DCIT 13(1)(2), MUMBAI vs. PINSTROM TECHNOLOGIES P.LTD, MUMBAI

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ITA 4937/MUM/2016Status: DisposedITAT Mumbai14 February 2018AY 2012-135 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision, noting that similar issues in the assessee's own cases for previous assessment years were decided in favour of the assessee by the ITAT. The payments were considered business profits, not royalty, and thus not chargeable to tax in India without a PE.

What were the facts?

The assessee made payments to Google Ireland Ltd. for banner advertisements. The Assessing Officer disallowed these payments for non-deduction of TDS, treating them as royalty. The CIT(A) deleted this disallowance, holding the payments as business profits not taxable in India due to the absence of a Permanent Establishment (PE).

What were the issues?

Whether payments for online banner advertisements to a foreign company constitute royalty or business profit, and if TDS was required in the absence of a PE in India.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI RAJENDRA, AM & SHRI AMARJIT SINGH, JM

For Appellant: Shri Haridas Bhat (AR)
For Respondent: Shri T.A. Khan (DR)
Hearing: 05.02.2018Pronounced: 14.02.2018

Assessee by: Shri Haridas Bhat (AR) Department by: Shri T.A. Khan (DR) Date of Hearing: 05.02.2018 Date of Pronouncement: 14.02.2018 O R D E R

PER AMARJIT SINGH, JM:

1.

The revenue has filed the present appeal against the order dated 16.05.2016 passed by the Commissioner of Income Tax (Appeals)-21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year2012-13.

2.

The revenue has raised the following grounds: - "

Whether, on the facts and in circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance u/s. 40(a)(ia)holding that the amount paid by the assesses to Google Ireland Ltd. for uploading and display of banner advertisement was not in the nature of rendering of royalty but was for rendering A.Y. 2012-13 of business profit of M/s Google Ireland Ltd. and in the absence of any PE of M/s Google Ireland Ltd. in India, the same is not chargeable to Tax in India". "Whether, On the facts and in the circumstances of the case and in law, the Ld. CIT(A] is justified in deleting the disallowance and passing the Judgment on the basis of Hon'ble ITAT decision in case of M/s. Yahoo India Pvt. Ltd. in ITA No. 506/Mum/2008. 3} The appellant prays that the order of the CIT (A) on the above ground be set aside and that of the Assessing Officer be restored. 4) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”

3. The brief facts of the case are that the assessee filed its return of income on 30.09.2012 declaring total income to the tune of Rs.17,41,270/-. Thereafter the assessee filed the revised return on 26.09.2013 declaring total loss to the tune of Rs.36,65,116/-. The revised return was filed on account of financial difficulties and lack of proper staff and the audit cannot be completed well in time. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case was selected for scrutiny and notice u/s 143(2) of the Act dated 10.09.2013 was issued and served upon the assessee. Notice u/s 142(1) of the Act dated 24.07.2014 was issued and served upon the assessee. The assessee is engaged in the business of search engines, marketing through internet consisting of generating clicks, links, visits through internet with clients. On verification, it was found that the assessee did not deduct the TDS on an amount of Rs.1,01,02,632/- on the payment made to the Foreign Vendors. Notice was given and after the reply, an amount of Rs.1,01,02,632/- was disallowed and added to the income of the assessee. AIR mismatch to the tune of Rs.1,03,285/- ITA. No.4937/M/2016 A.Y. 2012-13

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