the amount payable by the Appellant to Google Ireland and in view of its failure to deduct tax. the amount of Rs 1,41,80,57,831 was required to be disallowed u/s 40(a)(i) of the Act 32. Without prejudice to the above, assuming without admitting that the amount paid/ payable by the Company to Google Ireland Limited is not chargeable to tax in India warranting any deduction u/s 195 of the Act, the Ld AO have erred in disallowing the amount paid/ payable to Google Ireland Limited u/s 40(a)(i) disregarding the fact that the demand raised by the Learned Deputy Director of Income-tax (International Taxation), Circle 1(1), Bangalore u/s 201(1) of the Act for the relevant AY has been remitted by the Appellant. C. Miscellaneous 33. Have erred in imposing the levy of interest u/s 234B of the Act. 34. Have erred in initiating the penalty proceedings initiated u/s 271 (1)(c) of the Act.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 6 of 155 The Appellant craves, to consider each of the above grounds of appeal independently without prejudice to one another and craves leave to add, alter, delete or modify all or any of the above grounds of appeal.

2.1 The revenue has raised following grounds of appeal in IT(TP)A No.191/Bag/2014: 1. The order of the Dispute Resolution Panel is opposed to law and the facts and circumstances of the case. 2. The DRP erred in not accepting the application of the residual profit method wherein the joint profit of the assessee and M/s Google Ireland Ltd. has been computed by the TPO. 3. The DRP erred in concluding that the action of the TPO in merging the two segments and then giving a rebate from the ITES profits from the residual profits of the two parties as not proper without appreciating that the TPO had calculated profit on ITES activities separately which was not being deducted from the residual profit. 4. The DRP erred in holding that the assessee has rendered ITES to a wider client base without appreciating that as per records the assessee has rendered ITES to M/s Google Ireland Ltd. only and that as per the 3CEB report also ITES has been rendered by the assessee to M/s Google Ireland Ltd. only. 5. The DRP erred in holding that for implementing residual profit split method the normal profit of M/s Google Ireland Ltd. also needs to computed and reduced without appreciating that there is no routine profit of M/s Google Ireland Ltd. as no other functions have been performed by M/s Google Ireland Ltd. apart from contributing only the tangibles which is a non-routine function and for which the TPO had already attributed 50% of residual profit. 6. The DRP erred in holding that for the purposes of bench marking, ITES and Adwords distribution segments are to be treated separately without appreciating that the international transactions relating to ITES and Adwords are connected to each other and cannot be analyzed and evaluated separately for determination of ALP, 7. The DRP erred in directing to adopt profit split method for Adwords distribution segment instead of profit split method without appreciating the fact that the TPO had demonstrated the necessary evidences for the various functions the assessee has performed such as rendering ITES to M/s Google Ireland Ltd., providing marketing services and contribution of marketing tangibles while M/s Google Ireland Ltd. has only contributed the technology related intangibles. 8. The DRP erred in directing the AO to follow the ratio laid down by the Hon'ble Court in the case of Tata Elxsi Limited 349 ITR 98 and exclude telecommunication expenses of Rs. 10,99,83,459/- from the export turnover also while computing the deduction u/s 10A

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 7 of 155 of the I.T. Act, without appreciating the fact that there is no provision in section 10A that such expenses should be reduced from the total turnover also, as clause (iv) of the explanation to section 10A provides expenses are to be reduced only from the export turnover. 9. the DRP erred in not appreciating the fact that the jurisdictional High Court's decision in the case of Tata Elxsi Limited 349 ITR 98 has not been accepted by the department and an appeal filed before the Hon'ble Supreme Court. 10. DRP erred in directing to exclude Coral Hubs on the ground of functional incomparability without appreciating the fact that TNMM was applied as the most appropriate method and while applying TNMM the functions of the comparable need not be identical but a broad comparison is sufficient as many of the differences are evened out at the net margin level. 11. The DRP erred in directing that unallocated expenditure be taken into consideration in the case of Acropetal Technologies without appreciating that the comparable company itself has not taken the unallocated expenditure as operating expenditure while publishing the segmental results. 12. The DRP erred in not appreciating the fact that since M/s Google Ireland Ltd. has neither filed its return of income nor was witling to admit any tax liability in India. Hence, the additional profit of Rs. 30,65,47,268/- has been taxed rightly in the hands of the assesses. 13. The DRP erred in not appreciating the fact the additional profit of Rs. 30,65,47,268/- represents the profits evaded from being charged to income tax in India of the service, Google Adwords run through the medium of Google website in India. 14. The DRP erred in not appreciating the fact as per the contract the assessee is neither a captive service provider nor a cost centre to M/s Google Ireland Ltd but the assessee claims to have been an independent distributor acting on its own account. 15. The DRP, on the facts and in the circumstance of the ease erred in not appreciating the fact that the assessee should have declared incomes with respect to its revenues and not with respect to its cost as the whole agreement with Ms. Google Ireland Ltd is a ploy to evade payment of taxes in India. ,16. The DRP erred in not appreciating the fact that it has been brought out in great detail in the assessment order that the entire advertising business (Adwords) is treated as one enterprise in India and that there is only one profit earned out of the said enterprise. 17. The DRP erred in not appreciating the fact that for the lack of a better alternative the total Adwords revenue from the advertisers during the year was considered at Rs. 403,34,38,319/-rather than consider the actual Adwords revenue of Rs. 241,71,64,576/- in line with the global profits of Google Inc USA and the profit

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 8 of 155 represents the entire profit of the enterprise to be in the hands of M/s Google India Pvt. Ltd. as well as M/s Google Ireland 18. The DRP erred in not appreciating the fact that Rs. 117.37 cores being the difference between and the cost has been held to be the escaped profit of the enterprise in India considering the fact that Google Ireland Ltd. has neither filed its return if income nor is willing to admit any tax liability in India. 19. For these and such other grounds that may be urged at the time of hearing, it is humbly prayed of the DRP be reversed and that of the Assessing Officer be restored. 20. The appellate craves leave to add, to alter, to amend or delete any of the grounds that may be at the time of hearing of the appeal.”

2.2. The revenue has raised additional grounds for being admitted vide application dated 23.2.2018 that reads as under: 1. “The assessee is not entitled to deduction u/s 10A of the Act as the services rendered by the assessee on pre sale and Post sale of advertisement in terms of Google Adword Programme Distribution Agreement dated 12.12.2005 and services rendered by Service Agreement dated 1.4.2004 would not amount to export of articles or things or computer software. 2. The assessee is not entitled to deduction u/s 10A of the Act as the receipt from Google Ireland being associated enterprise, not being consideration for export of articles or things or computer software. 3. Without prejudice to the above contention, even if it is assumed that services rendered on pre sale and post sale of advertisement is considered as articles or things or computer software, the same not being exported outside the country, the primary condition of export is not fulfilled and consequently disentitles the assessee for claiming deduction u/s 10A of the Act.” 2.3. It is submitted that, no new facts needs to be considered in order to dispose of the above additional grounds raised by the assessee. It is submitted that, the additional grounds raised do not require verification of any new facts. The Ld.DR, thus prayed for the admission of additional grounds so raised by assessee.

2.4. On the contrary, the Ld.AR though opposed admission of the additional ground by submitting that the issue contested by the revenue has been accepted by the Ld.AO/DRP. It is submitted by

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 9 of 155 the Ld.AR that, when the Ld.AO in the draft assessment order decided to grant deduction u/s.10A on the income earned by the assessee under the IteS segment, the revenue cannot challenge the same before this Tribunal.

2.5. The Ld.AR submitted that, by raising these additional grounds, the revenue is trying to make out a case which is beyond the scope of assessment framed by the authorities below. The Ld.AR in the written submission dated 14/11/2023 submitted that it is beyond the scope of the revenue to raise these additional grounds, as, such powers vests only with the Ld.CIT under section 263 of the Act to revise any order which is erroneous and prejudicial to the interest of the revenue. The Ld.AR in his written submission dated 14/11/2023 relied on following decision in support of his argument that scope of issues raised before this Tribunal must be confined to supporting or defending the impugned order:  Decision of Hon’ble Mumbai Tribunal in case of CIT vs. Aishwarya K. Rai reported in (2010) 127 ITD 204  Decision of Hon’ble Pune Tribunal in case of ITO vs. Anant Y. Chavan reported in (2009) 126 TTJ 984  Decision of Hon’ble Special Bench of Mumbai Tribunal in case of Mahindra & Mahindra Ltd. Vs, DCIT reported in (2010) 122 ITD 216  Decision of Hon’ble Jodhpur Tribunal in case of (2008) 110 ITD 59  Decision of Hon’ble Kolkata Tribunal in case of Smt. Bhagwati Devi vs. ITO reported in (1993) 47 ITD 58  Decision of Hon’ble Delhi Tribunal in case of Ericson A.B. vs. DCIT reported in (2012) 53 SOT 177

We have perused the submissions advanced by both sides in light of records placed before us.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 10 of 155 2.6. On a plain reading of section 263 shows that, the Pr. Chief Commissioner or Chief Commissioner may revise order passed by the Assessing Officer, if the same is erroneous insofar as prejudicial to the interest of the revenue. The Explanation 1(a) of section 263 further clarifies that, order of the Assessing Officer in certain cases passed on the direction of certain superior officers can also be subject matter of section 263. The Explanation does not include the order passed under the direction of the DRP under section 144C(13). The Legislature in its wisdom has thought it appropriate to include orders passed by the Assessing Officer under direction under section 144A, but not under direction under section 144C(13). As per the provisions of section 144C(5), the Dispute Resolution Panel (DRP) shall in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. Explanation to sub-section (8) of section 144C duly provides that the DRP has power to enhance the variation and the power includes to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. It is nobody's case that the Assessing Officer has not followed the direction of the DRP and completed the assessment not in conformity with the direction of the DRP. Therefore, the final assessment order cannot be said to be erroneous. In fact, if the Assessing Officer had made disallowance in the final assessment order which were not as per the direction of the DRP, the said assessment order would be held to be invalid and contrary to law. After the direction of the DRP, if the Assessing Officer would have made any addition or even any enquiry on the issues raised by the by the revenue before this Tribunal, the same would be contrary to law as being contrary to section 144C(13). Therefore, there we reject

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 11 of 155 the argument of the Ld.AR that power vests only with the Ld.CIT under section 263 of the Act to revise any order which is erroneous and prejudicial to the interest of the revenue. Hence the final assessment order can only be erroneous only when the Assessing Officer has not followed the mandate of section 144C(13). We refer to the decision of Hon'ble Delhi High court in the case of Jai Parobolic Springs Ltd. Vs. CIT reported in 306 ITR 42, wherein Hon’ble Delhi High court has observed that the power of the Tribunal to entertain additional ground is not in any way restricted in view of the decision of the Hon'ble Supreme Court in the case of Goetz India Ltd reported in (2006) 284 ITR 323. In the case of Jute Corporation of India Ltd. v. CIT reported in (1991) 187 ITR 688 while dealing with the powers of the Appellate Assistant Commissioner, Hon’ble Supreme Court observed that :— ‘...An appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons, The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 12 of 155 ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. (Emphasis supplied) 2.7. We also note that, the additional grounds raised by the revenue are directly connected with the main issue of deduction computed under section10A by the authorities below and no new facts needs to be investigated for adjudicating the same We also note that the revenue was estopped from raising this issue before the DRP due to the applicable statutory provisions.

Based on the above discussion and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Accordingly, we admit the additional grounds raised by the revenue.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 13 of 155 computing the ALP of the transaction. On receipt of the reference, the Ld.TPO called for the economic details of the international transaction in Form 3CED. The Ld.TPO noted that for the year under consideration the assessee has following international transactions with its AE: Provision of software services Rs.41,02,20,628 Provision of Information Technology enables Services ('ITeS') Rs.14,72,66,223 Purchase of advertisement space for distribution to the advertisers in India Rs. 26,76,85,095

3.3. The Ld.TPO after considering various submissions, proposed following transfer pricing adjustments in the hands of the assessee:

The Ld.TPO passed transfer pricing order on 29/01/2013 u/s. 92CA(3) proposing a total adjustment at Rs.128,35,12,263/- 3.2 On receipt of the order u/s.92CA(3), The Ld.AO passed the Draft Order on 04/03/2013 and proposed total addition after incorporating the transfer pricing adjustment proposed by making following additions:  Re-computed deduction u/s.10A of the Act, by reducing telephone charges of Rs.62,543,937/- and internet charges of Rs.47,439,522 from export turnover without simultaneously reducing it from the total turnover. This has resulted in reduction on amount of profits eligible for deduction u/s.10A by Rs.2,70,62,703/-.  Disallowance u/s 40(a)(i) of the Act of Rs.3,28,20,75,060/- of the Ad Words distribution fee payable to Google Ireland Ltd., Ireland ('Google Ireland');

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 14 of 155  Additional income in respect of profits of distribution of Ad Words program of Rs.1,17,37,50,871/-.

3.3 On receipt of the transfer pricing order, the draft assessment order was passed on by incorporating the transfer pricing adjustments proposed. The Ld.AO further disallowed a sum of Rs.3,28,20,75,060/- u/s 40(a)(ia) of the Act for non-deduction of TDS in respect of the payment made toward the Google AdWords and recomputed the deduction u/s 10A by reducing telephone charges and internet charges from export turnover. The Ld.AO also added additional income in respect of profits of distribution of AdWords Programme.

On receipt of the draft assessment order the assessee preferred objections before the DRP. 3.4 The DRP after considering various submissions of the assessee reduced the transfer pricing adjustment Rs.82,51,71,946/- deleted the additional income that was added in respect of AdWords programme. However, upheld the disallowance u/s 40(a)(ia) of the Act. The DRP also accepted the contentions of the assessee regarding computation of deduction u/s 10A of the Act.

3.5. On receipt of the DRP directions the Ld.AO passed the final assessment order by making the necessary addition and deletion as per the directions of the DRP and computed the income in the hands of the assessee at Rs.4,25,51,51,616/-.

Aggrieved by the order of the Ld.AO, the assessee is in appeal before this Tribunal.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 15 of 155 4. At the outset, the Ld.AR submitted vide submission dated 14/11/2023 that Ground No.1-8 & Grounds 10-13 are not pressed by the assessee. Accordingly these grounds are dismissed as not pressed.

4.1. Ground No.9 is raised by the assessee challenging re- characterisation of the functionality of the Assessee in the Information Technology (“IT”) segment. The Ld.AR vide submissions dated 14/11/2023 submitted as under: (i) That for AY 2009-10, the Ld.TPO vide order dated 29.01.2013 qua the international transaction of provision of IT services to Google Inc., USA (now Google LLC) by re- characterising the said transaction as Knowledge Processing Outsourcing. Thereafter, the TPO applied Transactional Net Margin Method and compared the profitability of the Assessee with those companies, which were engaged in rendering KPO services and computed an adjustment of INR 44,84,24,329/-. (ii) He further submitted that on raising objection, the DRP, vide directions dated 30.12.2013 upheld the re- characterisation done by the TPO in the IT segment, directed the TPO to, inter-alia, exclude one of the comparables being Coral Hub, from the set of final comparables. Pursuant to the directions of the DRP, the Ld.TPO revised the adjustment in the IT segment to Rs.41,02,20,628/-. (iii) The Ld.AR submitted that the Assessee entered into Advance Pricing Agreement (“APA”) dated 04.12.2019 with Central Board of Direct Taxes (“CBDT”) and the APA covers the international transaction of provision of IT services to Google Inc., USA for AY 2010-11 to 2018-19. He submitted that though for the year under consideration, is not covered under the APA, it has been consistently held by various Courts, that the methodology adopted in an APA should be

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 16 of 155 adopted for benchmarking the international transactions, as long as the functions performed, assets utilised, and risks undertaken (“FAR”) remain the same among the AEs during the subject year as compared with the years covered under the APA. In support, reliance was placed on the following decisions of the Coordinate Benches of this Tribunal in:  Spencer Stuart (India) Pvt. Ltd. v. ACIT, (ITA No. 7117/Mum/2012, judgment dated 27.06.2018)  Aker Powergas (P.) Ltd. v. DCIT, (2023) 147 taxmann.com 253 (Mumbai – Tribunal) Honeywell Automation India Ltd. v. ACIT, (2019) 101 taxmann.com 6 (Pune – Trib.) He also relied on the decision of Hon’ble Delhi High Court in PCIT v. Springer India (P.) Ltd., reported in (2023) 151 taxmann.com 251. (iv) The Ld. AR submitted that, in the present case, it as an admitted position that the FAR of the AEs qua the international transaction of provision of IT services during the year under consideration has remained the same as in the subsequent assessment years covered by the APA. The Ld.AR drew attention to dated 30.01.2014 passed by the Ld.TPO in for 2010-11 which stands covered by the APA. He submitted that in the said order, para 2-3.1, the Ld.TPO, himself observed that the facts and issues pertaining to AY 2010-11 have remained the same as were for AY 2009-10. The referred order of the Ld.TPO for AY 2010-11 is placed at page 1-22 of the PB dated 07/08/2023 and the relevant observation of the Ld.TPO is at page 3 of the PB. He thus submitted that, it is undisputed that the FAR for the transaction in question for AY 2009-10 has remained the same for subsequent AYs, which are covered by the APA.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 17 of 155 (v) It is further submitted that, for all the subsequent AYs i.e., AY 2010-11 onwards, the Assessee has duly complied with the applicable law and has made necessary filings and reporting pursuant to the APA before the TPO, which have been accepted both by the TPO as well as by the AO. Reference in this regard is made to Form 3CEF filed by the Assessee for AY 2010-11 as well as order dated 24.03.2022 passed by the AO for giving effect to the modified tax return filed by the Assessee pursuant to the APA for AY 2010-11. (vi) The Ld.AR further submitted that, as far as the provision of IT services by GIPL to Google Inc., USA is concerned, the Ld.TPO did not re-characterize the said services as KPO services in the immediately preceding AYs i.e., AY 2005-06 to 2008-09. He referred to the discussion at para 8.1.3. and 8.1.10, at internal page 76 and 79 of the DRP direction for the year under consideration. He referred to Rule 10TA of the Income-tax Rules, wherein “software development services” [Rule 10TA(m) of the Rules] is a separate category of services in comparison to KPO services [Rule 10TA(g) of the Rules]. He thus submitted that, there is no merit in re-characterizing the provision of IT services as KPO services by the Ld.TPO and benchmarking it accordingly. (vii) The Ld.AR submitted that, as per the APA entered into by the Assessee for AY 2010-11 to 2018-19, the Assessee is characterised as rendering software development services and not KPO services. He submitted that as there was no change in the FAR analysis of assessee and the AEs for the assessment year under consideration and AY 2010-11 to 2018-19, for which APA was approved, and that though the APA was not binding for the assessment year under consideration, it would have persuasive value as per the ratio laid down by various decisions herein above. The Ld.AR thus

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 18 of 155 prayed that for the captioned AY as well, the IT segment be benchmarked by the TPO by taking into account profitability of comparable’s with the FAR adopted in the APA.

4.2. On the contrary, the Ld.DR submitted that APA for assessment year AY 2010-11 to 2018-19, was merely a negotiated agreement and could not be relied upon for assessment year under consideration. He also submitted that PA could not be applied retrospectively in the present year as it was beyond the rollback period of APA, if any. The Ld.DR relied on the Circular No.10/2015 dated 10/06/2015 and submitted that an applicant does not have the option to choose the year for which it wants to apply the Rollback provisions.

We have perused the submissions advanced by both sides in light of records paced before us. 4.3. We have perused the APA at page 127-153 of the PB. In the APA, we note that, it has been agreed that the functions performed by AEs are very limited and consequent risks assumed are less. The APA has been agreed on the whole mechanism of computation of ALP of International transactions of the assessee. There is no doubt that the principals laid down for comparability analysis in the APA have a greater persuasive value, even though, based on the critical assumptions to the set of facts related to an assessee, the APA would not have any effect on other years. Yet the concept and the methodology laid down in the APA can have the guidance value. In the present situation, the APA, between CBDT the assessee for AY 2010-11 to 2018-19, has considered all the aspects of the manner of determination of ALP which are submitted to be similar for the year under consideration. The circular relied by the Ld.DR cited supra also lays down that international transaction must be the same to which the agreement

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 19 of 155 applies and the APA shall be applied only if the FAR analysis of the rollback period does not differ materially from the FAR validated for the purpose of reaching an agreement in respect of the international transaction.

4.4. We further note from Appendix I (c ) to the APA at page 153 of the PB that, the agreements considered between the assessee and the AE’s are dated 01/01/2006, 01/04/2004 and 12/12/2005 for the services rendered under IT Services, ITeS Services and Google AdWords programme distribution. Thus it is clear that these agreements have been considered to analyse the FAR of the international transactions in the years of APA. We further note that these are the same agreements relied by the assessee before the Ld.TPO and DRP to explain the FAR of the services rendered by the assessee to the AE’s under the three segments, for which rollback benefit is sought for. The Income tax Rules provide that, if the International Transactions are same in the year of APA and in the past year than both the parties, assessee and CBDT may agree for applying the agreements contained in APA agreed.

4.5. An APA also provides complete guideline in respect of the international transaction, whose ALP is to be determined by applying appropriate transfer pricing methodology. The roll back provisions provide for application of the same agreement for earlier years is also based on the assumption that: (i) the international transaction is similar in the two years, ii) methodology required for determination of ALP is also similar, (iii) critical assumptions are the same, (iv) there is no change in the law, and (v) required formalities like filing of the return, audit, payment of additional taxes, are also completed.

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4.6. We therefore remand the issue back to the Ld.AO/TPO. The Ld.AO/TPO is directed to examine the facts closely and conclude the issue of applicability of APA to the year under consideration in principle. The Ld.AO/TPO is also directed to consider the above cited decisions relied by the Ld.AR reproduced herein above of this Tribunal as well Hon’ble Delhi High Court for the legal proposition of deciding the issue in the light of APA Accordingly Ground No. 9 raised by the assessee stands allowed for statistical purposes.

5.1. The Ld.AR submitted that Ld.TPO first applied TNMM for benchmarking the provision of ITeS to GIL, followed by aggregating the same with the international transaction with GIL under the distribution segment (distribution of online advertisement space under the Google AdWords Program) [relevant agreement for this segment is also with GIL and is placed at page 361 onwards of Paper Book and applied Residual Profit Split Method, to arrive at a combined adjustment of INR 83,50,87,934/- [INR 14,72,66,223 (ITeS segment) and INR 68,78,21,711/- (distribution segment)].

5.2. The DRP, vide directions dated 30.12.2013 directed the Ld.AO as under: (i) Segregate the transactions of ITeS and distribution segment, (ii) Independently benchmark the ITeS segment using TNMM.

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5.3. Pursuant to the directions of the DRP, the Ld.TPO segregated the international transaction under the ITeS segment and Distribution segment. However, as the Ld.TPO applied TNMM originally for ITeS segment, there was no reduction in the arm’s length price computed for this segment i.e., INR 14,72,66,223/-

5.4. The submission of the Ld.AR regarding the said comparables sought for exclusion on functional dissimilarities are as under: FAR of the Assessee’s Submission Comparable TPO’s For Exclusion comparable The Company is engaged in diversified healthcare activities, including medical transcription, medical coding, billing and receivable, as well as in provision of BPO services in the It offers healthcare sector. The services and Company has only one solutions for segment of activity, Healthcare namely, “Healthcare Accentia Receivables Receivable Technologies Cycle Management”. Limited Management Therefore, the Company and Software is functionally different (i) 46.40% Products for from the Assessee, Business engaged in providing Process captive ITeS. Outsourcing (S. No. 1 at page Reliance in regard to the 82 of Paper above is placed on: Book dated 06.09.2023). (i) Annual Report of the Company for the relevant AY – Page 33 – 39, page 61 and S. 12 at page 63 of the Compilation. (ii) Arctern Consulting

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 22 of 155 (P.) Ltd. v. ITO, [2022] 137 taxmann.com 69 (Bang. – Trib.) – Para 22 at page 270 of the Compilation. The Company is engaged in provision of diversified activities, including analytic services and data process solutions to its global clients. The Company is not engaged in provision of a simple service of data processing but is engaged in provision of Data content high-end services. management, Further, the Company data analysis operates under a single and process primary segment, i.e., improvement “data analytics and task, trade process outsourcing support and services”. Therefore, the eClerx validation, Company cannot be Services Ltd. settlements and compared with the (ii) clearing, asset Assessee, which is a low- 57.50% servicing, risk end service provider. management and Reliance in regard to the reconciliation above is placed on: (S. No. 5 at Page 83 of (i) Annual Report of Paper Book the Company for dated the relevant AY, 06.09.2023). where the Company has been stated to be a KPO – Page 93 and 141 of the Compilation. (ii) Arctern Consulting (Supra) - Para 22 at page at page 270 of the Compilation.

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It would also be relevant to point out that the Company has been held to be functionally comparable to the Assessee as regards its IT segment, after re- characterisation of the IT services as KPO services (page 92 and 93 of Paper Book dated 06.09.2023). The Company is engaged in provision of business process management services to organisations that outsource their business processes. Therefore, the Company is functionally different from the Assessee, since it provides management Business services in connection platforms, with business processes customer and is not by itself, service engaged in providing outsourcing, business process Infosys BPO finance and outsource services. That Limited accounting, apart, during the human (iii) relevant AY, i.e., AY 24.41% resource 2009-10, PAN Financial outsourcing, Services India Pvt. Ltd., legal process a subsidiary of the outsourcing (S. Company, amalgamated No. 7 at Page into the Company with 83 of Paper effect from 01.04.2008. Book dated This being an 06.09.2023). extraordinary event, the Company is not entitled to be chosen as a comparable for AY 2009- 10. Reliance in regard to the above is placed on: (i) Annual Report of

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 24 of 155 the Company for the relevant AY – Page 190, 192, para 16.2.15 at page 223 and para 16.2.21 at page 228 of the Compilation. (ii) Arctern Consulting (Supra) - Para 22 at page 271 of the Compilation.

5.5. It is submitted by the Ld.AR that ITeS segment of the Assessee is also covered in the APA entered into by the Assessee for AY 2010- 11 to AY 2018-19. It is submitted that under the APA, the ITeS segment of the Assessee is benchmarked independently of the distribution segment, using TNMM as the most appropriate method. Further it is submitted that the FAR of assessee for the year under consideration is the same as the FAR analysed under the APA for AY 2010-11 to AY 2018-19. The Ld.AR submitted that for computing correct arm’s length margin under the ITeS segment, the Assessee is seeking exclusions of the aforestated 3 comparables. The Ld.AR relied on the decisions of coordinate bench of this Tribunal in support of the exclusion of the three comparables the assessee relied on the decision of the coordinate bench of this Tribunal in case of Artern Consulting (p.) Ltd. Vs. ITO reported in (2022) 137 taxmann.com 69, wherein the alleged comparables have been held to be functionally not similar with a captive service provider.

5.6. On the contrary, the Ld.DR opposed the submissions of the Ld.AR. However, he submitted that in the event the APA is to be applied, the margins as adopted in the APA to ITeS segment should be applied

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5.7. In rebuttal to the above submissions of the Ld.AR, the Ld.AR submitted that the application of margins adopted under the APA for AY 2010-11 to 2018-19 to ITeS segment would be incorrect, as margins for transfer pricing purposes are to be computed based on current year data. Therefore, the APA has persuasive value only insofar as the methodology and functionality is concerned, nothing further. We have perused the submissions advanced by both sides in light of records placed before us.

5.8. We agree with the Ld.AR that the APA has persuasive value only insofar as the methodology and functionality is concerned, nothing further. However, we note that the DRP has already directed the separating the ITeS segment with the Distribution segment and to independently benchmark the ITeS segment by adopting TNMM as MAM. The Ld.AO while passing the impugned order computed the ALP of the ITeS segment at the same price as was computed by the Ld.TPO. The assessee is thus aggrieved with such computation of the ALP by the Ld.AO which is without considering the objections of the assessee in respect of following three comparables: Accentia Technologies Ltd., eClerx Services Ltd., Infosys BPO Ltd., 5.9. Before we undertake the exercise of comparability analysis, it is sine qua non to understand the FAR of assessee under ITeS segment, which is as under:

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5.10. The above FAR analysis has not been disputed by the revenue authorities for the year under consideration. It is thus an admitted fact that the assessee is a low risk bearing captive service provider. Based on the above FAR of the assessee, we shall consider the comparables sought for exclusion by the assessee. Primarily the assessee is submitting that the three companies are functionally not comparable with the assessee as they are into diversified activities for which there is no segmental details available. The objections of the assessee in respect of each comparables have been reproduced herein above. The Ld.AR relied on the annual reports of the comparables in support of the submissions.

5.11. We note that in Artern Consulting (p.) Ltd. Vs. ITO, Coordinate Bench of this Tribunal for assessment year 2009-10, observed and held regarding the alleged comparables as under: “ 22. As already mentioned, the ground that is being pressed is with regard to exclusion of Infosys BPO Ltd., Accentia Technologies Ltd., Informed TechnologiesLtd.,Cosmic Global Ltd. and Exclerx Services Ltd. From the list of comparable companies.(Ground No. 5 a). As far as exclusion of the aforesaid companies is concerned, the learned Counsel has filed a chart before us wherein he has referred to decision rendered by the ITAT, Bengaluru Benches, in the case of assessee's rendering ITeS services and in assessee's cases also, the very same comparables chosen in the case of the assessee in this appeal was chosen as a comparable company

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 32 of 155 by the TPO. In this regard, we find that in the case of e4e Business Solutions India (P.) Ltd.v.Dy.CIT [2016] 67 taxmann.com 68 (Bang. Tribunal), 4 of the 5 comparable companies set out in ground No. 5(a) were excluded for the following reasons: “Accentia Technologies Ltd. It was held that Accentia Technologies Ltd. is engaged in diversified activity of medical transcription, medical coding, billing and receivable management. The said company is engaged in the healthcare activity and providing BPO service in the healthcare sector, that too by providing specific services of medical transcription, medical coding, medical billing etc. These activities are quite different from the service of contact centre provided by the assessee to its AE which is purely in the nature of call centre. Therefore, the company Accentia Technologies Ltd. cannot be considered as a functionally comparable company with the services provided by the assessee to its AE. Ecclex Services Ltd. It was held that the company Eclerx Services Ltd. is engaged in diversified activity of providing services including analytic services and data process solutions to its global clients. The service provided by Eclerx Services Ltd., is in various areas including capital market and therefore, the services are in the nature of consultancy and end to end support through trade centre including trade confirmation, settlement, transaction, maintenance and analytic and reporting. Thus, it is apparent from the nature of the activity of this company that it is not providing a simple service of data processing but it is engaged in the activit of providing high-end services involving decision making analysis which requires thought process and evaluation of various facts and factors.Functional comparability of this company with that of simple BPO's service providing company has been examined by the Special Bench in the case of Maersk Global Centres (India) (P.) Ltd.v.Asstt. CIT [2014] 43 taxmann.com 100/147 1TD 83 (Mum. - Trib) and the Special Bench found that this company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly, the Assessing Officer/TPO is directed to exclude Eclerx Services Ltd. from the list of comparables for the purpose of determining ALP. Infosys BPO Ltd. It was held that the Annual Report of this company showed that there was amalgamation with effect from 1-4-2008. It is clear that there was extraordinary event of amalgamation during the year

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 33 of 155 under consideration. Therefore, in view of the extraordinary development of amalgamation of another company, this company cannot be considered as a good comparable for the assessment year under consideration. Apart from this, as per the segment reporting, this company is providing business process management services.” Thus form the above observations, it is clear that these are not fit comparable for a captive service provider like assessee. We therefore direct the Ld.AO/TPO to exclude the alleged three comparables from the final list. Accordingly Ground No.14 raised by the assessee stands allowed.

6.1. It is stated that the Ld.TPO aggregated the international transaction of the assessee with GIL under the distribution segment as well as ITeS segment and sought to apply RPSM to benchmark the two transactions together. The DRP on the other hand, directed the Ld.TPO to benchmark both the transactions separately, while also directing the application of PSM instead of RPSM for the distribution segment. Pursuant to the directions of the DRP, the Ld.TPO reduced the adjustment under the distribution segment from INR 68,78,21,711/- to INR 26,76,85,095/- by applying PSM instead of RPSM.

6.2. The Ld.AR at this juncture submitted that, in the APA entered into by the assessee for AY 2010-11 to 2018-19, the distribution segment and the ITeS segment have been benchmarked separately and both segments have been agreed to be benchmarked using TNMM as the Most Appropriate Method (running page 131, para 5.2

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 34 of 155 of the Paper Book dated 06.09.2023). He further submitted that, admittedly the FAR of the Assessee under the distribution segment has remained the same in AY 2009-10 as compared to subsequent years for which the assessee has entered into the APA. Accordingly, it is most humbly prayed that the TPO be directed to apply the TNMM basis profitability of comparables with FAR [appendix 1(b) at running page 148 – 152 of the Paper Book dated 06.09.2023] adopted in the APA, for the year under consideration as well.

We have considered the submissions of both sides in light of the records placed before us.

6.3. We note that the DRP has already directed the separating the ITeS segment with the Distribution segment and to independently benchmark the distribution segment by adopting TNMM as MAM. Further we note that the Ld.AO/TPO has not thereafter bench marked the distribution segment in accordance with the transfer pricing principles.

6.4. We therefore remand the issue of determination of ALP of distribution segment to the LD.AO/TPO. We direct the Ld.AO/TPO to benchmark the distribution segment by adopting TNMM as MAM and to compute the ALP of the transaction in accordance with law. Needless to say that the proper opportunity of being heard must be granted to the assessee. Accordingly Ground No.16-23 raised by the assessee stands allowed for statistical purposes.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 35 of 155 in ITA No. 374/Bang/2013, vide order dated 31.03.2023 passed for AY 2008-09. Reliance is also placed by the Ld.AR on the of this Tribunal in assessee’s own case in ITA No.68/Bang/2015, vide order dated 31.07.2023 which has followed the view taken in ITA No. 374/Bang/2013. For sake of convenience, the observation and view taken in ITA No.68/Bang/2015, which is a consolidated order for assessment years 2010-11 to 2015-16 is reproduced as under: “4. Issue 2: Rejection of books of accounts: Brief facts of this issue are as under: 4.1 The assessee entered into an agreement with Google Ireland for distribution of advertisement space under the AdWords program to the advertisers in India. As per the agreement, assessee was to pay to Google Ireland an amount equal to the excess of the revenue earned by Google India on distribution of advertisement space under the AdWords program. 4.2 Based on the contract, entered into by assessee with Indian advertisers for sale of advertisement space and as per the requirement under the generally accepted accounting principles in India (IGAAP), the assessee disclosed its advertisement revenue on a net basis in profit and loss account. Further it was submitted that in the profit and loss account, it was clearly stated that the advertisement revenue disclosed is net of amount payable by the assessee to Google Ireland for purchase of advertisement space. 4.3 The Ld. Counsel thus submitted that, the revenue authorities were not justified in rejecting the books of accounts of the assessee which has been duly audited based on conjectures and surmises without appreciating the disclosures made. 4.4 The Ld. Counsel submitted that the assessee reflected the receipts towards AdWord Program from various customers net of the distribution fees payable to GIL, though the TDS is claimed on the gross receipts. The Ld.AO therefore as a first step rejected the books of accounts u/s. 145. He submitted that the same situation arose for A.Y. 2008-09 in assessee’s own case in ITA

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 36 of 155 Nos. 374 & 362/Bang/2013 for A.Y. 2008-09 by order dated 31.03.2023. 4.5 The Ld. DR relied on the orders passed by authorities below. 4.6 We have perused the submissions advanced by both sides in the light of records placed before us. Identical issue has been considered by Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2008- 09 (supra) wherein this Tribunal held as under: “18. .......The ld AR during the course of hearing drew our attention to the observations of the coordinate bench of the Tribunal where by virtue of Grounds No. 2 to 4 (refer para 176 of order dated 11.05.2018) the issue was decided in favour of the Assessee. It was further brought to our attention that the said finding of this Hon’ble Tribunal was never challenged in appeal by the Department and that this issue was not the subject matter of appeal before the Hon’ble High Court of Karnataka which means that the same has attained finality. From these factual findings and given that there is no adverse finding with regard to the books of accounts, in our view the action of the AO by rejecting the books to recast the P&L with an intention to disallow distribution fee paid by the Assessee to GIL is not tenable. The grounds 2 to 4 with regard to rejection of books of accounts are accordingly held in favour of the assessee.” 4.7 Before us, the Ld.Counsel vehemently submitted that for the year under consideration, the revenue authorities did not point out any discrepancy in the books of accounts of the assessee. He also submitted that the facts for A.Y. 2008-09 on this issue are identical with the years under consideration. Before us the revenue has not brought anything contrary on record. 4.8 Respectfully following the view taken by Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2008-09 (supra), we do not find any reason to uphold the rejection of the books of accounts. Accordingly the grounds raised by assessee on rejection of books of accounts for A.Ys. 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15 stands allowed.”

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7.2. Respectfully following the above view, of the coordinate bench on this issue , we do not find any reason to uphold the rejection of the books of account. Accordingly Ground No.24 raised by the stands allowed.

8.1. Reliance is also placed by the Ld.AR on the of this Tribunal in assessee’s own case in ITA No.68/Bang/2015, vide order dated 31.07.2023 which has followed the view taken in ITA No. 374/Bang/2013. For sake of convenience, the observation and view taken in ITA No.68/Bang/2015, which is a consolidated order for assessment years 2010-11 to 2015-16 is reproduced as under: “6.1 The Ld. Counsel submitted that assessee had entered into agreement with Google Ireland for distribution of advertisement space under the google’s AdWords program in India and as per the agreement, assessee shall pay to Google Ireland a consideration for purchase of such advertisement space under the AdWords at Rs.1,85,68,92,343/- (for A.Y. 2010-11) which was in the nature of advertisement fees to post the advertisement of the advertisers on the server end by the Gooogle Ireland outside India. The Ld. Counsel submitted that, the assessee has been conducting its business of distribution of advertisement space under the AdWords program on its own account on a principal to principal basis and not as an agent or representative of the Google Ireland.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 38 of 155 6.2 He submitted that, the revenue authorities concluded that assessee is a Dependent Agent of Google Ireland in India, and that as the payment made towards the advertisement space under the AdWords to Google Ireland was without deduction of TDS, for which disallowance u/s. 40(a)(i) was made. 6.3 The Ld. Counsel submitted that Google Ireland did not have any business connection or permanent establishment in India and therefore the payments made by assessee to Google Ireland could not be subjected to tax provisions in India. In support, the Ld. Counsel relied on the decision of Google Ireland in ITA No. 2845/Bang/2017 passed by the Coordinate Bench for A.Y. 2007-08 by order dated 28.02.2023. 6.4 The Ld. Counsel submitted that, in assessee’s own case for A.Ys. 2009-10 to 2012-13, Coordinate Bench of this Tribunal has held that there is no permanent establishment of Google Ireland in India based on various discussions therein. The said view has been expressed in a decision reported in Google India Pvt. Ltd. vs. DCIT reported in (2022) 143 taxmann.com 302. “37. Therefore, in terms of the international guidance as stated herein, the position regarding taxability of receipts from sale of online advertisement space is clear. Unless the non- resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA.” 6.5 This Tribunal in the above decision also emphasised and drew support from the insertion of provisions related to equalization levy inserted by Finance Act, 2016 and observed as under: “38. The above view is also supported by insertion of provisions related to Equalisation Levy (EL) by Finance Act, 2016. The root for the emergence of the EL can be traced to the dynamic business models that have the ability to transcend the link between an income producing activity and a specific location since these business are carried in the cyber place. The PE definition presently is based upon the physical presence criteria. The new business models also created challenges in characterizing the nature of payment - whether the payment is for services or for any IPR and hence royalty or whether it represents pure business profits. Various ITAT

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 39 of 155 decisions, as discussed above, have held that income from sale of advertisement space on a website is not taxable in India if there is no PE of the foreign enterprise in India. It was held that such income is not to be regarded as royalty or FTS. Such tax challenges is addressed by the introduction of EL. Section 165 of the Finance Act, 2016 provides for charge of EL at 6% on consideration for specified services. Section 164(i) of Finance Act, 2016 provides that "specified service" means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf. Thus, online advertisement is now covered under EL. If online advertisement was already covered under definition of royalty, then bringing it as part of EL scheme would not arise.” 6.6 The Ld. Counsel submitted that in the aforesaid case, this Tribunal was seized with the identical issue of payments made by assessee to Google Ireland in respect of the Google AdWords program distribution agreement. 6.7 Further, it was submitted that Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2008-09 in ITA Nos. 374 & 362/Bang/2013 (supra) on similar issue on identical facts observed and held as under: “19. Now coming to main issue of disallowance of distribution fee u/s.40(a)(i), we notice that the basis on which the revenue has made the disallowance is that the assessee is the DAPE of GIL. The alternative ground of the revenue is that the payment is being in the nature of Royalty / FTS. We notice that the issue of taxing the distribution fees by treating the same as Royalty / FTS has already settled in favour of the assessee by the coordinate bench in assessee’s own case from the perspective of applicability of provisions of section 201 and accordingly there cannot be any disallowance u/s.40(a)(i) on this count. Therefore we in this order will restrict our adjudication to whether the assessee is the DAPE of GIL and whether the assessee is required to deduct tax at source u/s.195 on the impugned payments accordingly.” 6.7.1 This Tribunal held that assessee cannot be held to be a dependent agent PE of Google Ireland. This Tribunal further observed as under:

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 40 of 155 “20. To recapitulate the Assessee, during the year under consideration, recorded gross revenue of Rs.167,32,01,618/- from distributing online advertisement space to advertisers in India, out of which it paid Rs.119,82,61,984/- to GIL and retained net revenue of INR 47,49,39,634/-. The case of the revenue is that the assessee being the agent of GIL, the distribution fees is taxable in India i.e. assessee being the PE of GIL and therefore the payment is disallowed u/s.40(a)(i) in the hands of the assessee for failure on the part of the assessee to deduct tax at source. Before proceeding we will look at the relevant Article of DTAA. The term PE is defined in Article 5 of the DTAA and one of the forms of PE is DAPE, which is defined and governed by the provisions of Article 5(6) and 5(8) of the DTAA, reads as under: “6. Notwithstanding the provisions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 8 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State, that enterprise shall be deemed to have a permanent establishment in the first-mentioned Contracting State in respect of any activities which that person undertakes for the enterprise, if such a person: (a) has and habitually exercises in that State an authority to conclude contracts in the name of the enterprise, unless the activities of such person are limited to those mentioned in paragraph 5 which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph; or (b) has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise; or (c) habitually secures orders in the first- mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same control as that enterprise.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 41 of 155 …….. 8. An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, if the activities of such an agent are carried out wholly or almost wholly for the enterprise and the conditions made or imposed between them in their commercial and financial relations differ from those which would have been made or imposed if this had not been the case, that agent shall not be considered to be an agent of an independent status for the purpose of this paragraph.” 21. The plain reading of the above provision would point out to the following requisites, before an Indian entity can be classified as a DAPE of an Irish entity: (i) The Indian entity is broker, general commission agent or any other agent of the Irish entity and is not acting in the ordinary course of its business and is thus not an agent of independent status, (ii) The activities of such Indian entity are carried out wholly or almost wholly for the Irish entity and the conditions made or imposed between the two in their commercial and financial relations differ from those which would been made or imposed if this had not been the case, and (iii) Such Indian entity: (a) has and habitually exercises in India, an authority to conclude contracts in the name of the Irish entity, unless the activities of such Indian entity fall under any of the provision of Article 5(5) of the DTAA, or (b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the Irish entity, or (c) habitually secures orders in India, wholly or almost wholly for the Irish entity

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 42 of 155 itself or the Irish entity or any of its related party. 22. Therefore, all the above conditions must be satisfied, in the present case for the Assessee to be characterized as DAPE of GIL and in this regard one needs to examine the terms of Distribution Agreement, as the nature of the relationship should be determined based on such terms. The ld AR during the course of hearing drew our attention to the following clauses of the agreement to contend that the assessee is not a DAPE of GIL. Clause 2.1 that GIL appointed the Assessee as a distributor of Google AdWords Program to advertisers in India. It has been further provided in this clause that Assessee would conduct its business for its own account, in its own name, and not as an agent, employee, partner of franchisee of GIL. Clause 2.2 that the Assessee would market and distribute Google AdWords Program with its reasonable commercial expertise and own sales force and customer service infrastructure. Clause 2.6 that the Assessee would provide after-sales services to advertisers in India. Clause 14 that the Assessee and GIL shall remain independent contractors and nothing in the Distribution Agreement shall be deemed to create any agency, partnership, or joint venture between the Assessee and GIL. It has also been provided in this clause that neither Assessee nor GIL shall have any right or authority to create any obligation on behalf of each other. 23. We further notice that pursuant to the terms of the Distribution Agreement the Assessee entered into contracts with advertisers in India called “Google India Private Limited Advertising Program Terms” and perusal of the sample invoice (page 359 of Paper Book Volume 1) raised by the Assessee on an advertiser shows that the Assessee has raised the invoice and collected payments from the advertiser in its own name

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 43 of 155 and right. It is also noticed that the coordinate bench in assessee’s own case found the Assessee to be the distributor of the Google AdWords Program and therefore, the characterization as a distributor would mean that the Assessee is not an agent as per the findings of the Hon’ble Tribunal. Further the Distribution Agreement between the Assessee and GIL as well as Standard Contract entered into by the Assessee and advertisers in India do not contain any clauses that can lead to the conclusion that the Assessee has any authority to bind GIL. 24. We also notice that the CIT(A) though has confirmed the addition on the ground that the assessee is a DAPE of GIL, has given the following findings which is contrary to the same –  Internal Page 12: The CIT(A) noted the observation of the AO that various clauses of the Distribution Agreement between the Assessee and GIL make it clear that the Assessee is required to run the business on its own account.  Para 5.8 at Internal Page 21: The CIT(A) noted the observations of the AO yet again that the AdWords Program was sold by the Assessee for its own account, in its own name, and not as an agent, employee, partner or franchisee of GIL.  Para 6.8(iii) at Internal Page 39: The CIT(A) has categorically observed in this para that the Assessee is not a conduit or an agent of GIL.  Para 7.6(i) at Internal Page 51: The CIT(A) has observed that the Assessee never brought GIL into the picture for all its transactions and that all the payments had been collected by the Assessee in its own name. 25. It is noticed that inspite of giving the above findings, the CIT(A) upheld the AO’s decision by reproducing the AO’s observations and without bringing any contrary evidence on record from his end to prove that the Assessee has habitually concluded contracts on behalf of GIL.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 44 of 155 26. During the course of hearing the ld AR relied on various judicial pronouncements to submit that none of the requirements of Article 5(6) of the DTAA are satisfied since it is necessary for the Assessee to be characterized as DAPE that the conditions of Article 5(6) of the DTAA are satisfied and that burden of proving that an assessee has a PE is on the Department (i) Hon’ble High Court of Delhi in the case of Formula One World Championship Limited v. CIT, (2017) 390 ITR 199 (ii) Hon’ble High Court of Delhi in Nortel Networks India International Inc. v. DIT, (2016) 386 ITR 353 (iii) ADIT v. E-Funds IT Solution Inc., (2017) 399 ITR 34 (Supreme Court) (iv) Reuters Limited v. DCIT, (2015) SCC OnLine ITAT 8760 (Mum-Trib) (v) Taj TV Ltd. v. DCIT, (2022) 136 taxmann.com 278 (Mum-Trib) (vi) ESS Distribution (Mauritius) SNC et Compaginie v. DDIT, (2022) 145 taxmann.com 267 (Delhi-Trib) (vii) DDIT v. B4U International Holdings Ltd., (2012) 23 taxmann.com 372 (Mum-Trib) 27. In view of the above discussion with respect to the clauses in the Distribution agreement between the assessee and GIL, the invoices raised on advertisers and the relevant Articles of DTAA between India and Ireland, we hold that the Assessee cannot be treated as DAPE of GIL. Accordingly the distribution fees paid by the assessee to GIL is not liable for TDS u/s.195 of the Act and therefore no disallowance u/s.40(a)(i) is warranted. Grounds 5 to 9 is held in favour of the assessee.” 6.8 Nothing contrary has been filed by the revenue on this issue distinguishing the above referred observations of this Tribunal in assessee’s own case for A.Y. 2008-09 (supra) and the ld. D.R. has relied on orders passed by authorities below. 6.9 Respectfully following the above view, we hold that assessee cannot be treated as depending agent PE of Google Ireland and that no disallowance could be made u/s. 40(a)(i) of the act. Accordingly, grounds raised by assessee in respect of this issue for A.Ys. 2010-11 to 2015-16 stands allowed.”

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 45 of 155 8.2. Respectfully following the above views, we hold that the assessee cannot be treated as a dependent agent of Google Ireland. Accordingly Ground No.25-29 raised by the stands allowed.

(i) Google India Pvt. Ltd. v. ACIT, in ITA No. 374/Bang/2013, vide order dated 31.03.2023 for AY 2008-09. (ii) Google India Pvt. Ltd. v. DCIT & Anr, in ITA No. 68/Bang/2015, vide order dated 31.07.2023 for AY 2010-11 to 2011-12 (iii) Google India Pvt. Ltd. v. DCIT, in ITA No. 1513 to 1516/Bang/2013, vide order dated 19.10.2022 for AY 2009-10 to 2012-13 (iv) Google India Pvt. Ltd. v. DCIT, in ITA No. 1190/Bang/2014 and connected appeals, vide order dated 15.12.2022 for AY 2013-14 to 2016-17 (v) Google Ireland Limited v. DCIT, in ITA No. 2845/Bang/2017, vide order dated 28.02.2023 for AY 2007-08 9.1. Reliance is also placed by the Ld.AR on the decision of this Tribunal in assessee’s own case in ITA No.68/Bang/2015, vide order dated 31.07.2023 which has followed the view taken in ITA No. 374/Bang/2013. For sake of convenience, the observation and view taken in ITA No.68/Bang/2015, which is a consolidated order for assessment years 2010-11 to 2015-16 is reproduced as under: “7.1 The Ld. Counsel submitted that the payments that was disallowed u/s. 40(a)(i) of the act was also treated as Royalty / FTS by the Ld.AO. The Ld. Counsel submitted that the Ld.AO disallowed the payments as Royalty / FTS by holding the assessee to be a dependent agent PE of Google Ireland. 7.2 We have already held hereinabove that assessee cannot be held to be a dependent agent PE of Google Ireland by relying on decisions of coordinate bench of this

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 46 of 155 Tribunal in assessee’s own case. Further, in the decision of Coordinate Bench of this Tribunal in case of Google India Pvt. Ltd. vs. DCIT reported in (2022) 143 taxmann.com 302 this Tribunal has already held the payments made by assessee to Google Ireland cannot be considered to be Royalty as per para 39 of the said order. The same view has been taken by another decision of Coordinate Bench of this Tribunal in case of assessee in ITA No. 1190/Bang/2014 for A.Ys. 2013-14 to 2015-16 by order dated 15.12.2022. The relevant extract of the said order is reproduced as under: “6.1 With respect to the issue regarding payments made by the assessee to Google Ireland Ltd., being held to be Royalty under the Act read with the Treaty and liability to withhold tax fastened on the assessee, the assessee's representatives fairly conceded before the ld CIT(A) that the issue is covered by CIT(A)'s earlier year order for assessment years 2006-07 to 2012-13. Following his earlier decision, the ld CIT(A) confirmed the action of the AO. 7. Further, the AO has observed that M/s. Google Ireland was not beneficial owner of the amount received from the assessee in relation to royalty amount. The Ld. CIT(A) observed that in relation to characterization of amounts payable to M/s. Google Ireland as royalty by placing reliance on earlier order of the ld. CIT(A) in assessment years 2007-08 to 2012-13 in relation to contention of AO that M/s. Google Ireland is not beneficial owner of receivable from M/s. Google India Ltd., the ld CIT(A) has rejected the same and upheld that M/s. Google Ireland is beneficial owner of the sums received from M/s. Google India Ltd. under the reseller agreement. Aggrieved by the order of the ld. CIT(A), assessee is in appeal before this Tribunal on the issue of charaterisation of the amount payable to M/s. Google Ireland as royalty and the revenue is in appeal before us in relation to issue as to whether M/s. Google Ireland is the beneficial owner of the amount received from M/s. Google India Ltd. 8. We have heard the rival submissions and perused the materials available on record. Admittedly, this issue came for consideration before this Tribunal in assessee's own case in IT(TP)A No.1513 to 1516/Bang/2013 for the assessment years 2009-10 to 2012-13, the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 47 of 155 Tribunal vide order dated 19.10.2022 held as under: 13. We have heard rival submissions and perused the material on record. The issues involved in these appeals revolve around the taxability of payments received by GIL from the assessee, who is engaged in the business of online advertisement space to advertisers in India. The Revenue had sought to characterize these payments received by GIL to be royalty as defined in section 9(1)(vi) of the I.T.Act r.w. Article 12(3) of the India-Ireland Double Taxation Avoidance Agreement (India-Ireland DTAA) and thus chargeable to tax in India in the hands of GIL. The case of the assessee is that the said payments are in the nature of business profits, which are chargeable to tax in Ireland and not in India. Further, since the Department in these proceedings has never alleged that GIL had a Permanent Establishment (PE) in India in terms of Article 5 and accordingly by virtue of Article 7(1) of the India-Ireland DTAA, the right to tax these profits is solely with Ireland. Consequently, the assessee cannot be held to be an assessee in default u/s 201 of the I.T.Act for not deducting tax at source u/s 195 of the I.T.Act while making the subject payment to GIL. 14. For a proper adjudication of the above issue, it is necessary to briefly explain / examine the overview of the Google Adword Program, the role of the assessee under Adword Program distribution agreement and the service agreement (ITES). The undisputed fact on record is that Google.com is a search engine developed by Google LLC, USA available freely to the world at large providing information on any subject based on the search made by the user. The link to various websites related to the search are provided in the search result. Additionally, Google LLC, USA has also developed a computerised advertising program known as Google AdWords Program. Google Ireland Ltd (GIL) is the exclusive licensee and principal operator of the computerised advertising program i.e., "Google AdWords Program" for the whole world outside the USA. The Google AdWords program displays advertisements on Google's search engine. It has a separate website in which the advertisers have

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 48 of 155 to agree to certain terms and conditions including the consideration payable for the targeted Advertisements and provide appropriate keywords on searching of which the websites of the advertisers would be displayed on top of the Google search engine with the abbreviation "Ad". For instance, pursuant to the search query "Fresh Flower Delivery", website of "Ferns N Petals" is listed two times among websites of various other businesses. The listing of the website of "Ferns N Petals" at the top of the list is a sponsored link accompanied by a small abbreviation "Ad", and the other listing is an organic search result as it does not have any such abbreviation. [Page 318 of paper book 1] This is because, "Ferns N Petals" utilised the "Google AdWords Program" to advertise its business on the Google Search Engine. The targeting of advertisement is achieved by using appropriate keywords, which can be selected only by the Advertiser. The Google AdWords Program contains a glossary of keywords together with helpful suggestions for the Advertiser to select appropriate keywords for his targeted advertisement. Google AdWords Program also contains a number of computer commands, by which the proposed Advertiser can achieve a more focused and particularised targeting, such as geographical or area targeting (advertisement to be shown only in a particular area, say the State of Karnataka) or period targeting (advertisement to be shown only in a certain period) or time targeting (advertisement to be shown only at certain fixed times during the day) or duration targeting (to be shown only for a fixed time duration each time). All these types of targeting are over and above the usual subject targeting and are achieved by simple computer commands, given by the proposed Advertiser on the Google AdWords Program. All these facilities are available on the Google AdWords Program to any member of the public, free of charge, to enable him to formulate a suitable draft advertisement for his product or service. The only requirement is that the proposed Advertiser should have a website of his own / or entity giving particulars about his/ its business. The Google AdWords Program itself gives step-by-step and detailed instructions, so that even a person

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 49 of 155 who has a basic knowledge of computers and internet can create a draft advertisement and target it suitably by using the necessary computer commands (or tools). No payment is made for any use of the Google AdWords Program. After formulating the draft advertisement, the Advertiser is required to upload the same for display on Google Search Engine or other online properties using the Google AdWords Program. No payment is made for the same. Thereafter, the proposed advertisement is stored on the servers of Google Ireland Ltd (GIL) located outside India for undergoing a review process. 15. The review process is undertaken by GIL for advertisements uploaded by Advertisers from all around the world including India. Approximately 94% of global advertisements are reviewed by GIL through its automated system located outside India. Remaining global advertisements, which are not successfully reviewed by the automated system, are subjected to a manual review. For carrying out manual review, the balance 6% (approx.) global advertisements are forwarded to one of service centres of GIL's group entities, located in USA, Dublin, China, Korea, Japan, and India. An advertisement in English by an Indian Advertiser may go for manual review to any of these service centres. These service centres carry out the activity of manual review on a cost-plus basis. The assessee also carries out this activity under the ITES segment as per the services agreement dated 1.4.2004 entered into with GIL. The relevant terms and conditions of this agreement are as under: `THIS SERVICES AGREEMENT (''Agreement'') is entered into as of 1st April, 2004 (the "Effective Date''), by and between Google Ireland Limited, a corporation organized under the laws of Ireland ("Ireland'') and having its office at Seagrave House, 19120 Earlsfort Terrace, Dublin 02, Ireland, and Google Online India Private Limited, a company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Prestige Sigma, 1st Floor, NO.3 Vittal Mallya Road, Bangalore 560001, India ('Go ogle India') and having a branch office at RMZ Future, Block A, 4'" Floor Plot No. 14, Road No.2, Hitec City Layout, Madhapur village, Ranga

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 50 of 155 Reddy District, Hyderabad 500081, Andhra Pradesh. A. WHEREAS, Google Ireland is in the business of developing, licensing, selling, marketing and supporting certain Internet search, advertising system and information organization and management technology products and services to provide information, advertising, search and related services via the Internet, corporate intranets and private networks (collectively, 'Products ''); and . WHEREAS, Google Ireland desires to avail services, relating to, information technology. Information technology enabled services and software development related services from Google India as per the terms and conditions of this Agreement; and C WHEREAS, Google India has expertise in rendering the above services and is willing to render such services for Google Ireland as an independent contractor on the terms and conditions of this Agreement: NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein the parties agree as follows: 1. DEFINITIONS 1. 1 'Affiliate' shall mean any Person, whether de Jure or de facto, that directly or indirectly participates in the capital. control or management of either party or is under common ownership with a party to this Agreement or other entity actually controlled by, controlling. or under common control with a party to this Agreement. 1.2 "Confidential Information' shall mean all data and information of a confidential nature, Including know-how and trade secrets, relating to the business, the affairs, the products. the development or other projects or services of Google Ireland or its-suppliers or its affiliate. including but not limited to Intellectual Property. Confidential Information may be communicated orally, in writing. or in any other recorded, electronic or tangible form. Data and information shall be considered to be Confidential Information if (i) Google Ireland has marked them as such; (ii) Google Ireland, orally or in writing, has advised Google India of their confidential nature; or (iii) due to their character or nature, a reasonable person in a like position and under like circumstances would treat them as secret and

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 51 of 155 confidential. Confidential Information does not include information: (i) that is in the public domain through no fault of the receiving party, (ii) that was previously known by receiving party, as established by written records of the receiving party prior to receipt of such information from the providing party or (iii) that was lawfully obtained by the receiving party from a third party without any obligations of confidentiality to Google Ireland. 1.3 "Derivative works Work" shall mean (i) for copyrightable or copyrighted material, any modification. derivative works work (as defined in 17 USC. §101), translation, abridgment, revision or other form in which such material may be recast, transformed or adapted, (ii) for patentable or patented material, any improvement thereon. and (iii) for material protected by trade secret, any new material derived from such existing trade secret material, including new material which may be protected to copyright, patent and/or trade secret. 1.4 "Documentation" shall mean any and all information, written or otherwise, provided by Goode Ireland to Google India describing the Intellectual Property or the Products and any updated, improved or modified version(s) of such materials including information contained in published written materials, on magnetic media or communicated by electronic means. 1.5 "intellectual Property' shall mean all intellectual, proprietary, and/or intangible property rights constituting, embodied in. pertaining to, used in or with respect to the business of Google Ireland, the Products, or the provision of related services and all tangible embodiments hereof, wherever located, including but not limited to the following: (i) all trademarks, trade names, service marks, logos or trade dress, including all registrations and applications therefor; (ii) all copyrights. Moral Rights (as defined below), and other rights in works of authorship including all registrations and applications therefor; (iii) all patents and patent applications. patentable Ideas, Inventions, innovations and improvements; (iv) all know- how and trade secrets; v) all design and code documentation, methodologies, processes, design

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 52 of 155 information, design flows, encoding techniques, applications, product information. Formulae, engineering specifications, technical data, testing procedures, drawings and techniques and other proprietary information and materials of any kind; (vi) all software programs in both source code and object code format. including all testing software and software tools: (vii) all documentation, records, databases, drafts, designs, codes, drawings and algorithms: and (viii) all confidential and proprietary information related to any of (i) through (vii) above **** **** ****** 1.10 "Software Embodiments" shall mean all designs, discoveries, inventions. Products. procedures, improvements, developments, drawings, notes, Documentation. information. materials, Intellectual Property and Derivative works Works made, conceived or developed by Google India alone or with others which result from or relate to the Services 1.11 "Software Technology" shall mean all Intellectual Property, Confidential Information, Documentation, Derivative works Works and other technical data used by Google Ireland that are required, used or appropriate for the design and development of Products. including the reproduction, use, testing, operation, maintenance and service of such Products. **** **** ***** 2. SERVICES 2.1 Request Google India hereby agrees to perform certain information technology, information technology enabled services and software development services, as requested by Google Ireland from time to time, with respect to Products, utilizing Google Ireland Software Technology and other appropriate technology from Google Ireland or third parties which may be properly used for these purposes. Google Ireland will specify the information technology, information technology enabled services and software development services to be performed, the Products to be worked on or used, the time line for completion and the specific results to be achieved (the Services"). 2.2 Performance. Upon agreement between Google Ireland and Google India as to the Services and completion date for a particular Services project,

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 53 of 155 Google India will perform the Services. Google India agrees to use commercially reasonable efforts to perform the Services in a timely fashion and as described to it by Google Ireland. Google India may not subcontract work under this Agreement unless specifically and to the extent set forth in the Services. Google India shall, at all times, be responsible for work done by its subcontractors within the scope of this Agreement as it is for work done by its own employees. At the option of Google Ireland, Google India shall make Goggle Ireland a party to the agreements that Google India may execute with its subcontractors and Google Ireland shall have the right to pre-approve the terms and conditions of such agreements **** **** ****** 5. OWNERSHIP 5.1 Intellectual Property. Google India acknowledges the exclusive right. title and interest of Google Ireland and its licensors and/or suppliers in and to any and all Confidential Information, Intellectual Property, Software Technology and Documentation, and Google India will not at any time do or cause to be done any act or thing impairing or tending to impair any part of said right, title and interest. Google India acknowledges and agrees that all such Confidential Information, Intellectual Property, Software Technology and Documentation shall remain the exclusive property of Google Ireland and, as applicable, its licensors and/or suppliers. 5. 2 Ownership of Derivative works Works and Software Embodiments. Google India shall keep Google Ireland promptly informed of Google India's development of any Derivative works Works and Software Embodiments and hereby irrevocably agrees that all such Derivative works Works and Software Embodiments shall forever be the sole and exclusive property of Google Ireland throughout the world from the date of its creation. As between Google Ireland and Google India no additional action shall be required to vest all right, title and ownership of such Derivative works Works and Software Embodiments in Google Ireland. Google India shall furnish to Google Ireland all such Derivative works Works and Software Embodiments developed by Google India as soon as they become available. From time to-time, promptly upon receipt of Google

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 54 of 155 Ireland's request, Google India shall provide Google Ireland with assignments, in substantially the form of Exhibit B hereto to facilitate Google Ireland's perfection of its rights in the Derivative works Works and the Software Embodiments in any jurisdiction in the world. Google India shall also promptly make available to Google Ireland all Residuals. If Google India has any rights to Derivative works Works or Software Embodiments that cannot be assigned to Google Ireland under law. Google India hereby waives the enforcement of such rights; and if Google India has any rights which cannot be assigned or waived under law, Google India hereby grants to Google Ireland an exclusive, irrevocable, perpetual, worldwide, transferable, folly paid licence, with rights to sub license and assign, to all such rights. Google India shall enter into agreements with its Representatives sufficient to permit Google India to make the foregoing grant of rights. ****** ****** ***** 6. CONFIDENTIAL INFORMATION 6.1 Access and Use of Confidential Information. During the course of performance of this Agreement, Google Ireland will disclose certain Confidential Information to Google India solely to permit Google India to perform its obligations under this Agreement. Except as otherwise provided in this Agreement, Google India agrees that such Confidential Information shall be kept secret by Google India during the term of this agreement and after the expiration hereof Google India shall refrain from using or exploiting any and all Confidential Information for any purposes or activities other than those contemplated in this Agreement. 6.2 Agreement Not to Disclose Confidential Information. Google India shall not disclose or facilitate disclosure of such Confidential Information to any Person without the prior consent of Google Ireland, except to its Representatives, and then only to the extent necessary for the performance of the activities contemplated by this Agreement. Google India shall cause each of its Representatives with

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 55 of 155 access to the Confidential Information to enter into a nondisclosure agreement in a form approved by Google Ireland. Google India shall use the highest standard of care currently employed by any developer or distributor of high technology products in order to avoid disclosure or misappropriation of such Confidential Information. 6.3 Ownership and Return of Confidential Information. All files, lists, records. documents, drawings, specifications, equipment and computer programs which incorporate or refer to all or a portion of the Confidential Information shall remain the sole property of Go ogle Ireland or its licensors and suppliers. Such materials shall be promptly returned: (i) upon Google Ireland's reasonable request, or (ii) in accordance with Section 12 upon termination of this Agreement, whichever is earlier. **** ********* ****** 12.5 Rights and Duties of Termination. (a) Upon termination or expiration of this Agreement: (i) Google India shall have the right to retain any sums already paid by Google Ireland under this Agreement and Google Ireland shall pay all sums accrued, but not yet paid, that are due under this Agreement as of the date of such termination; (ii) Google India shall discontinue all use of the Confidential Information, Documentation, Intellectual Property and other Software Technology and shall have no further right with respect thereto. (iii) Google India shall (except as specified in subsection (b) below) immediately return to Google Ireland or (at Google Ireland's request) destroy, all copies of the Confidential Information, Documentation and other Software Embodiments, in its possession or control. Google India hereby expressly waives and agrees not to assert any right of detention whatsoever with respect to the foregoing.' 16. Prior to December 2005, an Indian Advertiser could get into a contract with GIL only, for purchasing online advertisement space. However, to accommodate Indian Advertiser(s) desirous to pay in Indian Rupees instead of foreign currency, GIL entered into the Google AdWords Program Distribution Agreement dated 12.12.2005 with

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 56 of 155 the-assessee, whereunder the assessee was appointed as a non- exclusive distributor of online advertisement space in India In terms thereof, the assessee set up its "Distribution Segment" for carrying out purchase and re-sale of online advertisement space to Indian Advertisers. However, Indian Advertisers who were willing to pay in foreign currency, continued to transact directly with GIL. The Google AdWords Program and its features remains the same whether the Advertiser in India purchases online advertisement space from GIL or its authorised distributor i.e., the assessee. The only difference is where Indian Advertiser purchases from the assessee, it pays in INR whereas where Indian advertiser purchases from GIL, it pays in foreign currency. 17. In a case where the assessee is involved in purchase and re-sale of online advertisement space to Advertiser and if such Advertiser finds it difficult to use Google AdWords Program, he can get guidance and assistance from the employees of the assessee working under the Distribution Segment. However, substantial portion of Indian Advertisers in India prepare their draft advertisements themselves, with the aid of the Google AdWords Program itself. All this is completely free and is open to any member of the public. No payment is made for any use of the Google AdWords Program. In fact, even after using the Google AdWords Program and formulating / displaying an online advertisement, no payment is made by the Advertiser, unless the Ad is clicked by an end-user. Relevant terms and conditions of the Distribution Agreement are as under:- 'Amended and Restated Google AdWords Program Distribution Agreement. This Amended and Restated Google AdWords Program Distribution Agreement ("Agreement'') is entered into as of December 12, 2005 (the "Effective Date'') by and between Google Ireland Limited, with offices at 1st & 2nd Floors Gordon House, Barrow Street, Dublin 4 Ireland ("Google''),and Google Online India Private Limited, a company incorporated under the Indian Companies Act, 1956 and having its registered office at 1st Floor, Prestige

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 57 of 155 Sigma, No. 3 Vittal Mallya Road, Bangalore 560 001 ("Distributor''). WHEREAS 1. Google wishes to enter into the Distribution Agreement for its AdWords Program with Distributor; 2. Whereas Google Inc., a Delaware corporation, and Distributor entered into a Google AdWords Program Distribution Agreement, dated as of December 12, 2005.(the "Prior Agreement"), and Google Inc. assigned its rights and obligations under the Prior Agreement to Google; and 3. Google and Distributor desire to terminate the Prior Agreement and further desire that this Agreement supersede and replace the Prior Agreement in its entirety; NOW, THEREFORE, in consideration of the promises and the mutual covenants, agreements, representations and warranties hereinafter set forth, Google and Distributor hereby agree as follows 1. Definitions. The following capitalized terms shall have the meanings set forth below. 1.1 ''Advertiser'' means an individual or business resident or having its principal place of business located within the Territory (as defined herein), where principal place of business is determined by the place of an entity's registration. 1.2 ''AdWords Program" means the advertising program currently offered by Google under the name ''AdWords.'' 1.3 "Brand Features" means the trade names. trademarks, service marks, logos, domain names, and other distinctive brand features of each party, respectively, as secured by such party from time to time. 1.4 "Designated Contact" means those contacts designated by each party as the point of contact or contacts for a particular function area related to this Agreement. 1.5 "Google Brand Features" means the Google trade names, trademarks, service marks, logos, domain names, and other distinctive brand features, with some but not all examples at "http://www.google.comipermissionsltrademarks. html" (or such other URL that Google may provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 58 of 155 may provide to Distributor for use solely under this Agreement. 1.6 "Intellectual Property Rights" shall mean any and all rights existing from time to time under patent law, copyright law, semiconductor chip protection law, moral rights law, trade secret law, trademark law, unfair competition law, publicity rights law, privacy rights law, and any and all other proprietary rights, as well as, any and all applications, renewals, extensions, restorations and re-instatements thereof now or hereafter in force and effect worldwide. 1.7 "Keywords" means words chosen by an advertiser through the AdWords Program for a given set of one or more advertisements that are used to target those advertisements to potential customers. 1.10 "User Data" means all data and information provided by users via the AdWords Program, including all registration data, names, email addresses, other addresses, contact information, and other identifying information. 2. Appointment of Territory and Distributor Obligations. 2.1 Appointment of Territory. Google appoints Distributor as a non-exclusive authorized Distributor of Go ogle AdWords Program to Advertisers, all under and in accordance with the terms and conditions set forth in this Agreement. Distributor shall conduct its business for its own account, in its own name, aid not as an agent, employee, partner, or franchisee of Google. Distributor may not solicit business from and shall not distribute AdWords Program to (even if unsolicited), any entity that does not have a principal place of business within the Territory. For the avoidance of doubt, an entity's principal place of business will be determined by the place of such entity's registration. All inquiries by any such entity for sale of advertising space shall be referred to the designated Google contact within three (3) business days of receipt by Distributor of such inquiry. 2.2 Distribution & Marketing of AdWords Program. Distributor agrees to market and distribute AdWords Program to Advertisers in the designated Territory. within the broad guidelines provided by Google, with its reasonable commercial expertise and own sales force and

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 59 of 155 customer service infrastructure. Distributor shall not subcontract any of its functions or obligations under this Agreement to any third parties. Distributor shall perform its obligations hereunder in a professional and workmanlike manner consistent with reasonably applicable industry standards and in accordance with this Agreement. Distributor will distribute AdWords Program in accordance with the training provided by Google. Failure to do so would constitute a material breach of this Agreement and shall be grounds for termination under section 9.3. 2.3 AdWords Program Sign Up Process. Distributor shall be responsible for uploading all Advertiser information that is required by Google for participation in the AdWords Program. 2.4 Licences; Approvals. Distributor shall be responsible for obtaining all licences and permits and for satisfying all formalities as may be required to enter into this Agreement and to perform its obligations in accordance with then- prevailing laws and regulations, including without limitation those necessary to enable Distributor to make payments to Google in US dollars. Distributor will promptly secure all governmental approvals as may be required in the Territory or performance of its obligations under this Agreement. 2.5 Compliance with United States and Other Applicable Law; Conduct of Business. Distributor will comply with all United States and local laws and regulations applicable to the distributor of the goods and services. including but not limited to the Foreign Corrupt Practices Act and US regulations of international boycotts. Distributor shall (a) conduct business in a manner that reflects favorably at all times on the AdWords Program and on Google's goodwill and reputation, and (b) agrees to adhere to the minimum levels of service as specified in Exhibit C. Breach of this Section 2. 5 will constitute a material breach of this Agreement. 2. 6 After-Sales Support. Distributor will provide after-sales services to Advertisers in accordance with the broad instructions, training and standards of Google. 3. Google Obligations.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 60 of 155 3.1 Advertising Space. Google agrees to provide advertising space through the AdWords Program for distribution by Distributor to Advertisers as set forth herein. 3.2 Training. Google agrees to train Distributor. 3.3 Non-Exclusivity. This Agreement shall constitute a non- exclusive relationship between Google and Distributor. ***** ***** ****** 5. Reporting Requirements. 5.1 Information Provided by Google. Google will make available to Distributor online information about Advertiser activity, on an aggregate and individual basis. which information shall contain include (i) the total number of Keywords purchased by Advertisers, (ii) the number of impressions of Advertisers' advertisement delivered across the Google network, (iii) the number of clicks delivered across the Google network for Advertisers' advertisement an (iv) the cost of clicks delivered across the Google network for Advertisers ' advertisement. Distributor must set up AdWords Program advertising accounts in order to receive such online information. Google reserves the right, but has no obligation, to send reports about an Advertiser's activity directly to such Advertiser. If an Advertiser makes a request to Distributor to receive a user name and password to access such Advertisers individual AdWords Program account activity, Distributor' will grant such request after approval from Google. ***** ***** ****** 6. Brand features. Each party shall own all right, title and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features. Google grants to Distributor nonexclusive and non sub-licensable licence during the Term to display Google Brand Features solely for the purpose of Distributor's marketing and distribution of AdWords Program under the terms and subject to the conditions set forth in this Agreement. Notwithstanding the foregoing, Distributor will submit all materials of any kind containing the Brand Features) to Google for written approval prior to release to the public. Furthermore, Distributor agrees to adhere to Google's then- current Brand Features use

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 61 of 155 guidelines, and any content referenced or included therein, which may be found at the following URL: http://www.google.comlpermissionslguidelines.ht ml (or such other URL that Google may provide from time to time) and to such other guidelines or restrictions provided by Google in writing to Distributor in connection herewith. Except as set forth in this Agreement, Distributor shall not acquire any right, title or interest in or to the Google Brand Features. All use by Google of Distributor Brand features (including any goodwill associated therewith shall inure to the benefit of Distributor and all use by Distributor of Go ogle Brand Features (including any goodwill associated therewith) shall inure to the benefit of Google. No party shall challenge or assist others to challenge the Brand Features of the other party (except to protect such party's rights with respect to its own Brand Features) or the registration thereof by the other party, nor shall either party attempt to register any Brand Features or domain names that are confusingly similar to those of the other party. 7. Confidentiality; Limitation on Public Announcements. Disclosure of confidential and/or proprietary information disclosed hereunder, including the User Data (including any aggregated User Data), the existence and content of this Agreement, and any information provided pursuant to this Agreement, shall be governed by the Google Standard Mutual Non-Disclosure Agreement (introductory paragraph and Sections 1 through 12, inclusive), executed by the parties prior to or concurrently with this Agreement (the "NDA ''), which is attached hereto as Exhibit B, and which is incorporated by reference herein. Each party acknowledges and agrees that it will obtain the other party's prior written approval, which shall include approval of any proposed text, before making any public announcements or communication, including, but not limited to, any press releases, online publishing or direct mailings concerning or related to the existence or terms of this Agreement. In addition. Distributor agrees to waive all claims against and release Google (and its affiliates, partners and representatives) from any claims or losses in

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 62 of 155 connection with any above publications made by Google. 4. User Data. Google owns all right, title, and interest in and to all information and data, including the User Data collected by Google relating to Advertisers in connection with the provision of the AdWords Program. Distributor shall maintain all User Data in accordance with local law and regulation applicable to such data. and shall implement policies and procedures with respect to the User Data that are at least as protective of the rights of the Advertisers as is provided in the Google Privacy Policy set forth at http://wwvv.qoogle.comlprivacy.html and all relevant policies implied therein ****** ****** ****** 9.4 Effect of Termination. Upon any termination or expiration of this Agreement, (i) all rights and licences granted by one party to the other. including but not limited to rights to use the other party's Brand Features shall cease immediately, (ii) each party shall promptly return to the other party, or destroy and certify the destruction of all Confidential Information as defined in the NDA and Section 7 of this Agreement) of the other party, and (iii) except for a termination pursuant to Section 9.2 or Section 9.3 above. Google will continue to serve advertisements as provided in this Agreement up to the earlier date to occur of (x) the date that the services provided by Google exhaust any amounts prepaid by Distributor, or (y) the date that is thirty (30) days after expiration or termination of the Agreement. Termination or expiration of this Agreement. in part or in whole. shall not limit either party from pursuing other remedies available to it, nor shall Distributor be relieved of its obligation to pay all charges that have accrued or are otherwise owed under this Agreement. Termination of this Agreement does not prevent Distributor from participating in the AdWords Program pursuant to the general terms and conditions made publicly available by Google from time to time in its sole discretion. ***** ***** ***** EXHIBIT C Service Level Agreement Distributor shall be solely responsible for providing all customer services to Advertisers. according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 63 of 155 contact Distributor directly for support and not to communicate directly with Google. Distributor agrees that it shall provide at least the following minimum levels of service: Business hours phone support to all Advertisers. E-mail queries from Advertisers shall be responded to within one (1) business day with immediate resolution of any issues when possible. Issues that cannot immediately be resolved by Distributor based on training and procedures provided under the Agreement must be communicated promptly to Google by Distributor and Google will assist Distributor in determining the best solution. Google agrees that it shall provide at least the following minimum levels of service to Distributor: Customer Queries (as defined below), up to the E- Mail Escalation Limit (as defined below), shall be responded to within one (1) business day "Customer Queries" shall mean e-mails sent from Distributor to Google related to Advertiser issues, but excluding general communications between Distributor and Google (e.g. billing questions, training information) and technical issues that only Google can solve. "E-Mail Escalation Limit" shall equal five (5) e- mails per month for everyone hundred (100) Advertisers serviced by Distributor, provided, however that the E-Mail Escalation Limit shall only apply beginning thirty (30) days after the completion of tile training. Timing for responses to Customer Queries from Distributor beyond the E- Mail Escalation Limit shall be at Google's sole discretion. Distributor agrees that Google will have the right, to review samples of communications sent to Advertisers to assess the quality of responses and modify communications accordingly. Google shall also have the right to send questionnaires to Distributor's customers to ensure that Distributor is providing an adequate level of service. Mutual Non-Disclosure Agreement This Mutual Non-Disclosure Agreement (''Agreement'') is made and entered into between Google Ireland Limited, for itself and its subsidiaries and affiliates ("Google''), and "Participant ' identified below, individually referred to as a ''Party'' and collectively referred to as the "Parties". The Parties

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 64 of 155 wish to exchange Confidential Information (as defined below in Section 2) for the following purpose(s): a) to evaluate whether to enter into a contemplated business transaction; and b) if the Parties enter into an agreement related to such business transaction, to fulfill each Party's confidentiality obligations to the extent the terms set forth below are incorporated therein (the ''Purpose''). The Parties have entered into this Agreement to protect the confidentiality of information in accordance with the following terms: 1. The Effective Date of this Agreement is December 12, 2005. 2. In connection with the Purpose, a Party may disclose certain information it considers confidential and/or proprietary ("Confidential Information '') to the other Party including, but not limited to, tangible, intangible, visual, electronic, present, or future information such as: (a) trade secrets; (b) financial information, including pricing; (c) technical information, including research, development, procedures, algorithms, data, designs. and know- how; (d) business information, including operations, planning, marketing interests, and products; (e) the terms of any agreement entered into between the Parties and the discussions, negotiations and proposals related thereto; and (f) information acquired during any facilities tours. 3. The Party receiving Confidential Information (a "Recipient'') will only have a duty to protect Confidential Information disclosed to it by the other Party ("Discloser''): (a) if it is clearly and conspicuously marked as "confidential" or with a similar designation; (b) if it is identified by the Discloser as confidential and/or proprietary before, during. or promptly after presentation or communication; or (c) if it is disclosed in a manner in which the Discloser reasonably communicated, or the Recipient should reasonably have understood under the circumstances including without limitation those described in Section 2 above, that the disclosure should be treated as confidential whether or not the specific designation "confidential" or any similar designation is used.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 65 of 155 4. A Recipient will use the Confidential Information only for the Purpose described above. A Recipient will use the same degree of care. but no less than a reasonable degree of care, as the Recipient uses with respect to its own information of a similar nature to protect the Confidential Information and to prevent: (a) any use of Confidential Information in violation of this agreement; and/or (b) communication of Confidential Information to any unauthorized third parties. Confidential Information may only be disseminated to employees, directors, agents or third party contractors of Recipient with a need to know and who have first signed an agreement with either of the Parties containing confidentiality provisions substantially similar to those set forth herein. ***** ***** ***** 6. This Agreement imposes no obligation upon a Recipient with respect to Confidential Information that: (a) was known to the Recipient before receipt from the Discloser; (b) is or becomes publicly available through no fault of the Recipient; (c) is rightfully received by the Recipient from a third party without a duty of confidentiality; (d) is independently developed by the Recipient without a breach of this Agreement; (e) is disclosed by the Recipient with the Discloser's prior written approval; or (f) is required to be disclosed by operation of law, court order or other governmental demand ("Process''); provided that (i) the Recipient shall immediately notify the Discloser of such Process; and (ii) the Recipient shall not produce or disclose Confidential Information in response to the Process unless the Discloser has: (a) requested protection from the legal or governmental authority requiring the Process and such request has been denied, (b) consented in writing to the production or disclosure of the Confidential Information in response to the Process, or (c) taken no action to protect its interest in the Confidential Information within 14 business days after receipt of notice from the Recipient of its obligation to produce or disclose confidential information in response to the Process ***** ***** *******

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 66 of 155 11. No Party acquires any intellectual property rights under II Agreement (including, but not limited to, patent, copyright, and trademark rights) except the limited rights necessary to carry out the Purpose as forth in this Agreement. 0. Each Party acknowledges that damages for improper disclosure Confidential Information may be irreparable; therefore, the injured Party is entitled to seek equitable relief, including injunction and preliminary injunction, in addition to all other remedies available to it. 18. The standard agreement entered into between the assessee and the advertisers is as under:- Google Advertising Agreement Customer Invoicing address Advertising third party Name and address Advertiser Advertising third party Customer will promptly notify Google of any change in address and contact name information for billing purpose. Agreement name. Agreement type Agreement Id Purchase order # Target start date End date Agreement budget Service tax Billing Method Payment Terms (payment due within the following number of days from invoice date) When applicable, Customer's purchase order number references above is required and must be provided by customer for Google Invoicing This Adwords Agreement ('SA') shall be governed by terms and conditions ('Terms and Conditions) available at the following URL: http.l/ www.google.co. inladsladwordsterms. html All terms contained in the Terms and Conditions are made a part of this SA through incorporation by reference. The signatory of this Service Agreement represents that she has read and agrees to such Terms and Conditions and the terms of SA. There shall be no force or effect to any different or

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 67 of 155 additional terms of any related SA, purchase order or sales document. Google may decide at any lime, in its sole discretion, to change, suspend or discontinue all or any aspect of its advertising programs, including their availability, and shall notify Customer of material changes and discontinuauons. Google shall have no liability for such decision. By signing below, Customer represents and warrants that all client information, including but not limited to credit card information and invoicing information, provided herein is complete and accurate and that no additional information is necessary for payment of Google invoices. Customer's campaign(s) may go live upon posting. at which time Google shall send Customer an email notifying customer it has 72 hours to modify Customers campaign keywords and settings as posted. During those 72 hours, Google is only liable to Customer for keywords or settings discrepancies if Customer can certify to Google by its contemporaneous documental (evidence that Google posted keywords or settings other than those requested by Customer. The account (as modified by Customer, or if unmodified, as initially posted) will be deemed approved by Customer 72 hours after it initially posts. Terms of Payment. If Google, at any time, deems itself insecure with respect to Customer's ability to meet its financial obligations under this SA, Google shall have the right to require pre- payment of the total amount due for the SA in advance of the Target Start Date or as otherwise requested by Google. Customer must remit all payments under this SA to Google by the due date indicated on the Invoice(s). In the event of nonpayment, Google reserves the right to immediately terminate this SA upon written notice to Customer and immediately suspend the entire Customer account. Late payments are subject to interest payments as set forth in the Terms and Conditions. Methods of Billing: Monthly Invoicing: Customer will be billed at the end of the month, based on the actual number of clicks or other billing methods Customer may choose to participate in as described in the FAQ (e.g. cost per impression programs). Customer's

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 68 of 155 credit must first be approved by Google in order for this billing method to apply. Prepayment: Customer will pay the total agreement budget prior to any campaign launch. Acceptance and terms of prepayment are at Google's sole discretion. Prepayment does not obligate Google to deliver any Ad Words ads notwithstanding acceptance of prepayment by Google. Unused portions of prepayments will be returned to Customer after the end date to the extent that there are no amounts still due to Google. Right To Reject Advertisement: All advertisements submitted by Customer are subject to Google's approval. Google reserves the right to review, reject or remove any SA, advertisement, or URL link, except that Google will not cancel placement of an SA, advertisement, or URL link due to inventory demand for other advertisers. Customer pre-authorises Google to modify or rearrange the text elements in advertising creative submitted by Customer. Please carefully read these Google Advertising Agreement terms and conditions ("Agreement') before selecting '1 Accept ' and submitting your selection. By selecting 'I Accept', you agree to be legally bound by the terms of this agreement. If you do not agree to the terms of this agreement please select "1 Decline" and submit your selection. Customer signature Name Title Company Google Signature Name Title Company." 19. The Standard Google India Private Limited Advertising Program Terms are as under: "Google India Private Limited Advertising Program Terms These Google India Private Limited Advertising Program Terms ("Terms") are entered into by, as applicable, the customer signing these Terms or any document that references these Terms or that accepts these Terms electronically ("Customer") and Google India Private Limited ("Google'~. These Terms govern Google's

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 69 of 155 advertising program(s) ("Program") as further described in the applicable Program's frequently asked questions at www.google.com (the "FAQs') and, as applicable, Customer's participation in any such Program (s), Customer's online management of any advertising campaigns ("Online Management") and/or any insertion orders ("IO" executed by and between the parties (together the "Agreement"). Google and Customer hereby agree and acknowledge: 1. Policies. Program use is subject to all applicable Google and Partner ad specification requirements and policies, including without limitation the Editorial Guidelines (adwords google.com/select/guidelines.html) Google Privacy Policy (www.google.com/privacy.html) and Trademark Guidelines (www.google.com/permissions/guidelines.html), (collectively, "Policies"). Policies may be modified any time. Customer shall direct only to Google communications regarding Customer ads on Partner Properties. Some Program features are identified as "Beta," "Ad Experiment," or otherwise unsupported ("Beta Features"). To the fullest extent permitted by law, Beta Features are provided "as is" and at Customer's option and risk. Customer shall not disclose to any third party any information from Beta Features, existence of non-public Beta Features or access to Beta Features. Google may, at its sole discretion and without any prior consent from the Customer, modify ads to comply with any Policies. 2. The Program: Customer is solely responsible for all: (a) ad targeting options and keywords (collectively "Targets") and all ad content, ad information, and ad URLs ("Creative"), whether generated by or for Customer; and (b) web sites. services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively "Services"). Customer shall protect any Customer passwords and takes full responsibility for Customer's own, and third party, use of any Customer accounts. Ads may be placed on (y) any content or property provided by Google ("Google Property"), and unless opted-out by Customer (z) any other content or property provided by a third party ( "Partner") upon which Google places ads ("Partner Property"). With

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 70 of 155 respect to Adwords online auction-based advertising, Google may send Customer an email notifying Customer it has 72 hours ("Modification Period") to modify keywords and settings as posted. The account (as modified by Customer otherwise as initially posted) is deemed approved by Customer after the Modification Period, and Google is only liable to Customer for discrepancies if Customer can certify by contemporaneous documentary evidence that Google posted ads not approved by Customer. With respect to all other advertising, Customer must provide Google with all relevant Creative by the due date set forth in that advertising Program's applicable FAQ or as otherwise communicated by Google. Customer grants Google permission to utilize an automated software program to retrieve and analyze websites associated with the Services for ad quality and serving purposes, unless Customer specifically opts out of the evaluation in a manner specified by Google. Google or Partners may reject or remove any ad or Target any time for any or no reason. Google may modify the Program or these Terms at any time without liability and your use of the Program after notice that Terms have changed indicates acceptance of the Terms. 3. Cancellation. Customer may independently cancel advertising itself online through Customer's account. if any, or, if such online cancellation functionality is not available, with prior written notice to Google, including electronic mail. AdWords online auction-based advertising cancelled online will cease serving upon cancellation. All other advertising may be subject to Google's ability to re-schedule reserved inventory or cancel advertisements already in production. Cancelled advertisements may be published despite cancellation if cancellation of those ads occurs after any applicable commitment date as set forth in advance by the Partner or Google in which case Customer must pay for those ads. Google may cancel immediately any 10, any of its advertising Programs, or these Terms at any time with notice, in which case Customer will be responsible for any ads already run. Google may modify any of its advertising Programs at any time without liability. Sections I,

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 71 of 155 2, 3,5, 6, 7, 8, and 9 will survive any expiration or termination of this Agreement. 4. Prohibited Uses; License Grant; Representations and Warranties. Customer shall not, and shall not authorize any party to: (a) generate automated, fraudulent or otherwise invalid impressions, inquiries, conversions, clicks or other actions; (b) use any automated means or form of scraping or data extraction to access, query or otherwise collect Google advertising related information from any Adwords website or property except as expressly permitted by Google; or (c) advertise anything illegal or engage in any illegal or fraudulent business practice. Customer represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent. publicity or other rights) in Creative. Services and Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform. display, reformat. excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ("Use"). Customer represents and warrants that LV) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights). Violation of the foregoing may result in immediate termination of this Agreement or customer's account without notice and may subject Customer to legal penalties and consequences. 3. Disclaimer and Limitation of Liability. To the fullest extent permitted by law. GOOGLE DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION FOR NONINFRINGEMENT, SATISFACTORY QUALITY, MERCHANTABILITY AND FITNESS FOR ANY PURPOSE. To the fullest extent permitted by law, Google disclaims all guarantees regarding positioning or the levels or timing of (i) costs per click, (ii) click through rates, (iii) availability and

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 72 of 155 delivery of any impressions, Creative, or Targets on any Partner Property, Google Property, or section thereof, (iv) clicks (v) conversions or other results for any ads or Targets (vi) the accuracy of Partner data (e.g. reach, size of audience, demographics or other purported characteristics of audience), and (vii) the adjacency or placement of advertisements within a Program. EXCEPT FOR indemnification AMOUNTS PAYABLE TO THIRD PARTIES HEREUNDER AND CUSTOMER'S BREACHES OF SECTION 1, to the fullest extent permitted by law: (a) NEITHER PARTY WILL BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES (INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, REVENUE, INTEREST, GOODWILL, LOSS OR CORRUPTION OF DATA OR FOR ANY LOSS OR INTERRUPTION TO CUSTOMER'S BUSINESS) WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY; AND (b) EACH PARTY'S AGGREGATE LIABILITY TO THE OTHER IS LIMITED TO AMOUNTS PAID OR PAYABLE TO GOOGLE BY CUSTOMER FOR THE AD GIVING RISE TO THE CLAIM. Except for payment obligations, neither party is liable for failure or delay resulting from a condition beyond the reasonable control of the party, including but not limited to acts of God, government, terrorism, natural disaster, labor conditions and power failures. 6. Agency. Customer represents and warrants that (a) it is authorized to act on behalf of and has bound to this Agreement any third party for which Customer advertises (a "Principal'') (b) as between Principals and Customer, the Principal owns any rights to Program information in connection with those advertisements, and (c) Customer shall not disclose Principal's Program information to any other party without Principal's consent. 7. Payment Customer shall be responsible for all charges up to the amount of each 10, or as set in an online account, and shall pay all charges in Indian Rupees or in such other currency as agreed to in writing by the parties. Unless agreed

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 73 of 155 to by the parties in writing, Customer shall pay all charges in accordance with the applicable 10 or Program FAQ. Late payments bear interest at the rate of 1.5% per month (or the highest rate permitted by law, if less). Charges are exclusive of taxes, cesses or other applicable levies. Customer is responsible for paying (y) all applicable taxes, cesses and levies, government charges, and (z) reasonable expenses and attorneys fees Google incurs collecting late amounts. To the fullest extent permitted by law, Customer waives all claims relating to charges unless claimed within 60 days after the charge (this does not affect Customer's credit card issuer rights). Charges are solely based on Google's measurements for the applicable Program, unless otherwise agreed in writing. To the fullest extent permitted by law, refunds (if any) are at the discretion of Google and only in the form of advertising credit for only Google Properties. Nothing in these Terms or and 10 may obligate Google to extend credit to any party. Customer acknowledges and agrees that any credit card and related billing and payment information that Customer provides to Google may be shared by Google with companies who work on Google's behalf, such as payment processors and/or credit agencies, solely for the purposes of checking credit, effecting payment to Google and servicing Customer's account. Google may also provide information in response to valid legal process, such as subpoenas, search warrants and court orders, or to establish or exercise its legal rights or defend against legal claims. Google shall not be liable for any use or disclosure of such information by such third parties. 8. Indemnification. Customer shall indemnify without limit and defend Google, its Partners, agents, affiliates, and licensors from any third party claim or liability (collectively, "Liabilities"), arising out of Use, Customer's Program use, Targets, Creative and Services and breach of the Agreement. Partners shall be deemed third party beneficiaries of the above Partner indemnity. Without limitation to the generality of the foregoing, Customer shall indemnify Google against any Liabilities or losses arising out of any claim based on any act or allegation of

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 74 of 155 infringement of intellectual property, misrepresentation or defamation. 9. Arbitration. The parties agree that they will try in good faith to settle within thirty (30) days any dispute, controversy or claim arising out of relating to or in connection with this Agreement ("Dispute''). If the Dispute is not resolved within thirty (30) days after such Dispute arose, such Dispute must be referred to and finally resolved by arbitration, to which the Parties hereto expressly agree and submit. The arbitration will be submitted to the International Centre for Dispute Resolution of the American Arbitration Association ("AAA") and conducted in accordance with the Commercial Arbitration Rules of the AAA in force as of the date of this Agreement ("Rules''). Pre-hearing information exchange shall be limited to the reasonable production of relevant, non- privileged documents and carried out expeditiously. There will be one arbitrator selected by mutual agreement of the Parties. The arbitrator will not act as amiable compositeur or ex aequo et bono. It is the intent of the parties that, barring extraordinary circumstances, arbitration proceedings will be concluded within 60 days from the date the arbitrator is appointed. The arbitrator may extend this time limit in the interests of justice. Failure to adhere to this time limit shall not constitute a basis for challenging the award. The arbitration will be conducted in English and the place of arbitration will be Bangalore, India. Either party may, without waiving any remedy under this Agreement, apply to the arbitrator and/or any court having jurisdiction any interim, provisional, injunctive or conservatory relief that is necessary to protect the rights or property of that party until the arbitration award is rendered or the Dispute is otherwise resolved. Any decision rendered by the arbitrator will be final and binding on the parties, and judgment thereon may be entered by any court of competent jurisdiction, including, but not limited to, any court that has jurisdiction over either of the parties or any of their assets. The parties expressly agree that the arbitrator will be empowered to award and order equitable or injunctive relief with respect to matters brought before him, provided however, that such remedy

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 75 of 155 or relief is consistent with the remedies and limitations set forth in this Agreement. The parties agree that all arbitral proceedings conducted pursuant to this Section, including the existence of any arbitral proceedings, information disclosed in the course of such arbitral proceedings, and any settlements, negotiations, discussions, proposals, and awards related thereto shall be considered confidential information and shall not be disclosed to third parties except as required by law or otherwise provided herein. The parties may, however, disclose such information to an appropriate court, as is necessary to seek enforcement of any award rendered by the arbitrator or to seek any interim, provisional, injunctive or conservatory relief pursuant to the terms hereof 10. Miscellaneous. The Agreement must be construed as if both parties jointly wrote it, governed by Indian law. The Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and replaces any other applicable agreements, terms and conditions applicable to the subject matter hereof Any conflicting or additional terms contained in additional documents (e.g. reference to a purchase order number) or oral discussions are void. Each party shall not disclose the terms or conditions of these Terms to any third party, except to its professional advisors under a strict duty of confidentiality or as necessary to comply with a government law, rule or regulation. Customer may grant approvals, permissions, extensions and consents by email, but any modifications by Customer to the Agreement must be made in a writing executed by both parties. Any notices to Google must be sent to Google India Pvt. Ltd., No.3, RMZ Infinity - Tower E, Old Madras Road, 4th Floor, Bangalore, 560016, India with a copy to Legal Department, via confirmed facsimile, with a copy sent via first class or air mail or overnight courier, and are deemed given upon receipt. Notice to Customer may be effected by sending email to the email address specified in Customer's account, or by posting a message to Customer's account interface, and is deemed received when sent (for

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 76 of 155 email) or no more than 15 days after having been posted (for messages in Customer's account interface). A waiver of any default is not a waiver of any subsequent default. Unenforceable provisions will be modified 10 reflect the parties' intention and only to the extent necessary to make them enforceable, and remaining provisions of the Agreement will remain in full effect. Customer may not assign any of its rights hereunder and any such attempt is void. Google and Customer and Google and Partners are not legal partners or agents, but are independent contractors. In the event that these Terms or an Advertising Program expire or is terminated, Google shall not be obligated to return any materials to Customer. 11. Term: Unless terminated earlier under the terms of this Agreement This Agreement shall have a term of 1 year from the latest of the signature dates below. Customer acknowledges and agrees that if this Agreement expires or is terminated any Customer campaigns in effect as of the date of such expiration or termination or any new campaigns commenced after such expiration or termination shall run thereafter subject to Google's then standard terms and conditions for the Program." 20. Under the Distribution Agreement, the assessee acted as a distributor of online advertisement space to Indian Advertisers. The assessee was ensured a specified margin over its cost from GIL. If in case, the revenue recorded by the assessee from the sale of online advertisement space to Indian Advertisers was less than its cost (incurred in connection with its distribution function) plus the specified margin, GIL was required to compensate the assessee for the difference. However, where the revenue recorded by the assessee from the onward sale of online advertisement space to Indian Advertisers was more than the cost plus the specified margin of the assessee, the assessee was required to make the payment to GIL. 21. In the present case, it is not in dispute that the DT AA between India - Ireland is applicable in respect of the payments made by the assessee to Google Ireland. The Hon'ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 77 of 155 v CIT (supra) at para 108 of its judgment held as under:- "108. Fourthly, the High Court is not correct in referring to section 9(1)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains, "India-Ireland DTAA". Article 12 of the aforesaid treaty defining "royalties" would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(1)(vi) of the Income-tax Act, as construed by the High Court. Here again, section 90(2) of the Income- tax Act, read with explanation 4 thereof has not been properly appreciated." 22. Thus, the definition of the term "royalty" in Article 12(3) of the India - Ireland DT AA override the definition of "royalty" as provided in Explanation 2 to section 9(l)(vi) of the Act by virtue of section 90(2). Therefore, the definition of the term "royalty" under the India - Ireland DTAA being more beneficial to the assessee must only be considered in these appeals. The findings of the AO and CIT(A) as regards the characterisation of the payments to Google Ireland as 'Royalty' under section 9(l)(vi) of the Act is therefore not relevant and consequently correctness of these findings need not be adjudicated in these appeals. Similarly, we do not think it is necessary to decide whether the services agreement and distribution agreement are interlinked or complementary to each other. ITES services are enabling the overall business and not directly related to generating revenue from Adword Program in India. Revenue is generated by end customers clicking on link and not because of ITES services. Even if it is interlinked, the internal tools / intangibles / software of Google Ireland are admittedly not transferred to assessee. The assessee has only right to use these for rendering ITES services. Applying ratio of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited (supra), this cannot result in royalty. We proceed

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 78 of 155 to examine whether the definition of 'Royalty' as per Article 12 of India-Ireland DT AA is satisfied in the present case considering the distribution agreement, services agreement and the facts on record. 23. The definition of 'Royalty' as per Article 12(3)(a) of India - Ireland DTAA is as under:- "3. (a) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph film or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft or for information concerning industrial, commercial or scientific experience. " 24. The first limb of the above definition treats consideration for the use of or the right to use any copyright of literary, artistic or scientific work including cinematograph film or films or tapes for radio or television broadcasting as royalty. The computerised advertising program i.e., "Google AdWords Program" is essentially a computer program i.e., a computer software. As per Explanation 3 to section 9(l)(vi), a computer software means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data. It is not in dispute that the Adwords Program is used by the assessee in the present case be it for the purpose of discharging its functions under the distribution agreement or under the services agreement. However, the question for our consideration is whether the copyright in "Google AdWords Program" is used by the assessee or not? In order to attract definition of 'Royalty', there has to be use or right to use, inter alia, any copyright. The issue as to whether usage of computer software tantamounts to royalty, is now resolved by the Supreme Court decision in the case of Engineering Analysis Centre of Excellence Private Limited (supra). The Supreme Court grouped the various appeals on

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 79 of 155 the aspect of royalty issue on software payments into four categories as under:- Category 1: Computer software purchased by an end-user, resident in India, from a foreign non- resident supplier/manufacturer. Category 2: Purchase of computer software by resident Indian companies that act as distributors/resellers, from foreign non-resident suppliers for the purpose reselling the same to resident Indian users. Category 3: Purchase of software by foreign non- resident distributor from a foreign non-resident supplier for the purpose of reselling the same to Indian distributors or end-users. Category 4: Computer software affixed onto a hardware and sold as an integrated unit/equipment by foreign non-resident suppliers to Indian distributors or end-users. 25. The Supreme Court made a reference to the relevant provisions of the Copyright Act and on the interpretation of the same, it accepted the difference between a copyright right and copyrighted article. The important observations of the Supreme Court are summarized as follows:- "71. The transfer of "all or any rights (including the granting of a licence) in respect of any copyright", in the context of computer software, is referable to sections 14(a), 14(b) and 30 of the Copyright Act. As has been held hereinabove, the expression "in respect of' is equivalent to "in" or "attributable to". Thus, explanation 2(v) to section 9(1)(vi) of the Income Tax Act, when it speaks of "all of any rights ... in respect of copyright" is certainly more expansive than the DTAA provision, which speaks of the "use of, or the right to use" any copyright. 72. However, when it comes to the expression "use of, or the right to use", the same position would obtain under explanation 2(v) of section 9(1)(vi) of the Income-tax Act, inasmuch as, there must, under the licence granted or sale made, be a transfer of any of the rights contained in sections 14(a) or 14(b) of the Copyright Act, for explanation 2(v) to apply. To this extent. there will be no difference in the position between the definition of "royalties" in the DTAAs and the definition of "royalty" in Explanation 2(v) of section 9(1)(vi) of the Income-tax Act.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 80 of 155 73. Even if we were to consider the ambit of "royalty" only under the Income-tax Act on the footing that none of the DT AAs apply to the facts of these cases, the definition of royalty that is contained in explanation 2 to section 9(1)(vi) of the Income-tax Act would make it clear that there has to be a transfer of "all or any rights" which includes the grant of a licence in respect of any copyright in a literary work. The expression "including the granting of a licence" in clause (v) of explanation 2 to section 9(1)(vi) of the Income-tax Act, would necessarily mean a licence in which transfer is made of an interest in rights "in respect of' copyright, namely, that there is a parting with an interest in any of the rights mentioned in section 14(b) read with section 14(a) of the Copyright Act. To this extent, there will be no difference between the position under the DTAA and Explanation 2 to section 9(1)(vi) of the Income-tax Act. ***** ******** ****** ....... 97. When, under a non- exclusive licence, an end-user gets the right to use computer software in the form of a CD, the end- user only receives a right to use the software and nothing more. The end-user does not get any of the rights that the owner continues to retain under section 14(b) of the Copyright Act read with sub-section (a)(i)-(vii) thereof Thus, the conclusion that when computer software is licensed for use under an EULA, what is also licensed is the right to use the copyright embedded therein, is wholly incorrect. The licence for the use of a product under an EULA cannot be construed as the licence spoken of in section 30 of the Copyright Act, as such EULA only imposes restrictive conditions upon the end- user and does not part with any interest relatable to any rights mentioned in sections 14(a) and 14(b) of the Copyright Act. ***** ******** ****** 100. Also, any ruling on the more expansive language contained in the explanations to section 9(1)(vi) of the Income- tax Act would have to be ignored if it is wider and less beneficial to the assessee than the definition contained in the DTAA, as per section 90(2) of the Income-tax Act read with explanation 4 thereof and Article 3(2) of the DTAA. Further, the expression

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 81 of 155 "copyright" has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems Asia Pacific Pty. Ltd (supra) does not state the law correctly and is thus set aside. ***** ******** ****** 108. Fourthly, the High Court is not correct in referring to section 9(l)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains. ["India-Ireland DTAA'']. Article 12 of the aforesaid treaty defining "royalties" would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(l)(vi) of the Income-tax Act, as construed by the High Court. Here again, section 90(2) of the Income-tax Act, read with explanation 4 thereof has not been properly appreciated ***** ******** ****** 117. The conclusions that can be derived on a reading of the aforesaid judgments are as follows: (i) Copyright is an exclusive right, which is negative in nature, being a right to restrict others from doing certain acts. (ii) Copyright is an intangible, incorporeal right, in the nature of a privilege, which is quite independent of any material substance. Ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied An obvious example is the purchaser of a book or a CD/DVD, who becomes the owner of the physical article, but does not become the owner of the copyright inherent in the work, such copyright remaining exclusively with the owner. (i) Parting with copyright entails parting with the right to do any of the acts mentioned in section 14 of the Copyright Act. The transfer of the material substance does not, of itself, serve to transfer the copyright therein. The transfer of the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 82 of 155 ownership of the physical substance, in which copyright subsists, gives the purchaser the right to do with it whatever he pleases, except the right to reproduce the same and issue it to the public, unless such copies are already in circulation, and the other acts mentioned in section 14 of the Copyright Act. (iv) A licence from a copyright owner, conferring no proprietary interest on the licensee, does not entail parting with any copyright, and is different from a licence issued under section 30 of the Copyright Act, which is a licence which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of the "licensed" computer software product over which the licensee has no exclusive rights, no copyright is parted with and consequently, no infringement takes place, as is recognized by section 52(l)(aa) of the Copyright Act. It makes no difference whether the end-user is enabled to use computer software that is customised to its specifications or otherwise. (iii) A non-exclusive, non-transferable licence, merely enabling the use of a copyright product, is in the nature of restrictive conditions which are ancillary to such use, and cannot be construed as a licence to enjoy all or any of the enumerated rights mentioned in section 14 of the Copyright Act. or create any interest in any such rights so as to attract section 30 of the Copyright Act. (v) The right to reproduce and the right to use computer software are distinct and separate rights, as has been recognized in State Bank of India (supra) (see paragraph 21), former amounting to parting with copyright and the latter, in the context of no exclusive EULAs, not being so." 26. Having considered the above principles in the context of copyright royalty, we proceed to examine the applicability of the above principles to the facts of the present case particularly with reference to distribution agreement, services agreement and other facts on record. As per para 2.1 of the distribution agreement, assessee is appointed as a non exclusive authorised distributor of Google Adwords program to

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 83 of 155 Advertisers. Para 2.2 of the agreement states that the distributor agrees to market and distribute Adwords program to advertisers within the broad guidelines provided by Google with its reasonable commercial expertise and own sales force and customer service infrastructure. It also provides that the Distributor will distribute the AdWords program in accordance with the training provided by Google. As per para 2.3, distributor shall be responsible for uploading all Advertiser information that is required by Google for participation in the Adwords Program. As per para 2.6, distributor will provide after sales services to Advertisers in accordance with the broad instructions, training and standards of Google. The advertising space is provided by GIL through the Adwords program and GIL also agreed to train the distributor. It is specifically agreed that the agreement shall constitute a non exclusive relationship between Google Ireland and distributor. Google Ireland owns all right, title and interest in and to all information and data including the user data collected by it in connection with the provision of the Adwords Program. 27. As per the service level agreement - Exhibit C to distribution agreement, assessee distributor shall be solely responsible for providing all customer services to Advertisers, according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to contact Distributor directly for support, and not to communicate directly with Google Ireland. Distributor agrees that it shall provide minimum levels of service like Business hours phone support to all Advertisers, E-mail queries from Advertisers shall be responded to within one (l) business day with immediate resolution of any issues when possible. It was decided that the issues that cannot immediately be resolved by Distributor based on training and procedures provided under the Agreement must be communicated promptly to Google Ireland by Distributor / assessee, and Google Ireland will assist assessee / Distributor in determining the best solution. It was also agreed that the distributor agrees that Google Ireland will have the right, to review samples of

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 84 of 155 communications sent to Advertisers to assess the quality of responses and modify communications accordingly. Google Ireland shall also have the right to send questionnaires to Distributor's customers to ensure that Distributor is providing an adequate level of service. 28. As per the standard Advertising program terms, the advertiser is solely responsible for all ad targeting options, keywords and all ad content. The advertiser represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent, publicity or other rights) in Creative, Services and Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform, display, reformat, excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ("Use"). The advertiser represents and warrants that (y) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights). Violation of the foregoing may result in immediate termination of this Agreement or customer's account without notice and may subject Customer to legal penalties and consequences. 29. As per the services agreement, the assessee was providing information and information technology enabled services to Google Ireland. As regards ownership of intellectual property and ownership of derivate works, it was agreed that all intellectual property shall remain the exclusive property of Google Ireland. The confidential information provided by Google Ireland was to be employed by the assessee in performance of its services under the agreement and it shall remain the sole property of the Google Ireland. The statements recorded from the employees also confirms that the confidential information, software technology and the training documents

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 85 of 155 for providing services under the services agreement are provided by Google Ireland to the assessee. 30. On a consideration of all the above agreements and the facts on record, we find that none of the rights as per section 14(a)/(b) and section 30 of the Copyright Act, 1957 have been transferred by Google Ireland to the assessee in the present case. As held by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT & Anr. (supra), mere use of or right to use a computer program without any transfer of underlying copyright in it as per section 14(a)/(b) or section 30 of the Copyright Act, 1957 will not be satisfying the definition of Royalty under the Act / DTAA. Similarly, use of confidential information, software technology, training documents and others are all 'literary work' with copyrights in it owned by the foreign entity and there was no transfer or license of copyrights in favour of the assessee company. Hence, the impugned payments cannot be characterised as 'Royalty' under the DTAA. 31. The lower authorities have held that the assessee has been granted the use of or right to use trademarks, other brand features and the process owned by Google Ireland for the purpose of distribution of Adwords program and consequently the sums payable to Google Ireland are royalty. As per Article 12 of India - Ireland DTAA, consideration for the use of or right to use any patent, trade mark, design or model, plan, secret formula or process is regarded as royalty. In the present case, as per the distribution agreement, "Google Brand Features" means the Google trade names, trademarks, service marks, logos, domain names, and other distinctive brand features, with some but not all examples at "http://www.google .com/permissions/trademarks.html" (or such other URL that Google may provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google may provide to Distributor for use solely under this Agreement. As per para 6 of the distribution agreement, each party shall own all right, title

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 86 of 155 and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features and Google Irland grants to the assessee / distributor nonexclusive and nonsublicensable licence during the Term to display Google Brand Features solely for the purpose of distributor's marketing and distribution of AdWords Program under the terms and subject to the conditions set forth in this Agreement. It is thus evident that the trademark and other brand features are not used independently or de hors the distribution agreement but they are incidental or ancillary for the purpose of carrying out the marketing and distribution of Adword program. The Delhi High Court in DIT v Sheraton International Inc [2009] 313 ITR 267 held that when the use of trade mark, trade name etc are incidental to the main service of advertisement, publicity and sales promotion and further when there is no consideration payable for such use of trade mark, trade name etc, the consideration cannot be characterised as royalty. Applying the said principle, in the present case, use of Google Brand Features etc are de hors any consideration payable to Google Ireland and further they are incidental and ancillary for achieving the main purpose of marketing and distributing the Google Adwords Program. Hence, the lower authorities were not right in treating the payments as Royalty. 32. As regards the applicability of 'use of or right to use industrial, commercial or scientific equipment" the CIT(A) held that the assessee cannot be said to have gained right to use any scientific equipment, since, Google Ireland has not parted with the copyright it holds in the Adwords program and hence it cannot be said that any kind of technical knowhow has been transferred to the assessee company. The CIT(A) was not in agreement with the AO on the above issue without prejudice to his view in holding that the remitted amount is royalty on different grounds. The revenue has not challenged the said finding of CIT(A). Hence, the impugned payments cannot be regarded as made for 'use of or right to use industrial, commercial or scientific equipment'. The remaining portion of definition of 'Royalty' under the India - Ireland DT AA is consideration

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 87 of 155 for information concerning industrial, commercial or scientific experience. The AO has not characterised the impugned payments as a consideration for the above. In any case, CIT(A) has given a finding that it cannot be said that any kind of technical knowhow has been transferred to the assessee company. This has not been challenged by the revenue. 33. Thus on an overall analysis of the entire facts on record, we hold that the impugned payments cannot be regarded as royalty under the India - Ireland DTAA. It is true that the Google Adword program was commercially and profitably exploited in a commercial sense and profitable manner in India to generate revenues from Indian customers or advertisers. This is the business or commercial aspect of the transaction. However, the stand of the lower authorities that the impugned payments are in the nature of Royalty cannot be upheld especially under Article 12 of the India - Ireland DTAA merely because the marketing, distribution and ITES activities are carried out in India and revenues are generated from India or from Indian Advertisers. As held by the Supreme Court in the case of UOI v Azadi Bachao Andolan [2003] 263 ITR 706, at page 763: "We are unable to agree with the submissions that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents." 34. Before concluding, it is to be mentioned that the taxability with respect to payments made for purchase of online advertisement has been decided by the following Coordinate Bench orders of the I.T.Act:- (i) Yahoo (supra): Department of Tourism of India hired the services of Yahoo India for uploading, displaying, and hosting its banner advertisement on the Yahoo portal, which was operated by Yahoo Hong Kong. For the said purposes Yahoo India engaged Yahoo Hong Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was remitted to Yahoo Hong Kong.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 88 of 155 The payment remitted by Yahoo India to Yahoo Hong Kong was the subject matter of dispute before the Tribunal. The AO as well as CIT(A) held such payments to be royalty and in that manner, disallowed the expenditure in the hands of Yahoo India under section 40(a) of the Act. The Tribunal, in second appeal, held that banner advertisement hosting services did not involve use or right to use any industrial, commercial, or scientific equipment and no such use was granted by Yahoo Hong Kong. In that manner, the Tribunal set aside the findings of the AO and CIT(A), wherein the subject payments were characterised as royalty. (ii) Pinstorm (supra): Pinstorm was engaged in buying online advertisement space for onward re- sale to an advertiser, much like GIPL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT(A) under section 40(a)(i) of the Act, on the premise that the said payments were taxable in India. While the AO held the said payments to be fees for technical services ("FTS"), the CIT(A) held them to be royalty. The Tribunal relied on the decision in Yahoo (supra) to delete the disallowance. It was also observed by the Tribunal that the said payments were business profits, which were not taxable in India, since GIL did not have a PE in India. (iii) Right Florists (supra): Right Florist was a florist who used Google Search Engine for online advertising, to generate more business for itself. In this case again, the AO had disallowed the payments made by Right Florist for online advertising under section 40(a)(i) of the Act. However, the CIT(A) reversed the said decision on the ground that none of the recipients of the payments had a PE in India. The Tribunal, in Department's appeal, upheld the order of the CIT(A), while observing that the decisions in Yahoo (supra) and Pinstorm (supra) were authorities in support of the proposition that payment by the Indian arm of a foreign owner of search engine portal, in connection with online advertising, is not in the nature of royalty as per section 9(1)(vi) of the Act. In this decision, the Tribunal also discussed the modalities involved in

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 89 of 155 the online advertising business, in the context of Google Search Engine. (iv) Inception Business (supra): In this case the assessee was engaged in the business of brand management as well as posting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non-resident, to be taxable in India. The CIT(A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT(A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty. The CIT(A) upheld the order of the AO. However, while doing so, the CIT(A) relied upon certain functional aspects of advertisement system qua Patent Number US20040059708A1 as well as US7778872B2. These two patents are held by Google LLC., USA in connection with the Google AdWords Program hereto. The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi) Myntra Designs (supra): Myntra in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty and in the alternate, as FTS. The CIT(A) upheld the order of the AO. The Tribunal followed the decision in Urban Ladder (supra), while setting aside the order of the CIT(A). (vii) Play Games (supra): Play games is engaged in the business of providing a platform for online gaming. It had made payments to Facebook Ireland Ltd. for online advertising. The AO and CIT(A) in this case as well, held that payments to be taxable in India. The Hon'ble Tribunal observed that Play Games did not get any right to modify/ deal with the servers, which belonged to Facebook Ireland Ltd., in any manner. It was also observed inter alia that the said servers, which

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 90 of 155 hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In that manner, the Tribunal set aside the order of the CIT(A) and held the payments in question to be neither royalty, nor FTS. (viii) Matrimony.com (supra): Matrimony.com in this case, made payments to Facebook Ireland Ltd. for online advertising. The AO in this case as well, disallowed the said payments under section 40(a)(i) of the Act, which action was upheld by the CIT(A). The Tribunal followed the decision in Urban Ladder (supra), while deleting the said disallowance. (ix) ESPN Digital Media (supra): ESPN India in this case, entered into a re-seller agreement with ESPN UK, for the resale of online advertisement space. In terms thereof, ESPN India purchased online advertisement space for re-sale to Indian advertisers. For this purchase, it made payments to ESPN UK, which were characterised as royalty by the AO. The CIT(A) upheld the order of the AO. The Tribunal, in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the re- seller agreement towards purchase of online advertisement space. It was also observed that a website is not a tangible property and is certainly not a high-tech equipment. It was also observed that the reliance of the AO and CIT(A) on the decision in Verizon Communications Singapore Pte Ltd. v. ITO, (2014) 361 ITR 575 (Madras High Court) was misplaced, since the same had been overruled by the Hon'ble Supreme Court in the decision in Engineering Analysis (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT(A) and held that the payments in question could not be characterised as royalty, while

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 91 of 155 relying on the decisions in Urban Ladder (supra) and Play Games (supra). 35. It is also relevant to point out that in the context of interpreting Article 12(3) of India - Ireland DTAA, it is relevant to take note of the existing international jurisprudence. The Technical Advisory Group ("TAG") set up by the Organisation for Economic Co-operation and Development ("OECD"), in its Report (2001) on treaty characterisation of electronic commerce payments analysed various e- commerce transactions and suggested suitable characterisation for consideration flowing thereunder. One of the transactions analysed by TAG was advertising. In the context of online advertisements, including advertisements where the payment is based on number of clicks (i.e., CPC basis), TAG recommended taxability of such payments under Article 7 of the relevant DTAA. The said Article 7 deals with "business profits" and not royalty. Business profits under Article 7 are taxable only where the non-resident has a PE in India. 36. It is important to note that TAG was set up by OECD and its recommendation on changes to the OECD commentary were accepted by OECD. As per the recent decision of the Hon'ble Supreme Court in Engineering Analysis, (supra), OECD commentary is a necessary aid for the interpretation of provisions contained in DTAA. In fact, the High-Powered Committee ("HPC") on electronic commerce and taxation, set up by the Central Board of Direct Taxes ("CBDT") had also accepted the view taken by TAG and recommended taxing consideration flowing for online advertisement under Article 7, and not Article 12 of the relevant DTAA. 37. Therefore, in terms of the international guidance as stated herein, the position regarding taxability of receipts from sale of online advertisement space is clear. Unless the non- resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA. 38. The above view is also supported by insertion of provisions related to Equalisation Levy (EL)

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 92 of 155 by Finance Act, 2016. The root for the emergence of the EL can be traced to the dynamic business models that have the ability to transcend the link between an income producing activity and a specific location since these business are carried in the cyber place. The PE definition presently is based upon the physical presence criteria. The new business models also created challenges in characterizing the nature of payment - whether the payment is for services or for any IPR and hence royalty or whether it represents pure business profits. Various ITAT decisions, as discussed above, have held that income from sale of advertisement space on a website is not taxable in India if there is no PE of the foreign enterprise in India. It was held that such income is not to be regarded as royalty or FTS. Such tax challenges is addressed by the introduction of EL. Section 165 of the Finance Act, 2016 provides for charge of EL at 6% on consideration for specified services. Section 164(i) of Finance Act, 2016 provides that "specified service" means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf. Thus, online advertisement is now covered under EL. If online advertisement was already covered under definition of royalty, then bringing it as part of EL scheme would not arise. 39. In view of the aforesaid discussion and the judicial pronouncements, cited supra, we hold that the impugned payment cannot be characterized as royalty under the India-Ireland DTAA. It is ordered accordingly. 40. In the result, the appeals filed by the assessee are allowed." 8.1. Respectfully following the above order of the Tribunal, we inclined to decide the assessee's appeal in IT(IT)A No.1190/Bang/2014 in favour of the assessee.” 7.2.1 The above view has been followed by Coordinate Bench of this Tribunal from another decision in assessee’s own case for A.Ys. 2009-10 to 2012-13 reported in (2022) 143 taxmann.com 302. 7.2.2 Even in case of M/s. Google Ireland Ltd. vs. DCIT in ITA No. 2845/Bang/2017 by order dated

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 93 of 155 28.02.2023, this Tribunal has taken a view that the payment received by the non-resident assessee on sale of online advertisement space directly from the advertisers in India is not taxable in the hands of the non-resident assessee. This Tribunal observed and held as under in the case of the payee being Google Ireland in order otcome to such conclusion. “8. We have heard the rival contentions and perused the material on record. The assessee in grounds of appeal has raised 35 grounds. Ground Nos. 13 to 15 relates to taxability of payments received by the assessee from GIPL as per terms of the distribution agreement dated 12.12.2005 as well as the payments received by the assessee directly from Indian advertisers. As regards chargeability of income received from GIPL is concerned we notice that in the hands of GIPL, the AO had show caused why the payment made by it to GIL M/s. Google Ireland Ltd. (assessee in this case) is not in the nature of royalty. The GIPL vide its reply dated 15.02.2013 explained that the payment made by it to GIL is in the nature of advertisement fees and not royalty under Act and DTAA. The AO, however, rejected the contentions of the GIPL and passed order under Sections 201 & 201(1A) of the Act dated 22.02.2013 for assessment years 2007-08 to 2012- 13. For assessment years 2007-08 and 2008-09, the Tribunal disposed off the case on 10.08.2022 on the short ground that order passed under Section 201 of the Act for AY 2007-08 and 2008-09 are barred by limitation (ITA Nos. 1511 & 1512/Bang/2013 order dated 10.08.2022). As regards assessment years 2009-10 to 2012-13 in IT(TP)A 1513 to 1516/Bang/2013 the issue was decided in favour of GIPL by the Tribunal by holding that the impugned payment made by it to GIL cannot be characterised as royalty under Act or DTAA. The relevant findings of the Tribunal in the case of payer, i.e. GIPL reads as follows: - "13. We have heard rival submissions and perused the material on record. The issues involved in these appeals revolve around the taxability of payments received by GIL from the assessee, who is engaged in the business of online advertisement space to advertisers in India. The Revenue had sought to characterize

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 94 of 155 these payments received by GIL to be royalty as defined in section 9(1)(vi) of the I.T.Act r.w. Article 12(3) of the India-Ireland Double Taxation Avoidance Agreement (India-Ireland DTAA) and thus chargeable to tax in India in the hands of GIL. The case of the assessee is that the said payments are in the nature of business profits, which are chargeable to tax in Ireland and not in India. Further, since the Department in these proceedings has never alleged that GIL had a Permanent Establishment (PE) in India in terms of Article 5 and accordingly by virtue of Article 7(1) of the India-Ireland DTAA, the right to tax these profits is solely with Ireland. Consequently, the assessee cannot be held to be an assessee in default u/s 201 of the I.T.Act for not deducting tax at source u/s 195 of the I.T.Act while making the subject payment to GIL. 14. For a proper adjudication of the above issue, it is necessary to briefly explain / examine the overview of the Google Adword Program, the role of the assessee under Adword Program M/s. Google Ireland Ltd. distribution agreement and the service agreement (ITES). The undisputed fact on record is that Google.com is a search engine developed by Google LLC, USA available freely to the world at large providing information on any subject based on the search made by the user. The link to various websites related to the search are provided in the search result. Additionally, Google LLC, USA has also developed a computerised advertising program known as Google AdWords Program. Google Ireland Ltd (GIL) is the exclusive licensee and principal operator of the computerised advertising program i.e., "Google AdWords Program" for the whole world outside the USA. The Google AdWords program displays advertisements on Google's search engine. It has a separate website in which the advertisers have to agree to certain terms and conditions including the consideration payable for the targeted Advertisements and provide appropriate keywords on searching of which the websites of the advertisers would be displayed on top of the Google search engine with the abbreviation "Ad". For instance, pursuant to the search query "Fresh Flower Delivery", website of "Ferns N Petals" is

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 95 of 155 listed two times among websites of various other businesses. The listing of the website of "Ferns N Petals" at the top of the list is a sponsored link accompanied by a small abbreviation "Ad", and the other listing is an organic search result as it does not have any such abbreviation. [Page 318 of paper book 1] This is because, "Ferns N Petals" utilised the "Google AdWords Program" to advertise its business on the Google Search Engine. The targeting of advertisement is achieved by using appropriate keywords, which can be selected only by the Advertiser. The Google AdWords Program contains a glossary of keywords together with helpful suggestions for the Advertiser to select appropriate keywords for his targeted advertisement. Google AdWords Program also contains a number of computer commands, by which the proposed Advertiser can achieve a more focused and particularised targeting, such as geographical or area targeting (advertisement to be shown only in a particular area, say the State of Karnataka) or period targeting (advertisement to be shown only in a certain period) or time targeting (advertisement to be shown only at certain fixed times during the day) or duration targeting (to be shown only for a fixed time duration each time). All these types of targeting are over and above the usual subject targeting and are achieved by simple computer commands, given by the proposed Advertiser on the Google AdWords Program. All these facilities are available on the Google AdWords Program to any member of the public, free of M/s. Google Ireland Ltd. charge, to enable him to formulate a suitable draft advertisement for his product or service. The only requirement is that the proposed Advertiser should have a website of his own / or entity giving particulars about his/ its business. The Google AdWords Program itself gives step-by-step and detailed instructions, so that even a person who has a basic knowledge of computers and internet can create a draft advertisement and target it suitably by using the necessary computer commands (or tools). No payment is made for any use of the Google AdWords Program. After formulating the draft advertisement, the Advertiser is required to upload the same for

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 96 of 155 display on Google Search Engine or other online properties using the Google AdWords Program. No payment is made for the same. Thereafter, the proposed advertisement is stored on the servers of Google Ireland Ltd (GIL) located outside India for undergoing a review process. 15. The review process is undertaken by GIL for advertisements uploaded by Advertisers from all around the world including India. Approximately 94% of global advertisements are reviewed by GIL through its automated system located outside India. Remaining global advertisements, which are not successfully reviewed by the automated system, are subjected to a manual review. For carrying out manual review, the balance 6% (approx.) global advertisements are forwarded to one of service centres of GIL's group entities, located in USA, Dublin, China, Korea, Japan, and India. An advertisement in English by an Indian Advertiser may go for manual review to any of these service centres. These service centres carry out the activity of manual review on a cost-plus basis. The assessee also carries out this activity under the ITES segment as per the services agreement dated 1.4.2004 entered into with GIL. The relevant terms and conditions of this agreement are as under: `THIS SERVICES AGREEMENT (''Agreement'') is entered into as of 1st April, 2004 (the "Effective Date''), by and between Google Ireland Limited, a corporation organized under the laws of Ireland ("Ireland'') and having its office at Seagrave House, 19120 Earlsfort Terrace, Dublin 02, Ireland, and Google Online India Private Limited, a company incorporated under the provisions of the Companies Act, 1956 and having its registered office at Prestige Sigma, 1st Floor, NO.3 Vittal Mallya Road, Bangalore 560001, India ('Go ogle India') and having a branch office at RMZ Future, Block A, 4'" Floor Plot No. 14, Road No.2, Hitec City Layout, Madhapur village, Ranga Reddy District, Hyderabad 500081, Andhra Pradesh. A. WHEREAS, Google Ireland is in the business of developing, licensing, M/s. Google Ireland Ltd. selling, marketing and supporting certain Internet search, advertising system and information organization and management technology

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 97 of 155 products and services to provide information, advertising, search and related services via the Internet, corporate intranets and private networks (collectively, 'Products ''); and B. WHEREAS, Google Ireland desires to avail services, relating to, information technology. Information technology enabled services and software development related services from Google India as per the terms and conditions of this Agreement; and C WHEREAS, Google India has expertise in rendering the above services and is willing to render such services for Google Ireland as an independent contractor on the terms and conditions of this Agreement: NOW THEREFORE, in consideration of the mutual covenants and conditions contained herein the parties agree as follows: 1. DEFINITIONS 1. 1 'Affiliate' shall mean any Person, whether de Jure or de facto, that directly or indirectly participates in the capital. control or management of either party or is under common ownership with a party to this Agreement or other entity actually controlled by, controlling. or under common control with a party to this Agreement. 1.2 "Confidential Information' shall mean all data and information of a confidential nature, Including know-how and trade secrets, relating to the business, the affairs, the products. the development or other projects or services of Google Ireland or its-suppliers or its affiliate. including but not limited to Intellectual Property. Confidential Information may be communicated orally, in writing. or in any other recorded, electronic or tangible form. Data and information shall be considered to be Confidential Information if (i) Google Ireland has marked them as such; (ii) Google Ireland, orally or in writing, has advised Google India of their confidential nature; or (iii) due to their character or nature, a reasonable person in a like position and under like circumstances would treat them as secret and confidential. Confidential Information does not include information: (i) that is in the public domain through no fault of the receiving party, (ii) that was previously known by receiving party, as established by written records of the receiving party prior to receipt of such information from the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 98 of 155 providing party or (iii) that was lawfully obtained by the receiving party from a third party without any obligations of confidentiality to Google Ireland. 1.3 "Derivative works Work" shall mean (i) for copyrightable or copyrighted material, any modification. derivative works work (as defined in 17 USC. §101), translation, abridgment, revision or other form in which such material may be recast, transformed or adapted, (ii) for patentable or patented material, any improvement thereon. and (iii) for material protected by trade secret, any new material derived from such existing trade secret material, including new material which may be protected to copyright, patent and/or trade secret. M/s. Google Ireland Ltd. 1.4 "Documentation" shall mean any and all information, written or otherwise, provided by Goode Ireland to Google India describing the Intellectual Property or the Products and any updated, improved or modified version(s) of such materials including information contained in published written materials, on magnetic media or communicated by electronic means. 1.5 "intellectual Property' shall mean all intellectual, proprietary, and/or intangible property rights constituting, embodied in. pertaining to, used in or with respect to the business of Google Ireland, the Products, or the provision of related services and all tangible embodiments hereof, wherever located, including but not limited to the following: (i) all trademarks, trade names, service marks, logos or trade dress, including all registrations and applications therefor; (ii) all copyrights. Moral Rights (as defined below), and other rights in works of authorship including all registrations and applications therefor; (iii) all patents and patent applications. patentable Ideas, Inventions, innovations and improvements; (iv) all know-how and trade secrets; v) all design and code documentation, methodologies, processes, design information, design flows, encoding techniques, applications, product information. Formulae, engineering specifications, technical data, testing procedures, drawings and techniques and other proprietary information and

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 99 of 155 materials of any kind; (vi) all software programs in both source code and object code format. including all testing software and software tools: (vii) all documentation, records, databases, drafts, designs, codes, drawings and algorithms: and (viii) all confidential and proprietary information related to any of (i) through (vii) above **** **** ****** 1.10 "Software Embodiments" shall mean all designs, discoveries, inventions. Products. procedures, improvements, developments, drawings, notes, Documentation. information. materials, Intellectual Property and Derivative works Works made, conceived or developed by Google India alone or with others which result from or relate to the Services 1.11 "Software Technology" shall mean all Intellectual Property, Confidential Information, Documentation, Derivative works Works and other technical data used by Google Ireland that are required, used or appropriate for the design and development of Products. including the reproduction, use, testing, operation, maintenance and service of such Products. **** **** ***** 2. SERVICES 2.1 Request Google India hereby agrees to perform certain information technology, information technology enabled services and software development services, as requested by Google Ireland from time to time, with respect to Products, utilizing Google Ireland Software Technology and other appropriate technology from Google Ireland or third parties which may be properly used for these purposes. Google Ireland will specify M/s. Google Ireland Ltd. the information technology, information technology enabled services and software development services to be performed, the Products to be worked on or used, the time line for completion and the specific results to be achieved (the Services"). 2.2 Performance. Upon agreement between Google Ireland and Google India as to the Services and completion date for a particular Services project, Google India will perform the Services. Google India agrees to use commercially reasonable efforts to perform the Services in a timely fashion and as described to it by Google Ireland. Google

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 100 of 155 India may not subcontract work under this Agreement unless specifically and to the extent set forth in the Services. Google India shall, at all times, be responsible for work done by its subcontractors within the scope of this Agreement as it is for work done by its own employees. At the option of Google Ireland, Google India shall make Goggle Ireland a party to the agreements that Google India may execute with its subcontractors and Google Ireland shall have the right to pre-approve the terms and conditions of such agreements **** **** ****** 5. OWNERSHIP 5.1 Intellectual Property. Google India acknowledges the exclusive right. title and interest of Google Ireland and its licensors and/or suppliers in and to any and all Confidential Information, Intellectual Property, Software Technology and Documentation, and Google India will not at any time do or cause to be done any act or thing impairing or tending to impair any part of said right, title and interest. Google India acknowledges and agrees that all such Confidential Information, Intellectual Property, Software Technology and Documentation shall remain the exclusive property of Google Ireland and, as applicable, its licensors and/or suppliers. 5. 2 Ownership of Derivative works Works and Software Embodiments. Google India shall keep Google Ireland promptly informed of Google India's development of any Derivative works Works and Software Embodiments and hereby irrevocably agrees that all such Derivative works Works and Software Embodiments shall forever be the sole and exclusive property of Google Ireland throughout the world from the date of its creation. As between Google Ireland and Google India no additional action shall be required to vest all right, title and ownership of such Derivative works Works and Software Embodiments in Google Ireland. Google India shall furnish to Google Ireland all such Derivative works Works and Software Embodiments developed by Google India as soon as they become available. From time to-time, promptly upon receipt of Google Ireland's request, Google India shall provide Google Ireland with assignments, in substantially the form of Exhibit B hereto to facilitate Google Ireland's perfection of its rights in the Derivative

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 101 of 155 works Works and the Software Embodiments in any jurisdiction in the world. Google India shall also promptly make available to Google Ireland all Residuals. If Google India has any rights to Derivative works Works or Software Embodiments that cannot be assigned to Google Ireland under law. Google M/s. Google Ireland Ltd. India hereby waives the enforcement of such rights; and if Google India has any rights which cannot be assigned or waived under law, Google India hereby grants to Google Ireland an exclusive, irrevocable, perpetual, worldwide, transferable, folly paid licence, with rights to sub license and assign, to all such rights. Google India shall enter into agreements with its Representatives sufficient to permit Google India to make the foregoing grant of rights. ****** ****** ***** 6. CONFIDENTIAL INFORMATION 6.1 Access and Use of Confidential Information. During the course of performance of this Agreement, Google Ireland will disclose certain Confidential Information to Google India solely to permit Google India to perform its obligations under this Agreement. Except as otherwise provided in this Agreement, Google India agrees that such Confidential Information shall be kept secret by Google India during the term of this agreement and after the expiration hereof Google India shall refrain from using or exploiting any and all Confidential Information for any purposes or activities other than those contemplated in this Agreement. 6.2 Agreement Not to Disclose Confidential Information. Google India shall not disclose or facilitate disclosure of such Confidential Information to any Person without the prior consent of Google Ireland, except to its Representatives, and then only to the extent necessary for the performance of the activities contemplated by this Agreement. Google India shall cause each of its Representatives with access to the Confidential Information to enter into a nondisclosure agreement in a form approved by Google Ireland. Google India shall use the highest standard of care currently employed by any developer or distributor of high technology products in order to avoid disclosure or misappropriation of such Confidential Information.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 102 of 155 6.3 Ownership and Return of Confidential Information. All files, lists, records. documents, drawings, specifications, equipment and computer programs which incorporate or refer to all or a portion of the Confidential Information shall remain the sole property of Go ogle Ireland or its licensors and suppliers. Such materials shall be promptly returned: (i) upon Google Ireland's reasonable request, or (ii) in accordance with Section 12 upon termination of this Agreement, whichever is earlier. **** ********* ****** 12.5 Rights and Duties of Termination. (a) Upon termination or expiration of this Agreement: (i) Google India shall have the right to retain any sums already paid by Google Ireland under this Agreement and Google Ireland shall pay all sums accrued, but not yet paid, that are due under this Agreement as of the date of such termination; (ii) Google India shall discontinue all use of the Confidential Information, Documentation, Intellectual Property and other Software M/s. Google Ireland Ltd. Technology and shall have no further right with respect thereto. (iii) Google India shall (except as specified in subsection (b) below) immediately return to Google Ireland or (at Google Ireland's request) destroy, all copies of the Confidential Information, Documentation and other Software Embodiments, in its possession or control. Google India hereby expressly waives and agrees not to assert any right of detention whatsoever with respect to the foregoing.' 16. Prior to December 2005, an Indian Advertiser could get into a contract with GIL only, for purchasing online advertisement space. However, to accommodate Indian Advertiser(s) desirous to pay in Indian Rupees instead of foreign currency, GIL entered into the Google AdWords Program Distribution Agreement dated 12.12.2005 with the-assessee, whereunder the assessee was appointed as a non-exclusive distributor of online advertisement space in India In terms thereof, the assessee set up its "Distribution Segment" for carrying out purchase and re-sale of online advertisement space to Indian Advertisers.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 103 of 155 However, Indian Advertisers who were willing to pay in foreign currency, continued to transact directly with GIL. The Google AdWords Program and its features remains the same whether the Advertiser in India purchases online advertisement space from GIL or its authorised distributor i.e., the assessee. The only difference is where Indian Advertiser purchases from the assessee, it pays in INR whereas where Indian advertiser purchases from GIL, it pays in foreign currency. 17. In a case where the assessee is involved in purchase and re- sale of online advertisement space to Advertiser and if such Advertiser finds it difficult to use Google AdWords Program, he can get guidance and assistance from the employees of the assessee working under the Distribution Segment. However, substantial portion of Indian Advertisers in India prepare their draft advertisements themselves, with the aid of the Google AdWords Program itself. All this is completely free and is open to any member of the public. No payment is made for any use of the Google AdWords Program. In fact, even after using the Google AdWords Program and formulating / displaying an online advertisement, no payment is made by the Advertiser, unless the Ad is clicked by an end-user. Relevant terms and conditions of the Distribution Agreement are as under:- 'Amended and Restated Google AdWords Program Distribution Agreement. This Amended and Restated Google AdWords Program Distribution Agreement ("Agreement'') is entered into as of December 12, 2005 (the M/s. Google Ireland Ltd. "Effective Date'') by and between Google Ireland Limited, with offices at 1st & 2nd Floors Gordon House, Barrow Street, Dublin 4 Ireland ("Google''),and Google Online India Private Limited, a company incorporated under the Indian Companies Act, 1956 and having its registered office at 1st Floor, Prestige Sigma, No. 3 Vittal Mallya Road, Bangalore 560 001 ("Distributor''). WHEREAS

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 104 of 155 1. Google wishes to enter into the Distribution Agreement for its AdWords Program with Distributor; 2. Whereas Google Inc., a Delaware corporation, and Distributor entered into a Google AdWords Program Distribution Agreement, dated as of December 12, 2005.(the "Prior Agreement"), and Google Inc. assigned its rights and obligations under the Prior Agreement to Google; and 3. Google and Distributor desire to terminate the Prior Agreement and further desire that this Agreement supersede and replace the Prior Agreement in its entirety; NOW, THEREFORE, in consideration of the promises and the mutual covenants, agreements, representations and warranties hereinafter set forth, Google and Distributor hereby agree as follows 1. Definitions. The following capitalized terms shall have the meanings set forth below. 1.1 ''Advertiser'' means an individual or business resident or having its principal place of business located within the Territory (as defined herein), where principal place of business is determined by the place of an entity's registration. 1.2 ''AdWords Program" means the advertising program currently offered by Google under the name ''AdWords.'' 1.3 "Brand Features" means the trade names. trademarks, service marks, logos, domain names, and other distinctive brand features of each party, respectively, as secured by such party from time to time. 1.4 "Designated Contact" means those contacts designated by each party as the point of contact or contacts for a particular function area related to this Agreement. 1.5 "Google Brand Features" means the Google trade names, trademarks, service marks, logos, domain names, and other distinctive brand features, with some but not all examples at "http://www.google. comipermissionsltrademarks.html" (or such other URL that Google may provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google may provide to Distributor for use solely under this Agreement. 1.6 "Intellectual Property Rights" shall mean any and all rights existing from time to time under

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 105 of 155 patent law, copyright law, semiconductor chip protection law, moral rights law, trade secret law, trademark law, unfair M/s. Google Ireland Ltd. competition law, publicity rights law, privacy rights law, and any and all other proprietary rights, as well as, any and all applications, renewals, extensions, restorations and re- instatements thereof now or hereafter in force and effect worldwide. 1.7 "Keywords" means words chosen by an advertiser through the AdWords Program for a given set of one or more advertisements that are used to target those advertisements to potential customers. 1.10 "User Data" means all data and information provided by users via the AdWords Program, including all registration data, names, email addresses, other addresses, contact information, and other identifying information. 2. Appointment of Territory and Distributor Obligations. 2.1 Appointment of Territory. Google appoints Distributor as a non- exclusive authorized Distributor of Go ogle AdWords Program to Advertisers, all under and in accordance with the terms and conditions set forth in this Agreement. Distributor shall conduct its business for its own account, in its own name, aid not as an agent, employee, partner, or franchisee of Google. Distributor may not solicit business from and shall not distribute AdWords Program to (even if unsolicited), any entity that does not have a principal place of business within the Territory. For the avoidance of doubt, an entity's principal place of business will be determined by the place of such entity's registration. All inquiries by any such entity for sale of advertising space shall be referred to the designated Google contact within three (3) business days of receipt by Distributor of such inquiry. 2.2 Distribution & Marketing of AdWords Program. Distributor agrees to market and distribute AdWords Program to Advertisers in the designated Territory. within the broad guidelines provided by Google, with its reasonable commercial expertise and own sales force and customer service infrastructure. Distributor shall not subcontract any of its functions or obligations under this Agreement to any third parties.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 106 of 155 Distributor shall perform its obligations hereunder in a professional and workmanlike manner consistent with reasonably applicable industry standards and in accordance with this Agreement. Distributor will distribute AdWords Program in accordance with the training provided by Google. Failure to do so would constitute a material breach of this Agreement and shall be grounds for termination under section 9.3. 2.3 AdWords Program Sign Up Process. Distributor shall be responsible for uploading all Advertiser information that is required by Google for participation in the AdWords Program. 2.4 Licences; Approvals. Distributor shall be responsible for obtaining all licences and permits and for satisfying all formalities as may be required to enter into this Agreement and to perform its obligations in accordance with then- prevailing laws and regulations, including without limitation those necessary to enable Distributor to make payments to Google in US dollars. Distributor will promptly secure all governmental approvals as M/s. Google Ireland Ltd. may be required in the Territory or performance of its obligations under this Agreement. 2.5 Compliance with United States and Other Applicable Law; Conduct of Business. Distributor will comply with all United States and local laws and regulations applicable to the distributor of the goods and services. including but not limited to the Foreign Corrupt Practices Act and US regulations of international boycotts. Distributor shall (a) conduct business in a manner that reflects favorably at all times on the AdWords Program and on Google's goodwill and reputation, and (b) agrees to adhere to the minimum levels of service as specified in Exhibit C. Breach of this Section 2. 5 will constitute a material breach of this Agreement. 2. 6 After-Sales Support. Distributor will provide after-sales services to Advertisers in accordance with the broad instructions, training and standards of Google. 3. Google Obligations. 3.1 Advertising Space. Google agrees to provide advertising space through the AdWords Program for distribution by Distributor to Advertisers as set forth herein.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 107 of 155 3.2 Training. Google agrees to train Distributor. 3.3 Non-Exclusivity. This Agreement shall constitute a non-exclusive relationship between Google and Distributor. ***** ***** ****** 5. Reporting Requirements. 5.1 Information Provided by Google. Google will make available to Distributor online information about Advertiser activity, on an aggregate and individual basis. which information shall contain include (i) the total number of Keywords purchased by Advertisers, (ii) the number of impressions of Advertisers' advertisement delivered across the Google network, (iii) the number of clicks delivered across the Google network for Advertisers' advertisement an (iv) the cost of clicks delivered across the Google network for Advertisers' advertisement. Distributor must set up AdWords Program advertising accounts in order to receive such online information. Google reserves the right, but has no obligation, to send reports about an Advertiser's activity directly to such Advertiser. If an Advertiser makes a request to Distributor to receive a user name and password to access such Advertisers individual AdWords Program account activity, Distributor' will grant such request after approval from Google. ***** ***** ****** 6. Brand features. Each party shall own all right, title and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features. Google grants to Distributor nonexclusive and non sub- licensable licence during the Term to display Google Brand Features solely for the purpose of Distributor's marketing and distribution of M/s. Google Ireland Ltd. AdWords Program under the terms and subject to the conditions set forth in this Agreement. Notwithstanding the foregoing, Distributor will submit all materials of any kind containing the Brand Features) to Google for written approval prior to release to the public. Furthermore, Distributor agrees to adhere to Google's then- current Brand Features use guidelines, and any content referenced or included therein, which may be found at the following URL: http://www.google.comlpermissionslguidelines.ht

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 108 of 155 ml (or such other URL that Google may provide from time to time) and to such other guidelines or restrictions provided by Google in writing to Distributor in connection herewith. Except as set forth in this Agreement, Distributor shall not acquire any right, title or interest in or to the Google Brand Features. All use by Google of Distributor Brand features (including any goodwill associated therewith shall inure to the benefit of Distributor and all use by Distributor of Go ogle Brand Features (including any goodwill associated therewith) shall inure to the benefit of Google. No party shall challenge or assist others to challenge the Brand Features of the other party (except to protect such party's rights with respect to its own Brand Features) or the registration thereof by the other party, nor shall either party attempt to register any Brand Features or domain names that are confusingly similar to those of the other party. 7. Confidentiality; Limitation on Public Announcements. Disclosure of confidential and/or proprietary information disclosed hereunder, including the User Data (including any aggregated User Data), the existence and content of this Agreement, and any information provided pursuant to this Agreement, shall be governed by the Google Standard Mutual Non-Disclosure Agreement (introductory paragraph and Sections 1 through 12, inclusive), executed by the parties prior to or concurrently with this Agreement (the "NDA ''), which is attached hereto as Exhibit B, and which is incorporated by reference herein. Each party acknowledges and agrees that it will obtain the other party's prior written approval, which shall include approval of any proposed text, before making any public announcements or communication, including, but not limited to, any press releases, online publishing or direct mailings concerning or related to the existence or terms of this Agreement. In addition. Distributor agrees to waive all claims against and release Google (and its affiliates, partners and representatives) from any claims or losses in connection with any above publications made by Google. 8. User Data. Google owns all right, title, and interest in and to all information and data,

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 109 of 155 including the User Data collected by Google relating to Advertisers in connection with the provision of the AdWords Program. Distributor shall maintain all User Data in accordance with local law and regulation applicable to such data. and shall implement policies and procedures with respect to the User Data that are at least as protective of the rights of the Advertisers as is provided in the Google Privacy Policy set forth at http://wwvv.qoogle.comlprivacy.html and all relevant policies implied therein ****** ****** ****** M/s. Google Ireland Ltd. 9.4 Effect of Termination. Upon any termination or expiration of this Agreement, (i) all rights and licences granted by one party to the other. including but not limited to rights to use the other party's Brand Features shall cease immediately, (ii) each party shall promptly return to the other party, or destroy and certify the destruction of all Confidential Information as defined in the NDA and Section 7 of this Agreement) of the other party, and (iii) except for a termination pursuant to Section 9.2 or Section 9.3 above. Google will continue to serve advertisements as provided in this Agreement up to the earlier date to occur of (x) the date that the services provided by Google exhaust any amounts prepaid by Distributor, or (y) the date that is thirty (30) days after expiration or termination of the Agreement. Termination or expiration of this Agreement. in part or in whole. shall not limit either party from pursuing other remedies available to it, nor shall Distributor be relieved of its obligation to pay all charges that have accrued or are otherwise owed under this Agreement. Termination of this Agreement does not prevent Distributor from participating in the AdWords Program pursuant to the general terms and conditions made publicly available by Google from time to time in its sole discretion. ***** ***** ***** EXHIBIT C Service Level Agreement Distributor shall be solely responsible for providing all customer services to Advertisers. according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 110 of 155 contact Distributor directly for support and not to communicate directly with Google. Distributor agrees that it shall provide at least the following minimum levels of service: Business hours phone support to all Advertisers. E-mail queries from Advertisers shall be responded to within one (1) business day with immediate resolution of any issues when possible. Issues that cannot immediately be resolved by Distributor based on training and procedures provided under the Agreement must be communicated promptly to Google by Distributor and Google will assist Distributor in determining the best solution. Google agrees that it shall provide at least the following minimum levels of service to Distributor: Customer Queries (as defined below), up to the E- Mail Escalation Limit (as defined below), shall be responded to within one (1) business day "Customer Queries" shall mean e-mails sent from Distributor to Google related to Advertiser issues, but excluding general communications between Distributor and Google (e.g. billing questions, training information) and technical issues that only Google can solve. "E-Mail Escalation Limit" shall equal five (5) e-mails per month for M/s. Google Ireland Ltd. everyone hundred (100) Advertisers serviced by Distributor, provided, however that the E-Mail Escalation Limit shall only apply beginning thirty (30) days after the completion of tile training. Timing for responses to Customer Queries from Distributor beyond the E- Mail Escalation Limit shall be at Google's sole discretion. Distributor agrees that Google will have the right, to review samples of communications sent to Advertisers to assess the quality of responses and modify communications accordingly. Google shall also have the right to send questionnaires to Distributor's customers to ensure that Distributor is providing an adequate level of service. Mutual Non-Disclosure Agreement This Mutual Non-Disclosure Agreement (''Agreement'') is made and entered into between Google Ireland Limited, for itself and its subsidiaries and affiliates ("Google''), and "Participant' identified below, individually referred to as a ''Party'' and collectively referred to as the "Parties". The Parties

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 111 of 155 wish to exchange Confidential Information (as defined below in Section 2) for the following purpose(s): a) to evaluate whether to enter into a contemplated business transaction; and b) if the Parties enter into an agreement related to such business transaction, to fulfill each Party's confidentiality obligations to the extent the terms set forth below are incorporated therein (the ''Purpose''). The Parties have entered into this Agreement to protect the confidentiality of information in accordance with the following terms: 1. The Effective Date of this Agreement is December 12, 2005. 2. In connection with the Purpose, a Party may disclose certain information it considers confidential and/or proprietary ("Confidential Information '') to the other Party including, but not limited to, tangible, intangible, visual, electronic, present, or future information such as: (a) trade secrets; (b) financial information, including pricing; (c) technical information, including research, development, procedures, algorithms, data, designs. and know-how; (d) business information, including operations, planning, marketing interests, and products; (e) the terms of any agreement entered into between the Parties and the discussions, negotiations and proposals related thereto; and (f) information acquired during any facilities tours. 3. The Party receiving Confidential Information (a "Recipient'') will only have a duty to protect Confidential Information disclosed to it by the other Party ("Discloser''): (a) if it is clearly and conspicuously marked as "confidential" or with a similar designation; (b) if it is identified by the Discloser as confidential and/or proprietary before, during. or promptly after presentation or communication; or (c) if it is disclosed in a manner in which the Discloser reasonably communicated, or the Recipient should reasonably have understood under the circumstances including without limitation those described in Section 2 above, that the disclosure should be treated as confidential whether or not the specific designation "confidential" or any similar designation is used. M/s. Google Ireland Ltd.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 112 of 155 4. A Recipient will use the Confidential Information only for the Purpose described above. A Recipient will use the same degree of care. but no less than a reasonable degree of care, as the Recipient uses with respect to its own information of a similar nature to protect the Confidential Information and to prevent: (a) any use of Confidential Information in violation of this agreement; and/or (b) communication of Confidential Information to any unauthorized third parties. Confidential Information may only be disseminated to employees, directors, agents or third party contractors of Recipient with a need to know and who have first signed an agreement with either of the Parties containing confidentiality provisions substantially similar to those set forth herein. ***** ***** ***** 6. This Agreement imposes no obligation upon a Recipient with respect to Confidential Information that: (a) was known to the Recipient before receipt from the Discloser; (b) is or becomes publicly available through no fault of the Recipient; (c) is rightfully received by the Recipient from a third party without a duty of confidentiality; (d) is independently developed by the Recipient without a breach of this Agreement; (e) is disclosed by the Recipient with the Discloser's prior written approval; or (f) is required to be disclosed by operation of law, court order or other governmental demand ("Process''); provided that (i) the Recipient shall immediately notify the Discloser of such Process; and (ii) the Recipient shall not produce or disclose Confidential Information in response to the Process unless the Discloser has: (a) requested protection from the legal or governmental authority requiring the Process and such request has been denied, (b) consented in writing to the production or disclosure of the Confidential Information in response to the Process, or (c) taken no action to protect its interest in the Confidential Information within 14 business days after receipt of notice from the Recipient of its obligation to produce or disclose confidential information in response to the Process ***** ***** ******* 11. No Party acquires any intellectual property rights under II Agreement (including, but not

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 113 of 155 limited to, patent, copyright, and trademark rights) except the limited rights necessary to carry out the Purpose as forth in this Agreement. 12. Each Party acknowledges that damages for improper disclosure Confidential Information may be irreparable; therefore, the injured Party is entitled to seek equitable relief, including injunction and preliminary injunction, in addition to all other remedies available to it. 18. The standard agreement entered into between the assessee and the advertisers is as under:- Google Advertising Agreement Customer Invoicing address Advertising third party Name and address Advertiser Advertising third party M/s. Google Ireland Ltd. Customer will promptly notify Google of any change in address and contact name information for billing purpose. Agreement name. Agreement type Agreement Id Purchase order # Target start date End date Agreement budget Service tax Billing Method Payment Terms (payment due within the following number of days from invoice date) When applicable, Customer's purchase order number references above is required and must be provided by customer for Google Invoicing This Adwords Agreement ('SA') shall be governed by terms and conditions ('Terms and Conditions) available at the following URL: http.l/www.google.co. inladsladwordsterms. html All terms contained in the Terms and Conditions are made a part of this SA through incorporation by reference. The signatory of this Service Agreement represents that she has read and agrees to such Terms and Conditions and the terms of SA. There shall be no force or effect to any different or additional terms of any related SA, purchase order or sales document. Google may decide at any lime, in its sole discretion, to change, suspend or discontinue all

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 114 of 155 or any aspect of its advertising programs, including their availability, and shall notify Customer of material changes and discontinuauons. Google shall have no liability for such decision. By signing below, Customer represents and warrants that all client information, including but not limited to credit card information and invoicing information, provided herein is complete and accurate and that no additional information is necessary for payment of Google invoices. Customer's campaign(s) may go live upon posting. at which time Google shall send Customer an email notifying customer it has 72 hours to modify Customers campaign keywords and settings as posted. During those 72 hours, Google is only liable to Customer for keywords or settings discrepancies if Customer can certify to Google by its contemporaneous M/s. Google Ireland Ltd. documental (evidence that Google posted keywords or settings other than those requested by Customer. The account (as modified by Customer, or if unmodified, as initially posted) will be deemed approved by Customer 72 hours after it initially posts. Terms of Payment. If Google, at any time, deems itself insecure with respect to Customer's ability to meet its financial obligations under this SA, Google shall have the right to require pre-payment of the total amount due for the SA in advance of the Target Start Date or as otherwise requested by Google. Customer must remit all payments under this SA to Google by the due date indicated on the Invoice(s). In the event of nonpayment, Google reserves the right to immediately terminate this SA upon written notice to Customer and immediately suspend the entire Customer account. Late payments are subject to interest payments as set forth in the Terms and Conditions. Methods of Billing: Monthly Invoicing: Customer will be billed at the end of the month, based on the actual number of clicks or other billing methods Customer may choose to participate in as described in the FAQ (e.g. cost per impression programs). Customer's

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 115 of 155 credit must first be approved by Google in order for this billing method to apply. Prepayment: Customer will pay the total agreement budget prior to any campaign launch. Acceptance and terms of prepayment are at Google's sole discretion. Prepayment does not obligate Google to deliver any Ad Words ads notwithstanding acceptance of prepayment by Google. Unused portions of prepayments will be returned to Customer after the end date to the extent that there are no amounts still due to Google. Right To Reject Advertisement: All advertisements submitted by Customer are subject to Google's approval. Google reserves the right to review, reject or remove any SA, advertisement, or URL link, except that Google will not cancel placement of an SA, advertisement, or URL link due to inventory demand for other advertisers. Customer pre-authorises Google to modify or rearrange the text elements in advertising creative submitted by Customer. Please carefully read these Google Advertising Agreement terms and conditions ("Agreement') before selecting '1 Accept' and submitting your selection. By selecting 'I Accept', you agree to be legally bound by the terms of this agreement. If you do not agree to the terms of this agreement please select M/s. Google Ireland Ltd. "1 Decline" and submit your selection. Customer signature Name Title Company Google Signature Name Title Company." 19. The Standard Google India Private Limited Advertising Program Terms are as under: "Google India Private Limited Advertising Program Terms These Google India Private Limited Advertising Program Terms ("Terms") are entered into by, as applicable, the customer signing these Terms or any document that references these Terms or that accepts these Terms electronically ("Customer") and Google India Private Limited ("Google'~. These Terms govern Google's advertising program(s) ("Program") as further described in the applicable Program's frequently asked questions at www.google.com (the "FAQs') and, as applicable, Customer's participation in any such Program (s), Customer's online management of any advertising campaigns

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 116 of 155 ("Online Management") and/or any insertion orders ("IO" executed by and between the parties (together the "Agreement"). Google and Customer hereby agree and acknowledge: 1. Policies. Program use is subject to all applicable Google and Partner ad specification requirements and policies, including without limitation the Editorial Guidelines (adwords google.com/select/guidelines.html) Google Privacy Policy (www.google.com/privacy.html) and Trademark Guidelines www.google.com/permissions/guidelines.html), (collectively, "Policies"). Policies may be modified any time. Customer shall direct only to Google communications regarding Customer ads on Partner Properties. Some Program features are identified as "Beta," "Ad Experiment," or otherwise unsupported ("Beta Features"). To the fullest extent permitted by law, Beta Features are provided "as is" and at Customer's option and risk. Customer shall not disclose to any third party any information from Beta Features, existence of non-public Beta Features or access to Beta Features. Google may, at its sole discretion and without any prior consent from the Customer, modify ads to comply with any Policies. 2. The Program: Customer is solely responsible for all: (a) ad targeting options and keywords (collectively "Targets") and all ad content, ad information, and ad URLs ("Creative"), whether generated by or for Customer; and (b) web sites. services and landing pages which Creative links or directs viewers to, and advertised services and products (collectively "Services"). Customer shall protect any Customer passwords and takes full responsibility for Customer's own, and third party, use of M/s. Google Ireland Ltd. any Customer accounts. Ads may be placed on (y) any content or property provided by Google ("Google Property"), and unless opted-out by Customer (z) any other content or property provided by a third party ( "Partner") upon which Google places ads ("Partner Property"). With respect to Adwords online auction-based advertising, Google may send Customer an email notifying Customer it has 72 hours ("Modification Period") to modify keywords and settings as posted. The account (as modified by Customer

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 117 of 155 otherwise as initially posted) is deemed approved by Customer after the Modification Period, and Google is only liable to Customer for discrepancies if Customer can certify by contemporaneous documentary evidence that Google posted ads not approved by Customer. With respect to all other advertising, Customer must provide Google with all relevant Creative by the due date set forth in that advertising Program's applicable FAQ or as otherwise communicated by Google. Customer grants Google permission to utilize an automated software program to retrieve and analyze websites associated with the Services for ad quality and serving purposes, unless Customer specifically opts out of the evaluation in a manner specified by Google. Google or Partners may reject or remove any ad or Target any time for any or no reason. Google may modify the Program or these Terms at any time without liability and your use of the Program after notice that Terms have changed indicates acceptance of the Terms. 3. Cancellation. Customer may independently cancel advertising itself online through Customer's account. if any, or, if such online cancellation functionality is not available, with prior written notice to Google, including electronic mail. AdWords online auction-based advertising cancelled online will cease serving upon cancellation. All other advertising may be subject to Google's ability to re-schedule reserved inventory or cancel advertisements already in production. Cancelled advertisements may be published despite cancellation if cancellation of those ads occurs after any applicable commitment date as set forth in advance by the Partner or Google in which case Customer must pay for those ads. Google may cancel immediately any 10, any of its advertising Programs, or these Terms at any time with notice, in which case Customer will be responsible for any ads already run. Google may modify any of its advertising Programs at any time without liability. Sections I, 2, 3,5, 6, 7, 8, and 9 will survive any expiration or termination of this Agreement. 4. Prohibited Uses; License Grant; Representations and Warranties. Customer shall not, and shall not authorize any party to: (a) generate automated, fraudulent or otherwise

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 118 of 155 invalid impressions, inquiries, conversions, clicks or other actions; (b) use any automated means or form of scraping or data extraction to access, query or otherwise collect Google advertising related information from any Adwords website or property except as expressly permitted by Google; or (c) advertise anything illegal or engage in any illegal or fraudulent business practice. Customer represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent. publicity or other rights) in Creative. Services and M/s. Google Ireland Ltd. Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform. display, reformat. excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ("Use"). Customer represents and warrants that LV) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights). Violation of the foregoing may result in immediate termination of this Agreement or customer's account without notice and may subject Customer to legal penalties and consequences. 5. Disclaimer and Limitation of Liability. To the fullest extent permitted by law. GOOGLE DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION FOR NON- INFRINGEMENT, SATISFACTORY QUALITY, MERCHANTABILITY AND FITNESS FOR ANY PURPOSE. To the fullest extent permitted by law, Google disclaims all guarantees regarding positioning or the levels or timing of (i) costs per click, (ii) click through rates, (iii) availability and delivery of any impressions, Creative, or Targets on any Partner Property, Google Property, or section thereof, (iv) clicks (v) conversions or other results for any ads or Targets (vi) the accuracy of

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 119 of 155 Partner data (e.g. reach, size of audience, demographics or other purported characteristics of audience), and (vii) the adjacency or placement of advertisements within a Program. EXCEPT FOR indemnification AMOUNTS PAYABLE TO THIRD PARTIES HEREUNDER AND CUSTOMER'S BREACHES OF SECTION 1, to the fullest extent permitted by law: (a) NEITHER PARTY WILL BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, OR PUNITIVE DAMAGES (INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, REVENUE, INTEREST, GOODWILL, LOSS OR CORRUPTION OF DATA OR FOR ANY LOSS OR INTERRUPTION TO CUSTOMER'S BUSINESS) WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY; AND (b) EACH PARTY'S AGGREGATE LIABILITY TO THE OTHER IS LIMITED TO AMOUNTS PAID OR PAYABLE TO GOOGLE BY CUSTOMER FOR THE AD GIVING RISE TO THE CLAIM. Except for payment obligations, neither party is liable for failure or delay resulting from a condition beyond the reasonable control of the party, including but not limited to acts of God, government, terrorism, natural disaster, labor conditions and power failures. 6. Agency. Customer represents and warrants that (a) it is authorized to act on behalf of and has bound to this Agreement any third party for which Customer advertises (a "Principal'') (b) as between Principals and Customer, the Principal owns any rights to Program information in M/s. Google Ireland Ltd. connection with those advertisements, and (c) Customer shall not disclose Principal's Program information to any other party without Principal's consent. 7. Payment Customer shall be responsible for all charges up to the amount of each 10, or as set in an online account, and shall pay all charges in Indian Rupees or in such other currency as agreed to in writing by the parties. Unless agreed to by the parties in writing, Customer shall pay all charges in accordance with the applicable 10 or

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 120 of 155 Program FAQ. Late payments bear interest at the rate of 1.5% per month (or the highest rate permitted by law, if less). Charges are exclusive of taxes, cesses or other applicable levies. Customer is responsible for paying (y) all applicable taxes, cesses and levies, government charges, and (z) reasonable expenses and attorneys fees Google incurs collecting late amounts. To the fullest extent permitted by law, Customer waives all claims relating to charges unless claimed within 60 days after the charge (this does not affect Customer's credit card issuer rights). Charges are solely based on Google's measurements for the applicable Program, unless otherwise agreed in writing. To the fullest extent permitted by law, refunds (if any) are at the discretion of Google and only in the form of advertising credit for only Google Properties. Nothing in these Terms or an 10 may obligate Google to extend credit to any party. Customer acknowledges and agrees that any credit card and related billing and payment information that Customer provides to Google may be shared by Google with companies who work on Google's behalf, such as payment processors and/or credit agencies, solely for the purposes of checking credit, effecting payment to Google and servicing Customer's account. Google may also provide information in response to valid legal process, such as subpoenas, search warrants and court orders, or to establish or exercise its legal rights or defend against legal claims. Google shall not be liable for any use or disclosure of such information by such third parties. 8. Indemnification. Customer shall indemnify without limit and defend Google, its Partners, agents, affiliates, and licensors from any third party claim or liability (collectively, "Liabilities"), arising out of Use, Customer's Program use, Targets, Creative and Services and breach of the Agreement. Partners shall be deemed third party beneficiaries of the above Partner indemnity. Without limitation to the generality of the foregoing, Customer shall indemnify Google against any Liabilities or losses arising out of any claim based on any act or allegation of infringement of intellectual property, misrepresentation or defamation.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 121 of 155 9. Arbitration. The parties agree that they will try in good faith to settle within thirty (30) days any dispute, controversy or claim arising out of relating to or in connection with this Agreement ("Dispute''). If the Dispute is not resolved within thirty (30) days after such Dispute arose, such Dispute must be referred to and finally resolved by arbitration, to which the Parties hereto expressly agree and submit. The arbitration will be submitted to the International Centre for Dispute Resolution of the American Arbitration Association ("AAA") and conducted in accordance M/s. Google Ireland Ltd. with the Commercial Arbitration Rules of the AAA in force as of the date of this Agreement ("Rules''). Pre-hearing information exchange shall be limited to the reasonable production of relevant, non- privileged documents and carried out expeditiously. There will be one arbitrator selected by mutual agreement of the Parties. The arbitrator will not act as amiable compositeur or ex aequo et bono. It is the intent of the parties that, barring extraordinary circumstances, arbitration proceedings will be concluded within 60 days from the date the arbitrator is appointed. The arbitrator may extend this time limit in the interests of justice. Failure to adhere to this time limit shall not constitute a basis for challenging the award. The arbitration will be conducted in English and the place of arbitration will be Bangalore, India. Either party may, without waiving any remedy under this Agreement, apply to the arbitrator and/or any court having jurisdiction any interim, provisional, injunctive or conservatory relief that is necessary to protect the rights or property of that party until the arbitration award is rendered or the Dispute is otherwise resolved. Any decision rendered by the arbitrator will be final and binding on the parties, and judgment thereon may be entered by any court of competent jurisdiction, including, but not limited to, any court that has jurisdiction over either of the parties or any of their assets. The parties expressly agree that the arbitrator will be empowered to award and order equitable or injunctive relief with respect to matters brought before him, provided however, that such remedy or relief is consistent with the remedies and

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 122 of 155 limitations set forth in this Agreement. The parties agree that all arbitral proceedings conducted pursuant to this Section, including the existence of any arbitral proceedings, information disclosed in the course of such arbitral proceedings, and any settlements, negotiations, discussions, proposals, and awards related thereto shall be considered confidential information and shall not be disclosed to third parties except as required by law or otherwise provided herein. The parties may, however, disclose such information to an appropriate court, as is necessary to seek enforcement of any award rendered by the arbitrator or to seek any interim, provisional, injunctive or conservatory relief pursuant to the terms hereof 10. Miscellaneous. The Agreement must be construed as if both parties jointly wrote it, governed by Indian law. The Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes and replaces any other applicable agreements, terms and conditions applicable to the subject matter hereof Any conflicting or additional terms contained in additional documents (e.g. reference to a purchase order number) or oral discussions are void. Each party shall not disclose the terms or conditions of these Terms to any third party, except to its professional advisors under a strict duty of confidentiality or as necessary to comply with a government law, rule or regulation. Customer may grant approvals, permissions, extensions and consents by email, but any modifications by Customer to the Agreement must be made in a writing executed by both parties. Any notices to Google must be sent to Google India Pvt. Ltd., No.3, RMZ Infinity - Tower E, Old Madras Road, 4th Floor, Bangalore, 560016, India with a copy to Legal M/s. Google Ireland Ltd. Department, via confirmed facsimile, with a copy sent via first class or air mail or overnight courier, and are deemed given upon receipt. Notice to Customer may be effected by sending email to the email address specified in Customer's account, or by posting a message to Customer's account interface, and is deemed received when sent (for

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 123 of 155 email) or no more than 15 days after having been posted (for messages in Customer's account interface). A waiver of any default is not a waiver of any subsequent default. Unenforceable provisions will be modified 10 reflect the parties' intention and only to the extent necessary to make them enforceable, and remaining provisions of the Agreement will remain in full effect. Customer may not assign any of its rights hereunder and any such attempt is void. Google and Customer and Google and Partners are not legal partners or agents, but are independent contractors. In the event that these Terms or an Advertising Program expire or is terminated, Google shall not be obligated to return any materials to Customer. 11. Term: Unless terminated earlier under the terms of this Agreement This Agreement shall have a term of 1 year from the latest of the signature dates below. Customer acknowledges and agrees that if this Agreement expires or is terminated any Customer campaigns in effect as of the date of such expiration or termination or any new campaigns commenced after such expiration or termination shall run thereafter subject to Google's then standard terms and conditions for the Program." 20. Under the Distribution Agreement, the assessee acted as a distributor of online advertisement space to Indian Advertisers. The assessee was ensured a specified margin over its cost from GIL. If in case, the revenue recorded by the assessee from the sale of online advertisement space to Indian Advertisers was less than its cost (incurred in connection with its distribution function) plus the specified margin, GIL was required to compensate the assessee for the difference. However, where the revenue recorded by the assessee from the onward sale of online advertisement space to Indian Advertisers was more than the cost plus the specified margin of the assessee, the assessee was required to make the payment to GIL. 21. In the present case, it is not in dispute that the DTAA between India - Ireland is applicable in respect of the payments made by the assessee to Google Ireland. The Hon'ble Supreme Court in Engineering Analysis Centre of Excellence (P) Ltd

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 124 of 155 v CIT (supra) at para 108 of its judgment held as under:- "108. Fourthly, the High Court is not correct in referring to section 9(1)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains, "India-Ireland M/s. Google Ireland Ltd. DTAA". Article 12 of the aforesaid treaty defining "royalties" would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(1)(vi) of the Income-tax Act, as construed by the High Court. Here again, section 90(2) of the Income- tax Act, read with explanation 4 thereof has not been properly appreciated." 22. Thus, the definition of the term "royalty" in Article 12(3) of the India - Ireland DT AA override the definition of "royalty" as provided in Explanation 2 to section 9(l)(vi) of the Act by virtue of section 90(2). Therefore, the definition of the term "royalty" under the India - Ireland DTAA being more beneficial to the assessee must only be considered in these appeals. The findings of the AO and CIT(A) as regards the characterisation of the payments to Google Ireland as 'Royalty' under section 9(l)(vi) of the Act is therefore not relevant and consequently correctness of these findings need not be adjudicated in these appeals. Similarly, we do not think it is necessary to decide whether the services agreement and distribution agreement are interlinked or complementary to each other. ITES services are enabling the overall business and not directly related to generating revenue from Adword Program in India. Revenue is generated by end customers clicking on link and not because of ITES services. Even if it is interlinked, the internal tools / intangibles / software of Google Ireland are admittedly not transferred to assessee. The assessee has only right to use these for rendering ITES services. Applying ratio of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 125 of 155 (supra), this cannot result in royalty. We proceed to examine whether the definition of 'Royalty' as per Article 12 of India- Ireland DT AA is satisfied in the present case considering the distribution agreement, services agreement and the facts on record. 23. The definition of 'Royalty' as per Article 12(3)(a) of India - Ireland DTAA is as under:- "3. (a) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph film or films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process or for the use of or the right to use industrial, commercial or scientific equipment, other than an aircraft or for information concerning industrial, commercial or scientific experience. 24. The first limb of the above definition treats consideration for the use of or the right to use any copyright of literary, artistic or M/s. Google Ireland Ltd. scientific work including cinematograph film or films or tapes for radio or television broadcasting as royalty. The computerised advertising program i.e., "Google AdWords Program" is essentially a computer program i.e., a computer software. As per Explanation 3 to section 9(l)(vi), a computer software means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data. It is not in dispute that the Adwords Program is used by the assessee in the present case be it for the purpose of discharging its functions under the distribution agreement or under the services agreement. However, the question for our consideration is whether the copyright in "Google AdWords Program" is used by the assessee or not? In order to attract definition of 'Royalty', there has to be use or right to use, inter alia, any copyright. The issue as to whether usage of computer software tantamounts to royalty, is now resolved by the Supreme Court decision in the case of Engineering Analysis Centre of Excellence Private Limited (supra). The

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 126 of 155 Supreme Court grouped the various appeals on the aspect of royalty issue on software payments into four categories as under:- Category 1: Computer software purchased by an end-user, resident in India, from a foreign non- resident supplier/manufacturer. Category 2: Purchase of computer software by resident Indian companies that act as distributors/resellers, from foreign non- resident suppliers for the purpose reselling the same to resident Indian users. Category 3: Purchase of software by foreign non- resident distributor from a foreign non-resident supplier for the purpose of reselling the same to Indian distributors or end-users. Category 4: Computer software affixed onto a hardware and sold as an integrated unit/equipment by foreign non-resident suppliers to Indian distributors or end-users. 25. The Supreme Court made a reference to the relevant provisions of the Copyright Act and on the interpretation of the same, it accepted the difference between a copyright right and copyrighted article. The important observations of the Supreme Court are summarized as follows:- "71. The transfer of "all or any rights (including the granting of a licence) M/s. Google Ireland Ltd. in respect of any copyright", in the context of computer software, is referable to sections 14(a), 14(b) and 30 of the Copyright Act. As has been held hereinabove, the expression "in respect of' is equivalent to "in" or "attributable to". Thus, explanation 2(v) to section 9(1)(vi) of the Income Tax Act, when it speaks of "all of any rights ... in respect of copyright" is certainly more expansive than the DTAA provision, which speaks of the "use of, or the right to use" any copyright. 72. However, when it comes to the expression "use of, or the right to use", the same position would obtain under explanation 2(v) of section 9(1)(vi) of the Income-tax Act, inasmuch as, there must, under the licence granted or sale made, be a transfer of any of the rights contained in sections 14(a) or 14(b) of the Copyright Act, for explanation 2(v) to apply. To this extent. there will be no difference in the position between the definition of "royalties" in the DTAAs and the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 127 of 155 definition of "royalty" in Explanation 2(v) of section 9(1)(vi) of the Income-tax Act. 73. Even if we were to consider the ambit of "royalty" only under the Income-tax Act on the footing that none of the DT AAs apply to the facts of these cases, the definition of royalty that is contained in explanation 2 to section 9(1)(vi) of the Income-tax Act would make it clear that there has to be a transfer of "all or any rights" which includes the grant of a licence in respect of any copyright in a literary work. The expression "including the granting of a licence" in clause (v) of explanation 2 to section 9(1)(vi) of the Income-tax Act, would necessarily mean a licence in which transfer is made of an interest in rights "in respect of' copyright, namely, that there is a parting with an interest in any of the rights mentioned in section 14(b) read with section 14(a) of the Copyright Act. To this extent, there will be no difference between the position under the DTAA and Explanation 2 to section 9(1)(vi) of the Income-tax Act. ***** ******** ****** ........... 97. When, under a non-exclusive licence, an end-user gets the right to use computer software in the form of a CD, the end-user only receives a right to use the software and nothing more. The end-user does not get any of the rights that the owner continues to retain under section 14(b) of the Copyright Act read with sub-section (a)(i)-(vii) thereof Thus, the conclusion that when computer software is licensed for use under an EULA, what is also licensed is the right to use the copyright embedded therein, is wholly incorrect. The licence for the use of a product under an EULA cannot be construed as the licence spoken of in section 30 of the Copyright Act, as such EULA only imposes restrictive conditions upon the end-user and does not part with any interest relatable to any rights mentioned in sections 14(a) and 14(b) of the Copyright Act. **** ******** ****** 100. Also, any ruling on the more expansive language contained in the explanations to section 9(1)(vi) of the Income-tax Act would have to be ignored if it is wider and less beneficial to the assessee than the definition contained in the DTAA, as per section 90(2) of the Income-tax Act

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 128 of 155 read with explanation 4 thereof and Article 3(2) of the DTAA. Further, the M/s. Google Ireland Ltd. expression "copyright" has to be understood in the context of the statute which deals with it, it being accepted that municipal laws which apply in the Contracting States must be applied unless there is any repugnancy to the terms of the DTAA. For all these reasons, the determination of the AAR in Citrix Systems Asia Pacific Pty. Ltd (supra) does not state the law correctly and is thus set aside. **** ******** ****** 108. Fourthly, the High Court is not correct in referring to section 9(l)(vi) of the Income-tax Act after considering it in the manner that it has and then applying it to interpret the provisions under the Convention between the Government of the Republic of India and the Government of Ireland for the Avoidance of Double Taxation and for the Prevention of Fiscal Evasion with respect to Taxes on Income And Capital Gains. ["India- Ireland DTAA'']. Article 12 of the aforesaid treaty defining "royalties" would alone be relevant to determine taxability under the DTAA, as it is more beneficial to the assessee as compared to section 9(l)(vi) of the Income-tax Act, as construed by the High Court. Here again, section 90(2) of the Income-tax Act, read with explanation 4 thereof has not been properly appreciated **** ******** ****** 117. The conclusions that can be derived on a reading of the aforesaid judgments are as follows: (i) Copyright is an exclusive right, which is negative in nature, being a right to restrict others from doing certain acts. (ii) Copyright is an intangible, incorporeal right, in the nature of a privilege, which is quite independent of any material substance. Ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embodied An obvious example is the purchaser of a book or a CD/DVD, who becomes the owner of the physical article, but does not become the owner of the copyright inherent in the work, such copyright remaining exclusively with the owner. (iii) Parting with copyright entails parting with the right to do any of the acts mentioned in section

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 129 of 155 14 of the Copyright Act. The transfer of the material substance does not, of itself, serve to transfer the copyright therein. The transfer of the ownership of the physical substance, in which copyright subsists, gives the purchaser the right to do with it whatever he pleases, except the right to reproduce the same and issue it to the public, unless such copies are already in circulation, and the other acts mentioned in section 14 of the Copyright Act. (iv) A licence from a copyright owner, conferring no proprietary interest on the licensee, does not entail parting with any copyright, and is different from a licence issued under section 30 of the Copyright Act, which is a licence which grants the licensee an interest in the rights mentioned in section 14(a) and 14(b) of the Copyright Act. Where the core of a transaction is to authorize the end-user to have access to and make use of M/s. Google Ireland Ltd. the "licensed" computer software product over which the licensee has no exclusive rights, no copyright is parted with and consequently, no infringement takes place, as is recognized by section 52(l)(aa) of the Copyright Act. It makes no difference whether the end-user is enabled to use computer software that is customised to its specifications or otherwise. (v) A non-exclusive, non-transferable licence, merely enabling the use of a copyright product, is in the nature of restrictive conditions which are ancillary to such use, and cannot be construed as a licence to enjoy all or any of the enumerated rights mentioned in section 14 of the Copyright Act. or create any interest in any such rights so as to attract section 30 of the Copyright Act. (vi) The right to reproduce and the right to use computer software are distinct and separate rights, as has been recognized in State Bank of India (supra) (see paragraph 21), former amounting to parting with copyright and the latter, in the context of no exclusive EULAs, not being so." 26. Having considered the above principles in the context of copyright royalty, we proceed to examine the applicability of the above principles to the facts of the present case particularly with reference to distribution agreement, services

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 130 of 155 agreement and other facts on record. As per para 2.1 of the distribution agreement, assessee is appointed as a non exclusive authorised distributor of Google Adwords program to Advertisers. Para 2.2 of the agreement states that the distributor agrees to market and distribute Adwords program to advertisers within the broad guidelines provided by Google with its reasonable commercial expertise and own sales force and customer service infrastructure. It also provides that the Distributor will distribute the AdWords program in accordance with the training provided by Google. As per para 2.3, distributor shall be responsible for uploading all Advertiser information that is required by Google for participation in the Adwords Program. As per para 2.6, distributor will provide after sales services to Advertisers in accordance with the broad instructions, training and standards of Google. The advertising space is provided by GIL through the Adwords program and GIL also agreed to train the distributor. It is specifically agreed that the agreement shall constitute a non exclusive relationship between Google Ireland and distributor. Google Ireland owns all right, title and interest in and to all information and data including the user data collected by it in connection with the provision of the Adwords Program. 27. As per the service level agreement - Exhibit C to distribution agreement, assessee distributor shall be solely responsible for M/s. Google Ireland Ltd. providing all customer services to Advertisers, according to the procedures, and in compliance with standards, provided by Google. All Advertisers shall be instructed by Distributor to contact Distributor directly for support, and not to communicate directly with Google Ireland. Distributor agrees that it shall provide minimum levels of service like Business hours phone support to all Advertisers, E-mail queries from Advertisers shall be responded to within one (l) business day with immediate resolution of any issues when possible. It was decided that the issues that cannot immediately be resolved by Distributor based on training and procedures provided under the Agreement must be

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 131 of 155 communicated promptly to Google Ireland by Distributor / assessee, and Google Ireland will assist assessee / Distributor in determining the best solution. It was also agreed that the distributor agrees that Google Ireland will have the right, to review samples of communications sent to Advertisers to assess the quality of responses and modify communications accordingly. Google Ireland shall also have the right to send questionnaires to Distributor's customers to ensure that Distributor is providing an adequate level of service. 28. As per the standard Advertising program terms, the advertiser is solely responsible for all ad targeting options, keywords and all ad content. The advertiser represents and warrants that it holds and hereby grants Google and Partners all rights (including without limitation any copyright, trademark, patent, publicity or other rights) in Creative, Services and Targets needed for Google and Partner to operate Google's advertising programs for Customer (including without limitation any rights needed to host, cache, route, transmit, store, copy, modify, distribute, perform, display, reformat, excerpt, analyze, and create algorithms from and derivative works of Creative or Targets) in connection with this Agreement ("Use"). The advertiser represents and warrants that (y) all Customer information is complete, correct and current; and (z) any Use hereunder and Customer's Creative, Targets, and Customer's Services will not violate or encourage violation of any applicable laws, regulations, code of conduct, or third party rights (including, without limitation, intellectual property rights). Violation of the foregoing may result in immediate termination of this Agreement or customer's account without notice and may subject Customer to legal penalties and consequences. 29. As per the services agreement, the assessee was providing information and information technology enabled services to Google M/s. Google Ireland Ltd. Ireland. As regards ownership of intellectual property and ownership of derivate works, it was agreed that all intellectual property shall remain the exclusive property of Google Ireland. The

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 132 of 155 confidential information provided by Google Ireland was to be employed by the assessee in performance of its services under the agreement and it shall remain the sole property of the Google Ireland. The statements recorded from the employees also confirms that the confidential information, software technology and the training documents for providing services under the services agreement are provided by Google Ireland to the assessee. 30. On a consideration of all the above agreements and the facts on record, we find that none of the rights as per section 14(a)/(b) and section 30 of the Copyright Act, 1957 have been transferred by Google Ireland to the assessee in the present case. As held by the Hon'ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited v. CIT & Anr. (supra), mere use of or right to use a computer program without any transfer of underlying copyright in it as per section 14(a)/(b) or section 30 of the Copyright Act, 1957 will not be satisfying the definition of Royalty under the Act / DTAA. Similarly, use of confidential information, software technology, training documents and others are all 'literary work' with copyrights in it owned by the foreign entity and there was no transfer or license of copyrights in favour of the assessee company. Hence, the impugned payments cannot be characterised as 'Royalty' under the DTAA. 31. The lower authorities have held that the assessee has been granted the use of or right to use trademarks, other brand features and the process owned by Google Ireland for the purpose of distribution of Adwords program and consequently the sums payable to Google Ireland are royalty. As per Article 12 of India - Ireland DTAA, consideration for the use of or right to use any patent, trade mark, design or model, plan, secret formula or process is regarded as royalty. In the present case, as per the distribution agreement, "Google Brand Features" means the Google trade names, trademarks, service marks, logos, domain names, and other distinctive brand features, with some but not all examples at "http://www.google.com/permissions/trademark s. html" (or such other URL that Google may

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 133 of 155 provide from time to time), and such other trade names, trademarks, service marks, logos, domain names, or other distinctive brand features that Google may provide to Distributor for use solely under this M/s. Google Ireland Ltd. Agreement. As per para 6 of the distribution agreement, each party shall own all right, title and interest, including without limitation all Intellectual Property Rights, relating to its Brand Features and Google Irland grants to the assessee / distributor nonexclusive and nonsublicensable licence during the Term to display Google Brand Features solely for the purpose of distributor's marketing and distribution of AdWords Program under the terms and subject to the conditions set forth in this Agreement. It is thus evident that the trademark and other brand features are not used independently or de hors the distribution agreement but they are incidental or ancillary for the purpose of carrying out the marketing and distribution of Adword program. The Delhi High Court in DIT v Sheraton International Inc [2009] 313 ITR 267 held that when the use of trade mark, trade name etc are incidental to the main service of advertisement, publicity and sales promotion and further when there is no consideration payable for such use of trade mark, trade name etc, the consideration cannot be characterised as royalty. Applying the said principle, in the present case, use of Google Brand Features etc are de hors any consideration payable to Google Ireland and further they are incidental and ancillary for achieving the main purpose of marketing and distributing the Google Adwords Program. Hence, the lower authorities were not right in treating the payments as Royalty. 32. As regards the applicability of 'use of or right to use industrial, commercial or scientific equipment" the CIT(A) held that the assessee cannot be said to have gained right to use any scientific equipment, since, Google Ireland has not parted with the copyright it holds in the Adwords program and hence it cannot be said that any kind of technical knowhow has been transferred to the assessee company. The CIT(A) was not in agreement with the AO on the above issue without prejudice to his view in holding that the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 134 of 155 remitted amount is royalty on different grounds. The revenue has not challenged the said finding of CIT(A). Hence, the impugned payments cannot be regarded as made for 'use of or right to use industrial, commercial or scientific equipment'. The remaining portion of definition of 'Royalty' under the India - Ireland DT AA is consideration for information concerning industrial, commercial or scientific experience. The AO has not characterised the impugned payments as a consideration for the above. In any case, CIT(A) has given a finding that it cannot be said that any kind of technical knowhow has been transferred to the assessee company. This has not been challenged by the revenue. M/s. Google Ireland Ltd. 33. Thus on an overall analysis of the entire facts on record, we hold that the impugned payments cannot be regarded as royalty under the India - Ireland DTAA. It is true that the Google Adword program was commercially and profitably exploited in a commercial sense and profitable manner in India to generate revenues from Indian customers or advertisers. This is the business or commercial aspect of the transaction. However, the stand of the lower authorities that the impugned payments are in the nature of Royalty cannot be upheld especially under Article 12 of the India - Ireland DTAA merely because the marketing, distribution and ITES activities are carried out in India and revenues are generated from India or from Indian Advertisers. As held by the Supreme Court in the case of UOI v Azadi Bachao Andolan [2003] 263 ITR 706, at page 763: "We are unable to agree with the submissions that an act which is otherwise valid in law can be treated as non est merely on the basis of some underlying motive supposedly resulting in some economic detriment or prejudice to the national interests, as perceived by the respondents." 34. Before concluding, it is to be mentioned that the taxability with respect to payments made for purchase of online advertisement has been decided by the following Co-ordinate Bench orders of the I.T.Act:- (i) Yahoo (supra): Department of Tourism of India hired the services of Yahoo India for uploading, displaying, and hosting its banner advertisement

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 135 of 155 on the Yahoo portal, which was operated by Yahoo Hong Kong. For the said purposes Yahoo India engaged Yahoo Hong Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was remitted to Yahoo Hong Kong. The payment remitted by Yahoo India to Yahoo Hong Kong was the subject matter of dispute before the Tribunal. The AO as well as CIT(A) held such payments to be royalty and in that manner, disallowed the expenditure in the hands of Yahoo India under section 40(a) of the Act. The Tribunal, in second appeal, held that banner advertisement hosting services did not involve use or right to use any industrial, commercial, or scientific equipment and no such use was granted by Yahoo Hong Kong. In that manner, the Tribunal set aside the findings of the AO and CIT(A), wherein the subject payments were characterised as royalty. (ii) Pinstorm (supra): Pinstorm was engaged in buying online advertisement space for onward re- sale to an advertiser, much like GIPL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT(A) under section 40(a)(i) of the Act, on the premise that the said payments were taxable in India. While the AO held the said payments to be fees for technical services ("FTS"), the M/s. Google Ireland Ltd. CIT(A) held them to be royalty. The Tribunal relied on the decision in Yahoo (supra) to delete the disallowance. It was also observed by the Tribunal that the said payments were business profits, which were not taxable in India, since GIL did not have a PE in India. (iii) Right Florists (supra): Right Florist was a florist who used Google Search Engine for online advertising, to generate more business for itself. In this case again, the AO had disallowed the payments made by Right Florist for online advertising under section 40(a)(i) of the Act. However, the CIT(A) reversed the said decision on the ground that none of the recipients of the payments had a PE in India. The Tribunal, in Department's appeal, upheld the order of the

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 136 of 155 CIT(A), while observing that the decisions in Yahoo (supra) and Pinstorm (supra) were authorities in support of the proposition that payment by the Indian arm of a foreign owner of search engine portal, in connection with online advertising, is not in the nature of royalty as per section 9(1)(vi) of the Act. In this decision, the Tribunal also discussed the modalities involved in the online advertising business, in the context of Google Search Engine. (iv) Inception Business (supra): In this case the assessee was engaged in the business of brand management as well as posting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non- resident, to be taxable in India. The CIT(A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT(A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty. The CIT(A) upheld the order of the AO. However, while doing so, the CIT(A) relied upon certain functional aspects of advertisement system qua Patent Number US20040059708A1 as well as US7778872B2. These two patents are held by Google LLC., USA in connection with the Google AdWords Program hereto. The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi) Myntra Designs (supra): Myntra in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty and in the alternate, as FTS. The CIT(A) upheld the order of the AO. The Tribunal followed the decision in Urban Ladder (supra), while setting aside the order of the CIT(A). (vii) Play Games (supra): Play games is engaged in the business of providing a platform for online

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 137 of 155 gaming. It had made payments to Facebook Ireland Ltd. for online advertising. The AO and CIT(A) in this case as well, held that payments to be taxable in India. The Hon'ble Tribunal observed that Play Games did not get any right to modify/ deal M/s. Google Ireland Ltd. with the servers, which belonged to Facebook Ireland Ltd., in any manner. It was also observed inter alia that the said servers, which hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In that manner, the Tribunal set aside the order of the CIT(A) and held the payments in question to be neither royalty, nor FTS. (viii) Matrimony.com (supra): Matrimony.com in this case, made payments to Facebook Ireland Ltd. for online advertising. The AO in this case as well, disallowed the said payments under section 40(a)(i) of the Act, which action was upheld by the CIT(A). The Tribunal followed the decision in Urban Ladder (supra), while deleting the said disallowance. (ix) ESPN Digital Media (supra): ESPN India in this case, entered into a re-seller agreement with ESPN UK, for the resale of online advertisement space. In terms thereof, ESPN India purchased online advertisement space for re-sale to Indian advertisers. For this purchase, it made payments to ESPN UK, which were characterised as royalty by the AO. The CIT(A) upheld the order of the AO. The Tribunal, in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the re- seller agreement towards purchase of online advertisement space. It was also observed that a website is not a tangible property and is certainly not a high-tech equipment. It was also observed that the reliance of the AO and CIT(A) on the decision in Verizon Communications Singapore Pte Ltd. v. ITO, (2014) 361 ITR 575 (Madras High Court) was misplaced, since the same had been overruled by the Hon'ble Supreme Court in the decision in Engineering Analysis (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 138 of 155 the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT(A) and held that the payments in question could not be characterised as royalty, while relying on the decisions in Urban Ladder (supra) and Play Games (supra). 35. It is also relevant to point out that in the context of interpreting Article 12(3) of India - Ireland DTAA, it is relevant to take note of the existing international jurisprudence. The Technical Advisory Group ("TAG") set up by the Organisation for Economic Co-operation and Development ("OECD"), in its Report (2001) on treaty characterisation of electronic commerce payments analysed various e-commerce transactions and suggested suitable characterisation for consideration flowing thereunder. One of the transactions analysed by TAG was advertising. In the context of online advertisements, including advertisements where the payment is based on number of clicks (i.e., CPC basis), TAG recommended M/s. Google Ireland Ltd. taxability of such payments under Article 7 of the relevant DTAA. The said Article 7 deals with "business profits" and not royalty. Business profits under Article 7 are taxable only where the non- resident has a PE in India. 36. It is important to note that TAG was set up by OECD and its recommendation on changes to the OECD commentary were accepted by OECD. As per the recent decision of the Hon'ble Supreme Court in Engineering Analysis, (supra), OECD commentary is a necessary aid for the interpretation of provisions contained in DTAA. In fact, the High-Powered Committee ("HPC") on electronic commerce and taxation, set up by the Central Board of Direct Taxes ("CBDT") had also accepted the view taken by TAG and recommended taxing consideration flowing for online advertisement under Article 7, and not Article 12 of the relevant DTAA. 37. Therefore, in terms of the international guidance as stated herein, the position regarding taxability of receipts from sale of online advertisement space is clear. Unless the non-

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 139 of 155 resident, who is engaged in sale of online advertisement space, has a PE in India, no portion of receipts earned by it from sale of online advertisement space in India can be brought to tax in India as Act read with the relevant DTAA. 38. The above view is also supported by insertion of provisions related to Equalisation Levy (EL) by Finance Act, 2016. The root for the emergence of the EL can be traced to the dynamic business models that have the ability to transcend the link between an income producing activity and a specific location since these business are carried in the cyber place. The PE definition presently is based upon the physical presence criteria. The new business models also created challenges in characterizing the nature of payment - whether the payment is for services or for any IPR and hence royalty or whether it represents pure business profits. Various ITAT decisions, as discussed above, have held that income from sale of advertisement space on a website is not taxable in India if there is no PE of the foreign enterprise in India. It was held that such income is not to be regarded as royalty or FTS. Such tax challenges is addressed by the introduction of EL. Section 165 of the Finance Act, 2016 provides for charge of EL at 6% on consideration for specified services. Section 164(i) of Finance Act, 2016 provides that "specified service" means online advertisement, any provision for digital advertising space or any other facility or M/s. Google Ireland Ltd. service for the purpose of online advertisement and includes any other service as may be notified by the Central Government in this behalf. Thus, online advertisement is now covered under EL. If online advertisement was already covered under definition of royalty, then bringing it as part of EL scheme would not arise. 39. In view of the aforesaid discussion and the judicial pronouncements, cited supra, we hold that the impugned payment cannot be characterized as royalty under the India-Ireland DTAA. It is ordered accordingly. 40. In the result, the appeals filed by the assessee are allowed." 9. In view of above order of Tribunal, where it is stated that the payment made by GIPL to GIL is

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 140 of 155 not in the nature of Royalty or FTS under the Act and DTAA, a different treatment cannot taken in the hands of the payee, i.e. the assessee in the instant case. The contentions raised in the written submission of the learned D.R. has been addressed by the Tribunal in the payer's case i.e. GIPL (supra). Hence, we are not dealing with the same in this order. Therefore, we hold that a sum of Rs.42,57,53,347/- cannot be brought to tax in the hands of the assessee. 10. As regards receipt of Rs.51,09,74,532/- on sale of advertisement space from Indian customers other than GIPL we find it is covered in favour of the assessee by the following orders of the Tribunal: - (i) Yahoo (supra): Department of Tourism of India hired the services of Yahoo India for uploading, displaying, and hosting its banner advertisement on the Yahoo portal, which was operated by Yahoo Hong Kong. For the said purposes Yahoo India engaged Yahoo Hong Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was remitted to Yahoo Hong Kong. The payment remitted by Yahoo India to Yahoo Hong Kong was the subject matter of dispute before the Tribunal. The AO as well as CIT(A) held such payments to be royalty and in that manner, disallowed the expenditure in the hands of Yahoo India under section 40(a) of the Act. The Tribunal, in second appeal, held that banner M/s. Google Ireland Ltd. advertisement hosting services did not involve use or right to use any industrial, commercial, or scientific equipment and no such use was granted by Yahoo Hong Kong. In that manner, the Tribunal set aside the findings of the AO and CIT(A), wherein the subject payments were characterised as royalty. (ii) Pinstorm (supra): Pinstorm was engaged in buying online advertisement space for onward re- sale to an advertiser, much like GIPL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT(A) under section 40(a)(i) of the Act, on the premise that the said payments were

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 141 of 155 taxable in India. While the AO held the said payments to be fees for technical services ("FTS"), the CIT(A) held them to be royalty. The Tribunal relied on the decision in Yahoo (supra) to delete the disallowance. It was also observed by the Tribunal that the said payments were business profits, which were not taxable in India, since GIL did not have a PE in India. (iii) Right Florists (supra): Right Florist was a florist who used Google Search Engine for online advertising, to generate more business for itself. In this case again, the AO had disallowed the payments made by Right Florist for online advertising under section 40(a)(i) of the Act. However, the CIT(A) reversed the said decision on the ground that none of the recipients of the payments had a PE in India. The Tribunal, in Department's appeal, upheld the order of the CIT(A), while observing that the decisions in Yahoo (supra) and Pinstorm (supra) were authorities in support of the proposition that payment by the Indian arm of a foreign owner of search engine portal, in connection with online advertising, is not in the nature of royalty as per section 9(1)(vi) of the Act. In this decision, the Tribunal also discussed the modalities involved in the online advertising business, in the context of Google Search Engine. (iv) Inception Business (supra): In this case the assessee was engaged in the business of brand management as well as posting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non-resident, to be taxable in India. The CIT(A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT(A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO M/s. Google Ireland Ltd. held the said payments to be royalty. The CIT(A) upheld the order of the AO. However, while doing so, the CIT(A) relied upon certain functional

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 142 of 155 aspects of advertisement system qua Patent Number US20040059708A1 as well as US7778872B2. These two patents are held by Google LLC., USA in connection with the Google AdWords Program hereto. The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi) Myntra Designs (supra): Myntra in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty and in the alternate, as FTS. The CIT(A) upheld the order of the AO. The Tribunal followed the decision in Urban Ladder (supra), while setting aside the order of the CIT(A). (vii) Play Games (supra): Play games is engaged in the business of providing a platform for online gaming. It had made payments to Facebook Ireland Ltd. for online advertising. The AO and CIT(A) in this case as well, held that payments to be taxable in India. The Hon'ble Tribunal observed that Play Games did not get any right to modify/ deal with the servers, which belonged to Facebook Ireland Ltd., in any manner. It was also observed inter alia that the said servers, which hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In that manner, the Tribunal set aside the order of the CIT(A) and held the payments in question to be neither royalty, nor FTS. (viii) Matrimony.com (supra): Matrimony.com in this case, made payments to Facebook Ireland Ltd. for online advertising. The AO in this case as well, disallowed the said payments under section 40(a)(i) of the Act, which action was upheld by the CIT(A). The Tribunal followed the decision in Urban Ladder (supra), while deleting the said disallowance. (ix) ESPN Digital Media (supra): ESPN India in this case, entered into a re-seller agreement with ESPN UK, for the resale of online advertisement space. In terms thereof, ESPN India purchased online advertisement space for re-sale to Indian advertisers. For this purchase, it made payments

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 143 of 155 to ESPN UK, which were characterised as royalty by the AO. The CIT(A) upheld the order of the AO. The Tribunal, in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the re- seller agreement towards purchase of online advertisement space. It was also observed that a website is not a tangible property and is M/s. Google Ireland Ltd. certainly not a high-tech equipment. It was also observed that the reliance of the AO and CIT(A) on the decision in Verizon Communications Singapore Pte Ltd. v. ITO, (2014) 361 ITR 575 (Madras High Court) was misplaced, since the same had been overruled by the Hon'ble Supreme Court in the decision in Engineering Analysis (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT(A) and held that the payments in question could not be characterised as royalty, while relying on the decisions in Urban Ladder (supra) and Play Games (supra)” 7.3 The Ld. DR on the contrary has relied on the orders passed by the authorities below. 7.3.1 Respectfully following the view taken by the Coordinate Benches in assessee’s own case, relied upon hereinabove, we hold the payment towards on online advertisement paid by assessee to Google Ireland is not liable to be taxed as Royalty for the years under consideration and therefore no disallowance can be made u/s. 40(a)(i).

7.4 Regarding applicability of FTS provisions, this Bench had called for submissions from the ld. A.R., which was submitted and is placed on record. In respect of the applicability of FTS under the Act as well as DTAA, it was submitted that the issue of FTS arises only for A.Ys. 2010-

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 144 of 155 11 to 2012-13. It is submitted that the FTS is defined under Article 12(3)(b) of the Double Taxation Avoidance Agreement between India and Ireland ("India — Ireland Tax Treaty"), as under: "The term 'fees for technical services" means payment of any kind in consideration for the rendering of any managerial, technical or consultancy services including the provision of services by technical or other personnel but does not include payments for services mentioned in Articles 14 and 15 of this Convention." 7.5 It is submitted that the definition of FTS under the Act and India-Ireland tax treaty is identically worded and therefore in order to fall within the scope of FTS, the consideration paid ought to be for rendition of managerial or technical or consultancy services. 7.6 The Ld. Counsel submitted that the Ld.AO in passing the draft assessment order has observed and held as under: “Similarly, payments made to M/s. Google Ireland Ltd. are also liable to be taxed either as royalties or Fees for technical services. For this purpose, there is no need to establish the PE of the recipient in India. It is abundantly clear as per Article 12 of DTAA whereby such royalties and fees for technical services have been defined in great detail. Google has been a search engine which has provided an online solution for all kinds of Internet based queries. It has almost created a revolution on account of its patented search engine technology, established business processes and technological prowess, in offering search results under one web address for anything and everything available on the Internet. This marvelous search engine is a patent with a trade mark and is a design of great value and is a process of great value proposition. Google offers its servers and database for conducting the business from India to the assessee concern. Google also provides certain technical services on account of its technical consultancy services by offering the best solution online for any available problem. Considering the totality of reasons as above, it is seen that the amount paid to M/s. Google Ireland Ltd. of Rs.570,74,19,173 are also attracted under Article 12 of DTAA and it is liable for TDS u/s. 195 of the Income Tax Ad. The

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 145 of 155 failure on the part of the assessee to make TDS is liable for disallowance u/s. 400)(0 of the Income Tax Act . This is alternatively ordered in addition to the revenue's contention that the amount payable to Google Ireland Ltd is taxable as business profits in India.” 7.6.1 The above observation has been reproduced from the draft assessment order passed for A.Y. 2012-13. Similar is the observations for A.Y. 2010-11 (paras 30 & 31 of the draft assessment order) and for A.Y. 2011-12 (para 30 of the draft assessment order). 7.7. The Ld. Counsel submitted that the Ld.AO initiated proceeding to tax the payments made by assessee to be Royalty / FTS under Article 12 of DTAA of India Ireland Treaty and/or business profits of Google Ireland and has held to be taxable in India, by holding assessee to be a dependent agent PE of Google Ireland. 7.8 He submitted that the DRP while dealing with the issue followed the directions of its predecessors for A.Y. 2009-10, to hold the payments to be in the nature of FTS. However, the Ld. Counsel submitted that, the entire discussions by the DRP is based on characterising the said payment to be in the nature of royalty. 7.9 The Ld. Counsel while arguing against the said payment to be in the nature of FTS, submitted that, in case of certain payees as observed by the Coordinate Bench while considering the issue in the hands of Google Ireland in ITA No. 2845/Bang/2017 vide order dated 28.2.2023 held the payments to be in the nature of business profits. However, this Tribunal further held that as there is no PE, that is established in India of the Google Ireland, such payment could not have been held to be taxable in India. 7.10 The Ld.Counsel referred to the reliance placed by Coordinate Bench of this Tribunal while deciding the issue in case of Google Ireland Ltd. (supra) (which already has been reproduced hereinabove). For the sake of reference and at the cost of repetition, the same is reproduced hereinbelow: “10. As regards receipt of Rs.51,09,74,532/- on sale of advertisement space from Indian customers other than GIPL we find it is covered in favour of the assessee by the following orders of the Tribunal: - (i) Yahoo (supra): Department of Tourism of India hired the services of Yahoo India for uploading, displaying, and hosting its banner advertisement on the Yahoo portal, which was operated by Yahoo Hong Kong. For the said purposes Yahoo

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 146 of 155 India engaged Yahoo Hong Kong for uploading and displaying the said banner advertisement. Pursuant to such arrangement, Yahoo India received consideration from Department of Tourism of India and after retaining its margin, the balance was remitted to Yahoo Hong Kong. The payment remitted by Yahoo India to Yahoo Hong Kong was the subject matter of dispute before the Tribunal. The AO as well as CIT(A) held such payments to be royalty and in that manner, disallowed the expenditure in the hands of Yahoo India under section 40(a) of the Act. The Tribunal, in second appeal, held that banner M/s. Google Ireland Ltd. advertisement hosting services did not involve use or right to use any industrial, commercial, or scientific equipment and no such use was granted by Yahoo Hong Kong. In that manner, the Tribunal set aside the findings of the AO and CIT(A), wherein the subject payments were characterised as royalty. (ii) Pinstorm (supra): Pinstorm was engaged in buying online advertisement space for onward re- sale to an advertiser, much like GIPL in the present case. For such purpose, Pinstorm made payments to GIL, which were disallowed by the AO and CIT(A) under section 40(a)(i) of the Act, on the premise that the said payments were taxable in India. While the AO held the said payments to be fees for technical services ("FTS"), the CIT(A) held them to be royalty. The Tribunal relied on the decision in Yahoo (supra) to delete the disallowance. It was also observed by the Tribunal that the said payments were business profits, which were not taxable in India, since GIL did not have a PE in India. (iii) Right Florists (supra): Right Florist was a florist who used Google Search Engine for online advertising, to generate more business for itself. In this case again, the AO had disallowed the payments made by Right Florist for online advertising under section 40(a)(i) of the Act. However, the CIT(A) reversed the said decision on the ground that none of the recipients of the payments had a PE in India. The Tribunal, in Department's appeal, upheld the order of the CIT(A), while observing that the decisions in Yahoo (supra) and Pinstorm (supra) were

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 147 of 155 authorities in support of the proposition that payment by the Indian arm of a foreign owner of search engine portal, in connection with online advertising, is not in the nature of royalty as per section 9(1)(vi) of the Act. In this decision, the Tribunal also discussed the modalities involved in the online advertising business, in the context of Google Search Engine. (iv) Inception Business (supra): In this case the assessee was engaged in the business of brand management as well as posting advertisements in the social portal on behalf of their clients. The AO held the payments made by it for that purpose to Facebook Ireland Ltd., a non-resident, to be taxable in India. The CIT(A) upheld the order of the AO. The Tribunal relied on the decision in Yahoo (supra), Pinstorm (supra), Right Florists (supra), while setting aside the order of the AO/ CIT(A) and holding that the payments for purchase of online advertisement space were not taxable in India. (v) Urban Ladder (supra): The assessee in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO M/s. Google Ireland Ltd. held the said payments to be royalty. The CIT(A) upheld the order of the AO. However, while doing so, the CIT(A) relied upon certain functional aspects of advertisement system qua Patent Number US20040059708A1 as well as US7778872B2. These two patents are held by Google LLC., USA in connection with the Google AdWords Program hereto. The Tribunal, set aside the order of the CIT(A), while following the decision of the Hon'ble Supreme Court in Engineering Analysis (supra). The Hon'ble Tribunal also relied on the decisions in Yahoo (supra), Pinstorm (supra) and Right Florists (supra). (vi) Myntra Designs (supra): Myntra in this case, made payments to Facebook Ireland Ltd., for online advertising. The AO held the said payments to be royalty and in the alternate, as FTS. The CIT(A) upheld the order of the AO. The Tribunal followed the decision in Urban Ladder (supra), while setting aside the order of the CIT(A). (vii) Play Games (supra): Play games is engaged in the business of providing a platform for online

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 148 of 155 gaming. It had made payments to Facebook Ireland Ltd. for online advertising. The AO and CIT(A) in this case as well, held that payments to be taxable in India. The Hon'ble Tribunal observed that Play Games did not get any right to modify/ deal with the servers, which belonged to Facebook Ireland Ltd., in any manner. It was also observed inter alia that the said servers, which hosted online advertisements, were located outside India and that Facebook Ireland Ltd. did not have a PE in India. In that manner, the Tribunal set aside the order of the CIT(A) and held the payments in question to be neither royalty, nor FTS. (viii) Matrimony.com (supra): Matrimony.com in this case, made payments to Facebook Ireland Ltd. for online advertising. The AO in this case as well, disallowed the said payments under section 40(a)(i) of the Act, which action was upheld by the CIT(A). The Tribunal followed the decision in Urban Ladder (supra), while deleting the said disallowance. (ix) ESPN Digital Media (supra): ESPN India in this case, entered into a re-seller agreement with ESPN UK, for the resale of online advertisement space. In terms thereof, ESPN India purchased online advertisement space for re-sale to Indian advertisers. For this purchase, it made payments to ESPN UK, which were characterised as royalty by the AO. The CIT(A) upheld the order of the AO. The Tribunal, in second appeal, set aside the order of the CIT(A), while observing that ESPN India was merely making payment under the re- seller agreement towards purchase of online advertisement space. It was also observed that a website is not a tangible property and is M/s. Google Ireland Ltd. certainly not a high-tech equipment. It was also observed that the reliance of the AO and CIT(A) on the decision in Verizon Communications Singapore Pte Ltd. v. ITO, (2014) 361 ITR 575 (Madras High Court) was misplaced, since the same had been overruled by the Hon'ble Supreme Court in the decision in Engineering Analysis (supra). (x) Interactive Avenues (supra): Interactive Avenues is an internet advertising agency, which places online advertisements on behalf of its

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 149 of 155 clients. The payments in this case were made to Facebook Ireland Ltd., which were disallowed by the AO and the CIT(A). The Tribunal observed that Interactive Avenues was utilising Google Search Engine amongst others, to buy online advertisement space on behalf of its clients. Be that as it may, the Tribunal set aside the order of the CIT(A) and held that the payments in question could not be characterised as royalty, while relying on the decisions in Urban Ladder (supra) and Play Games (supra)” 7.11 He thus submitted that the Google AdWords Program is a standard facility for display of online advertisements on web properties, like the Google search engine, provided to those who pay for it and in that manner, it is not a custom- made and the amount paid / payable in lieu thereof, does not partake the character of FTS. Reliance was also placed on the decision in Skycell Communications Ltd. vs. DCIT reported in (2001) 119 Taxman 496 (Madras High Court). 7.12. It is the submission of the Ld.Counsel that, the revenue has not made out a specific case for the payments to be in the nature of FTS and that the revenue has not alleged the payments to be in the nature of FTS. He once again relied on para 19 of Coordinate Bench of this decision in assessee’s own case for A.Y. 2008-09 in ITA No. 374/Bang/2013 wherein this Tribunal observed as under: “19. Now coming to main issue of disallowance of distribution fee u/s.40(a)(i), we notice that the basis on which the revenue has made the disallowance is that the assessee is the DAPE of GIL. The alternative ground of the revenue is that the payment is being in the nature of Royalty / FTS. We notice that the issue of taxing the distribution fees by treating the same as Royalty / FTS has already settled in favour of the assessee by the coordinate bench in assessee’s own case from the perspective of applicability of provisions of section 201 and accordingly there cannot be any disallowance u/s.40(a)(i) on this count. Therefore we in this order will restrict our adjudication to whether the assessee is the DAPE of GIL and whether the assessee is required to deduct tax at source u/s.195 on the impugned payments accordingly.” 7.13 On the contrary, the Ld. DR relied on the orders passed by the authorities below. 7.14 We have perused the submissions advanced by both sides in the light of records placed before us.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 150 of 155 After considering the plethora of decisions, in assessee’s own case as well as in the case of the payee being Google Ireland, we do not find that a case has been made out by the revenue to categorise the amounts paid by assessee to Google Ireland to be FTS. Further, it is also held that the assessee is not a dependent agent PE of Google Ireland in order to bring to tax the business profits of Google Ireland in India. Nothing contrary to the observations of the Coordinate Bench of this Tribunal has been brought to our notice. Respectfully following the above, we hold that the payments paid by the assessee to Google Ireland cannot be treated as FTS and therefore no disallowance could have been made u/s. 40(a)(i). Accordingly, this issue for the years under consideration stands allowed in favour of the assessee.” 9.2. Respectfully following the above views, we hold that the assessee cannot be treated as a dependent agent of Google Ireland and the payments made to Google Ireland cannot be treated as FTS or Royalty. Accordingly Ground nos. 25-29 raised by the stands allowed.

Revenue appeal in IT(TP)A No.191/Bang/2023: 11. At the outset, the Ld.AR submitted that Ground No.1-7 raised by assessee has been considered by coordinate bench of this in case of Google Ireland, the recipient of the services wherein it has been held that the services rendered by assessee to Google Ireland is not in the nature of FTS.

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12.1. For sake of convenience, the observation and view taken in ITA No.68/Bang/2015, which is a consolidated order for assessment years 2010-11 to 2015-16 is reproduced as under: “5.1 He further submitted that, in the appeals filed by the revenue, for A.Ys. 2010-11 and 2011-12, the issue of ET/TT is covered in favour of assessee by the decision of Hon’ble Supreme Court in case of CIT vs. HCL Technologies Ltd. reported in 404 ITR 719 which has upheld the decision of Hon’ble Karnataka High Court in case of CIT vs. Tata Elxsi Ltd. reported in (2012) 349 ITR 98. 5.2 The Ld. DR relied on the orders passed by authorities below. 5.3 We note that the issue raised by revenue in the appeals for A.Ys. 2010-11 and 2011-12 pertains to the computation of deduction u/s. 10A of the act wherein the Ld.AO reduced the communication expenses from the export turnover while computing the eligible profits. 5.4 This issue is no longer resintegra by virtue of the decisions relied by the Ld.Counsel hereinabove. Respectfully following the ratio laid down therein, we direct the Ld.AO to recomputed the eligible profits available for deduction u/s. 10A of the act in the hands of the assessee as

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 152 of 155 per the directions by Hon’ble Supreme Court in case of CIT vs. Tata Elxsi Ltd. (supra). Accordingly, the appeals filed by revenue for A.Ys. 2010-11 and 2011-12 stands dismissed.” 12.2. Respectfully following the above, we direct the Ld.AO to recompute the deduction available to the assessee under section 10 A of the Act as per the directions of Hon’ble Supreme Court. Accordingly Grounds 8-9 raised by the revenue stands dismissed.

13.1. The Revenue is also challenging the issue of considering the unallocated expenditure for Accropetal Technologies Ltd., chosen by the Ld.TPO under the IT segment by treating the assessee as a KPO. We have already remanded the issue of bench marking the IT segment to the Ld.AO/TPO in accordance with the APA with a direction not to consider the assessee to be a KPO under the IT segment. It is also directed to use TNMM as the MAM for determining the arms length of the transaction. As we have remanded the entire issue to the Ld.TPO for computing the ALP of IT segment de novo as per the directions, the issue of comparables also stands remanded. The comparables are therefore to be selected to be in accordance with law. Accordingly Grounds 10-11 becomes infructuous and accordingly dismissed.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 153 of 155 14. Ground No.12-18 are raised in respect of relief given by the Ld.CIT(A) in respect of attribution of additional profits. As we have already held while considering Issue 4 that assessee cannot be held to be a dependent agent permanent establishment of Google Ireland, the income earned by Google Ireland cannot be taxed in India as business profits. Under such circumstances, the issue of attribution does not arise. Accordingly Ground No.12-18 raised by the revenue becomes infructuous.

IT(TP)A Nos.69 & 191/Bang/2014 Google India Pvt. Ltd., Bangalore Page 154 of 155 We have perused the submissions advanced by both sides in light of records placed before us.

Admittedly, the necessary criteria to claim eligibility under section 10A in respect of the income earned by the assessee under ITeS segment has not been verified by the Ld.AO. In the interest of justice we remand this issue to the Ld.AO to verify the invoices, the service work order and any other documents related to rendition of ITeS services and the necessary documents to verify if the payment has been received by the assessee in India in foreign currency in respect of the ITeS services rendered. Assessee is directed to furnish all relevant information in support of the claim. The Ld/AO shall then consider the claim in accordance with law. Accordingly additional grounds raised by the revenue stands allowed for statistical purposes.

In the result the appeal filed by the assessee and revenue stands partly allowed. Order pronounced in the open court on 22nd December, 2023

Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Bangalore, Dated 22nd December, 2023. VG/SPS

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Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file By order

Assistant Registrar, ITAT, Bangalore