TMI Blog2021 (4) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... written note, the Bench had gone through the books available in public domain at Google Adword or Google analytics and also gone through the website of the Google and the Adword links and based upon the above research carried out by the Tribunal, they have summarized the Google Adword functions. The material on which Google Adword functions were summarized does not find place in the order of the Tribunal nor the material was brought to the notice of the appellant, meaning thereby some material collected behind back of the appellant has been used by the Tribunal and the material brought on record through proper application has not been looked into. Keeping in view Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and also keeping in view the fact that the material on the basis of which the order has been passed was not furnished to the appellant at any point time, the order passed by the Tribunal is certainly violative of principles of natural justice and fair play as the appellant was not afforded an opportunity to rebut fresh evidence especially when such evidence was based on Google study. Another important aspect of the case is that details of the material has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogle Ireland Limited. 5. The assessing officer initiated proceedings under Sections 201 and 201(1A) of the Income Tax Act, 1961 (hereinafter referred to as IT Act), vide notice dated 20.11.2012 for the assessment year 2007-08 and in the said notice, the assessing officer referred to the assessment order dated 30.11.2011 under Section 143(3) of the IT Act passed in the case of the appellant for the assessment year 2008-09 by the Additional Commissioner of Income-tax, Range-11, wherein disallowance under Section 40(a)(i) of the IT Act was made on account of non-deduction of tax at source for the sums payable by the appellant to Google Ireland under the Distribution Agreement. The assessing officer vide common order dated 22.2.2013 for the assessment years 2007-08 to 2012-13 passed an order under Section 201(1) and 201(1A) of the IT Act, thereby determining the appellant as assessee in default in respect of non-deduction of tax at source for the sums payable to Google Ireland as fee for distribution rights and consequently, attaching a tax liability of INR 7,40,47,853/- for the assessment year 2007-08. 6. The appellant-assessee being aggrieved by the common order dated 22.2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice and fair play, hence, the matter should be remanded back to the Tribunal permitting the parties to raise all possible grounds while arguing the matter afresh. He has also vehemently argued before this Court that a liberty be granted to all the parties to place all documents before the Tribunal enabling the Tribunal to decide the matter afresh on merits. 10. The learned Senior Counsel has also argued that erroneous findings have been arrived at by the Tribunal in paragraph 35 based upon some material which was not furnished to the assessee and therefore, the matter be remanded back to the Tribunal. Reliance has been placed upon a judgment delivered by the Division Bench of Madras High Court in the case of Ramco Industries Ltd., vs. Deputy Commissioner of Income-tax, Corporate Circle-2, [2020] 117 taxmann.com 382 (Madras) and his contention is that the Division Bench of the Madras High Court in similar circumstances has set aside the orders passed by the Tribunal and the matter was remanded back to the Tribunal for fresh adjudication. 11. Sri. Aravind, learned counsel for the Income-tax department has argued before this Court that the material which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile arguing the matter has fairly stated before this Court that question Nos.2 and 3 are required to be decided in the present case so far as his prayer in respect of remand is concerned and the other questions be left open. 14. Substantial questions of law III(2) and III(3) read as under; III (2) Whether the impugned order of the Tribunal is perverse in as much as the conclusions of the Tribunal are based on assumptions, conjectures and surmises and not on the basis of facts available on record and as such liable to bet set aside? III (3) Whether the Tribunal grossly erred in law in placing reliance on unverified material available in public domain to conclude that payments made by the Appellant to GIL constituted royalty under the provisions of the Act and DTAA and more so since the Appellant was not confronted with such material, thereby violating the principles of natural justice? 15. Heard the learned counsel for the parties at length and perused the record. 16. The basic question before this Court is whether the Tribunal while passing the common order dated 23.10.2017 has violated the principles of natural justice and fair play as it has not afforded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The Google search engine or search based campaign gives high conversion rate and better return of investment then display of advertisement on television rate, newspaper and magazine. 17. The Tribunal in the aforesaid paragraph has held that no literature or books or documents were filed by the assessee except some of the documents mentioned in the order of the Tribunal and as the parties have failed to bring any tangible material except in the form of written note, the Bench had gone through the books available in public domain at Google Adword or Google analytics and also gone through the website of the Google and the Adword links and based upon the above research carried out by the Tribunal, they have summarized the Google Adword functions. The material on which Google Adword functions were summarized does not find place in the order of the Tribunal nor the material was brought to the notice of the appellant, meaning thereby some material collected behind back of the appellant has been used by the Tribunal and the material brought on record through proper application has not been looked into. 18. The Madras High Court in similar circumstances, in the case of Ram ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any legislation. 9. As rightly pointed out by the learned counsel for the appellant/assessee with regard to the study or research done by ITAT, the appellant/assessee was not put on notice. Hence, on this sole ground, the impugned common order warrants interference. 10. The Substantial Questions of Law Nos.1 and 2 are answered in affirmative and in favour of the appellant/assessee company. 19. In the considered opinion of this Court, keeping in view Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and also keeping in view the fact that the material on the basis of which the order has been passed was not furnished to the appellant at any point time, the order passed by the Tribunal is certainly violative of principles of natural justice and fair play as the appellant was not afforded an opportunity to rebut fresh evidence especially when such evidence was based on Google study. 20. Another important aspect of the case is that details of the material has also not been reflected in the order passed by the Tribunal and therefore, this Court is of the opinion that as there is a violation of principles of natural justice and fair play, the matter deserves t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to take notice for the respondent and is heard. Perused the record. The matter requires consideration. The appeal is admitted to consider substantial questions of law formulated at paras III(1), III(2), III(3), III(4), III(5) and III(7) in the appeal memorandum. ORDER ON IA.NO.2/2017 The learned Senior Counsel appearing for the appellant submits that IA.No.2/2017 may be disposed of by directing the Income Tax Appellate Tribunal, Bengaluru, to dispose of the appeals namely, I.T.A.No.1190/Bang/2014, I.T.A.No.949/Bang/2017 and I.T.A.No.950/Bang/2017 without being influenced by the order dated 23.10.2017 passed in IT(TP) A.1511/Bang/2013 which is impugned in this appeal. We find no legal impediment to grant the aforesaid prayer. Accordingly, we direct the Income Tax Appellate Tribunal, Bengaluru, to dispose of the appeals in I.T.A.No.1190/Bang/2014, I.T.A.No.949/Bang/2017 and I.T.A.No.950/Bang/2017 in accordance with law and without in any way being influenced by the order dated 23.10.2017 passed in IT (TP) A.1511/Bang/2013 which is impugned in this appeal. IA.No.2/2017 stands disposed of accordingly. 27. Inspite of the fact that an order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant for part of the payment that was paid during AY 2014-15 and hence were taxable income of GIL only in AY 2014-15 since Royalty as per the DTAA is taxable on receipt basis? 7. Whether the Tribunal failed to appreciate that the withholding obligations on the Appellant were integrally linked/dependent with/on the taxability of the amounts in the hands of GIL and in the absence of such taxability for the period under consideration, there could be no withholding obligations? 29. The order passed by the Tribunal dated 11.5.2018 has been passed in a mechanical manner. It is nothing but a cut, copy, paste order and in some of the paragraphs the earlier order dated 23.10.2017 has been relied upon word by word. 30. The following is the comparison of extracts of order dated 11.5.2018 vis- -vis order dated 23.10.2017; Order dated 11.5.2018 passed in ITA 502/2018 and subsequent appeals. Order dated 23.10.2017 impugned in the captioned appeal. Para 102 page 126: It gives advertiser the access to the tools of the Adword Program which can be accessed through the gateway of Google India/Appellant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p or I.P address of the tablet, photographs, time spent on a website, eating habits wearing preferences etc. With the help of I.P address, Google search engine is having the access to various information and data pertaining to the user of the website in the form of name, sex, city, state, country, phone number, religion etc. Besides the above basic information, the Google is also having the access of the history of the users as well as to the behavior of the persons searching Google engine. Para 102 page 127 and 128: Based on various inputs mentioned above and contents of more than 2 million website, the Appellant was able to provide the effective focus ad campaign to the advertiser. The Adword Program and tools therein gives the advertiser to pick up the keywords, phrases which are similar in nature and germane, and in a digitalized and tabulated form and grouped together. The advertiser is having the access to this Google Analytics Program through the appellant. Whenever one particular keyword is searched, the targeted ad will be shown to the consumer and by clicking on the ad, the consumer will be landed on a webpage. The selection and display o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtiser. The appellant also suggests periodical review of the website home page, product and services which can be bundled together... It also suggests the traffic forecast of the list of key words, multiple key word placed to get new key word ideas... Based on initial key words, the advertiser enters and the tools shows various key word suggestions automatically grouped into different ad groups. This is only possible as Appellant permits the use of information, data and key planner to the advertisers which is patent and protected software of the Google. The key word planner also suggests the suitability of the key words which are useful in the particular month of the year. The advertiser is able to plan its compaign for optimization or for the purpose of getting more impression and conversion based on keyword planner. Based on this impression and forecast, the advertiser is able to bid on the key words. Para 103 page 128: The display of the advertisement based on the keywords, is dependent upon the auction price paid by the advertiser. The keywords bid at the highest rate by the advertiser would be shown at the top of search result and therefore, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then search result will show only a formal shoe. Para 46 page 50: The Appellant facilitate the advertisers to start the campaign of advertising initially with the help broad match thereafter with phrase match and thereafter with exact match. Now with the help of the key word management, the Google Adword program takes care of the miss spelling, singular plural abbreviation, acronyms (short word) stemming. For example, if the advertisement shows the formal shoes, then the key words are formal plus shoes, if it is broad match key words then the advertisement will show formal shoe, sport shoe, black dress shoe, partly shoes etc. However, if the advertiser had only opted for exact word match, then search result would only show a formal shoe. Para 105 page 129 and 139: The appellant helps the advertiser with the help of tools of Adword Program to include or delete various variation of keywords in the realm of advertisement compaign and similarly the advertiser may with the help of Google tool can avoid the unnecessary traffic on its website. For example, if an advertiser does not want the visit of a surfer who is searching the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para 106 page 130: The Google Adword Program is also having Google Analytics which is connected with the Google Adword Program and which is a potential patented tool to target the keywords and the negative keywords. This is the USP of the Google Adword Program, which is maintaining thousands of different keywords used by people to search the website and based on this user behaviour, the Google Analytics suggests the appropriate keywords to be used by the advertiser for encouraging the traffic on the website. Similarly, the Google Analytics also uses the same data to filter out the negative keywords on the basis of which an unattended or unwarranted person have landed on the website of the advertiser. The Appellant is using all these tools in conjucture with the advertisers at the time of granting the backhand services to advertisers, as the Appellant is having access to all these date, information, etc., Para 49 page 51 and 52 : The Google Adword program is also having Google analytics which is connected with the Google Adword programme and which is a potential patented tool to target the key words and the negative key words. This is the USP o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the distribution agreement various ITES services, which the assessee had wrongly claimed to have been provided not under the distribution agreement, but under the service agreement. This is only a design/structure prepared by the assessee to avoid the payment of taxes. 31. Sri.Aravind, learned counsel for the department has filed written submissions also and his contention is that the material on the basis of which the subsequent order of the Tribunal dated 11.5.2018 was passed had been supplied to the assessee and was also on record. He has stated that AdWord program training material was submitted by the assessee before the Tribunal in a paper book form and the extracts of the learning Google AdWord and Google Analytics written by Benjamin Mangold was submitted by the Revenue in its paper book. 32. The fact remains that the documents which were supplied either by the assessee or by revenue were certainly looked into, but the research material on the basis of which the so-called research was carried out by the Tribunal, was not brought on record. The subsequent order is based upon the first order passed by the Tribunal and there is word by word repetition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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