TMI Blog2022 (10) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... and its reasonableness is not under dispute. Only the payment made to Google Singapore for which there is no income which accrue or arise in India based on the provision of section 9 and section 165 of EL. In view of that contention of the assessee that the consideration paid to Google Singapore is not amenable to equalization levy was rejected by the AO stating that as it is noticed from the factual matrix present in this case that the payment has been made to a Non Resident (Google Singapore) by the assessee for advertisement purposes in the digital mode on behalf of his clients and that no tax was deducted as equalization levy on the payment made to the non-resident. The above transaction carried out by the assessee clearly attract the provisions of sec. 165(1) of the Finance Bill, 2016 as the condition specified therein are clearly satisfied by the facts present in this case. Further the assessee's case does not fall within the exception provided u/s 165(2) of the Finance Act. Therefore, the facts present in the assessee case clearly lead to the conclusion that equalization levy is attracted in the payment made by the assessee to Google Singapore. Therefore, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MLESH JAYANTBHAI, A.M. This appeal is filed by the revenue aggrieved from the order of the National Faceless Appeal Centre (NFAC) [ Here in after referred as Ld. CIT(A) ] for the assessment year 2018-19 dated 13.06.2022 which in turn arises from the order passed by the National Faceless Assessment Center, New Delhi passed under Section 143(3) read with section 144B of the Income tax Act, 1961 (in short 'the Act') dated 23.09.2021. 2. Aggrieved form the order of the ld. NFAC the revenue has marched this appeal on the following grounds; 1. Whether on the facts and circumstances of this case, the ld. CIT(A) is justified in deleting the addition of Rs. 8,89,35,558/- made by the Assessing Officer u/s. 40(a)(ib) of the Income Tax Act, 1961 for non-charging of Equalization levy when the conditions prescribed as per the provisions of section 165 were fulfilled. 3. The brief fact as culled out from the records is that assessee is a proprietor of Oan Media and Web Solutions filed his return in ITR-3 declaring total income of Rs. 43,86,210/- on 31.10.2018. The case was selected for complete scrutiny under CASS for Foreign remittance and notice u/s. 143(2) was issued o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf online advertisement campaign was carried out by him availing Google Singapore services. b) Documentary evidence to establish that the assessee was an agent of Google Singapore as claimed by the assessee. c) Establish with documentary evidence that the transaction carried out with Google Singapore feel within the exceptions mentioned in section 165 of the Finance Act and therefore, was not liable to equalization levy. d) Clarify and explain why a sum of Rs. 8,89,35,558/- was paid to Google Singapore when as per submission already on record the export revenue received was only Rs. 7,36,79,273/-. 5. In response the assessee furnished copy of the agreements entered into by the assessee with his clients and stated that the assessee is an agent of Google Singapore whereby the assessee is granted access for the purpose of advertisement to be made on Google. On approaching the assessee, such person gets login credentials, generated by the assessee on the website of google through such credentials such person on its own runs advertisement on google. Such person on its own decides where the advertisement is to be run i.e. on which geographical location, who would be the targ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on record have been given due consideration. The contentions of the assessee made in these submissions to establish that equalisation levy is not attracted on the payment made to Google Singapore are not accepted for the detailed reasons discussed in the following paragraphs. 8. Contention No.1 - Assessee is only an agent of Google Singapore It is noticed that the assessee has made a claim that he is only an agent of Google Singapore in order to escape from the clutches of equalisation levy. However, the facts as borne out from the assessee's case do not support such a claim. On perusal of the Google Advertising Service Agreement entered into between the assessee and the Google Singapore furnished by the assessee, it is seen that it is a contract between Google Singapore and the assessee who is stated as a customer and not an agent for the purpose of utilising Google's Program for placing digital advertisements on his behalf or on behalf of a third party. As per the Terms Conditions of the agreement, as per point No.1 of the terms and conditions, the customer (assessee) authorises Google or its affiliates to place customer's advertising materials and related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Program is an advertising platform on which Customer authorizes Google or its affiliates to use automated tools to format Ads. Google and its affiliates may make available to Customer certain optional Program features to assist Customer with the selection and generation of Targets and Creative. Customer is not required to authorize use of these optional Targeting and Creative features and, as applicable, may opt-in to or opt-out of usage of these features, but if Customer uses these features then Customer will be solely responsible for the Targets and Creative. Google and Partners may reject or remove a specific Ad or Target at any time for any or no reason. 8D. Clearly indicates the technical aspects that are be provided by the assessee with regard to running of online advertising campaign on the google platform. This clearly establishes the nature services being provided by assessee his customers for effective running of online advertisement campaign behalf of clients which he compensated with consultancy fees. 8E. summary, the contention that he only acting as conduit/agent for channelizing funds from Advertiser (customers of assessee) to Publisher (Google Singapore) not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct tax issues relating to e-commerce are the difficulties of characterizing the nature of payment and establishing a nexus or link between a taxable transaction, activity and a taxing jurisdiction, the difficulty of locating the transaction, activity and identifying the taxpayer for income tax purposes. The digital business fundamentally challenges physical presence-based permanent establishment rules. If permanent establishment (PE) principles are to remain effective in the new economy, the fundamental PE components developed for the old economy i.e. place of business, location, and permanency must be reconciled with the new digital reality. . Considering the potential of new digital economy and the rapidly evolving nature of business operations it is found essential to address the challenges in terms of taxation of such digital transactions as mentioned above. In order to address these challenges, it is proposed to insert a new Chapter titled Equalisation Levy in the Finance Bill, to provide for an equalisation levy of 6% of the amount of consideration for specified services received or receivable by a non resident not having permanent establishment (PE) in India, from a resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on business or profession; or (ii) A non-resident having a permanent establishment in India. (2) The equalisation levy under sub-section (1) shall not be charged, where a) the non-resident providing the specified service has a permanent establishment in India and the service is effectively connected with such permanent establishment, b) the aggregate amount of consideration for specified service received or receivable in a previous year by the non-resident from a person resident in India and carrying on business or profession, or from a non-resident having a permanent establishment in India, does not exceed one lakh rupees; or (c) where the payment for the speci service by y the person resident in India, or the permanent establishment in India is not for the purposes of carrying out business or profession. 10. Sec.40(a)(ib) of the Income Tax Act The provisions of Sec.40(a)(ib) of the Act provide that any consideration paid or payable to non-resident for a specified service on which equalisation levy is deductible under the er vill of the provisions of Chapter VIII of the Finance Act 2016 and such levy has not been deducted or after deduction, has not been pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having a PE in India, will not attract equalisation levy and the tax authorities do not have the jurisdiction to tax such transactions as his customers from whom he received consultancy charges and the target audience of the online advertisement are located outside India and has not indicated the provisions of the Finance Act 2016 which form the basis for non-attraction of equalisation levy. He has also not furnished any documentary evidence in support of his above claim. 10D. It can be seen from the notes to the Finance Act 2016 it is clearly mentioned that to avoid interpretational issues and to provide certainty, definitions to the terms and expressions used in the provisions relating to Equalisation Levy have been provided. The definitions provided therein clearly indicate that the consideration paid to a non-resident for specified services by a resident in India carrying on business or profession is liable for equalisation levy provided that the transactions do not fall within the exceptions mentioned in Sec.165(2) of the Finance Act 2016. So, the attempt by the assessee to carve out an exception which is not already provided in the statute and bring out an ambiguity is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not tenable for the detailed reasons mentioned in paras 7 to 10 above. As such, the entire payment of Rs.8,89,35,558/- made to M/s. Google Asia Pacific Pte Ltd., Singapore, a non resident having no PE in India, claimed as expenses in the P L A/c by the assessee is disallowed and added to his income following provisions of Sec.40(a)(ib) as the assessee has failed to deduct the equalisation levy in respect of the above payment of Rs.8,89,35,558/-. 7. Aggrieved from the findings of the ld. AO, assessee moved an appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. As the revenue did not agree to the findings of the ld. CIT(A) has moved this appeal before us only on the solitary ground of deletion of an addition made u/s. 40(a)(ib) for non-charging of Equalization levy when the conditions prescribed u/s. 165 of the Finance Act, 2016 are fulfilled. Before we proceed on the issue it is better to understand the findings of the ld. PCIT, the same is reiterated herein below:- 7.1 Ground of Appeal No. 1- Disallowance u/s 40(a)(ib) Rs.8,89,35,558/-. a) The gist of disallowance made by the AO is outlined in paras 2(a) to 2(f) of this order. b) The u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree cases- - Where Non Resident providing the Specified Services has a PE in India and the Specified Service is effectively connected with such PE. - Where aggregate amount of consideration for Specified Services does not exceed Rs. 1 lac. - Where the payment for specified services by person resident in India or the PE in India is not purpose of carrying out business or profession. i) The essential ingredients for Equalisation Levy are as under: Amount of consideration in excess of Rs.1,00,000/- Specified Services received or receivable. Service provided by a Non Resident and does not have PE in India Services received by - a) Resident in India and carrying on business or profession in India. b) Non resident having PE in India. When all the above ingredients are in a transaction then liability arises for Equalisation levy @ 6% on the amount of consideration received or receivable. 7.3 The next issue to be decided in whether Equalisation levy is applicable in the case of Appellant or not on the transaction of Rs.8,89,35,558/- with Google, Singapore a) The gist of addition/disallowance made by the AO is outlined in paras 2(b) to 2(f) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngkong. Shenzhen Scolour Technology Co. Ltd., Hongkong. Shenzhen Tonsee Electronics Co. Ltd, Hongkong. All these ads were run outside India as their target audience was outside India. Thus, the online ads for which payments were made by Appellant to Google Singapore were for clients located outside India and the target audience for these online ads were also outside India. To support the above contention the Appellant filed the following details/documents, Information was provided in a tabulated manner giving Name of clients for whom ads were run by Appellant, Addresses of such clients (which are out side India), Amount received from these clients for purpose of running such online ads. Amounts subsequently paid to Google Singapore and Target audience for such ads. Copies of FIRC were submitted on sample basis to establish that amount was received by Appellant for purpose of online ad on behalf of clients located outside India. Some samples of campaign reports obtained from Google Singapore in respect of such online ads of such clients. These campaign reports give Targeted locations, campaign details, number of clicks, Impr. etc. It shows that Target locati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant is not the ultimate beneficiary of such online ads and these online ads are not related to Appellant's business perse. The clients for whom the Appellant acted were all located outside India and they did not have any connection of whatsoever nature to business in India. Neither did these clients carry out any business in India nor did they have any target audience in India. Section 165A was introduced through Finance Act, 2020. It clearly specifies that services will be taxable in India, only if they are provided to a person in India or to a person who buys such goods or services using IP Address based in India. The intention of this amendment is to bring under purview of Equalisation levy the transactions which have some connection to India in relation to business carried out or services rendered. In the present case, the business of clients is located outside India and their target audience/customers for online ads are located outside India. Thus, these clients have no connection to India in respect of business carried out or services rendered. The invoice was not raised directly by Google Singapore to client of Appellant. It was channelized th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices required by his clients out of the amount received by him from Non Resident having no business in India (clients of Appellant). The clients of Appellant carried out their business outside India. The target audience for whom such online ads were run were located outside India. Nothing on account of such business was carried out from India. Appellant only was a conduit/agent between his Non Resident clients and Google Singapore. The Indian jurisdiction was used only for transfer of funds. In view of the above facts as outlined in paras 7.2 to 7.4 of this order, it is hereby held that as per section 165 of the Act the Appellant had no liability for payment of Equalisation Levy. Hence, the disallowance of Rs.8,89,35,558/- made by the AO u/s 40(a)(ib) of the Act is not sustainable and is hereby deleted. Ground of Appeal No. 1 is allowed. 8. The ld. DR appearing on behalf of the revenue submitted that the assessee is engaged in the business of online advertiser and his activity consist of digital marketing and web designing. Since, the assessee has paid to Google Singapore he is subjected to equalization levy and the disallowance made by the AO u/s. 40(a)(ib) is correct. He e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In addition, during the process of hearing the ld. DR called for the detailed copy of the audited accounts so as to reconcile the payment disallowed with that of the income received from foreign client. The same has been supplied and the ld. AR satisfied the ld. DR about the difference of amount and the ld. DR has that the export revenue is only Rs. 7.36Cr and local revenue Rs. 2.39 cr and that payment cannot be considered as export revenue and paid to Google Singapore. The ld. AR of the assessee counters this arguments of the ld. DR and submitted that the said issue is dealt by the AO in his order at page 4 para 6C and based on the submission of the assessee no adverse inference is drawn and in fact the same is also of foreign client and is explained vide submission already placed on the records and the said revenue is related to Buzz Media 32 lakhs and Drive Digital for Rs. 1.49 cr wherein also the nature of services are same and if that amount included then the same is matching with the figure of the remittance paid to Google Singapore. 9. Per contra, the ld. AR of the assessee has relied upon the written submission filed by him. The same is extracted here in below ; DPT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the lower authorities during the course of assessment and appellate proceedings. 2.2. In this regard, the below mention details/documents were put forth before the lower authorities [PB : 1-34] :- 2.2.i. TABLE SUGGESTING (i) Name of the customers/clients for and on behalf of whom advertisement was run by the assessee;(ii) Such Table/factual position established that the clients of the assessee were companies/entities outside India; (iii)Amount for the purpose of running online advertisement was received by the assessee from outside India;(iv) Amount subsequently spent on such advertisement was paid by the assessee to Google Singapore; (v)Advertisements were run outside India or in other words the target audience of such advertisements were outside India. 2.2.ii. FOREIGN INWARD REMITTANCE CERTIFICATES ( FIRCs ) were submitted, on sample basis, to establish that the amount was received by the assessee, for the purpose of online advertisement, on behalf of the clients, from outside India only. 2.2.iii. CAMPAIGN REPORT OBTAINED FROM GOOGLE SINGAPORE , on sample basis, establishing the fact that the target audience of such advertisements were outside India. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers/audience who are stationed/based in that location. 2.4.i. For instance, if the client of the assessee wanted that the advertisement should be shown in Washington DC, USA , then specific to that location, the details were filled on the Google portal. 2.4.ii. Thereafter, the advertisements were run only specific to Washington DC. 2.4.iii. Due to this reason, and for establishing that the advertisements were run outside India only, campaign reports were submitted to the lower authorities, which clearly established that the locations of such advertisement were all outside India and not in India. 2.5. Assessee, being stationed in Jaipur, was not fully aware as to for which campaign, which area code was to be specified. For such purposes and for selecting the target audience assessee was completely dependent on his client. The clients were given access to the Google platform, with assessee being the co-user of such platform, Assessee was only responsible for making the campaign to be run, rest everything was done by the client of the assessee, including how much amount is to be appropriated to which campaign and also the target audience for each and every campaign. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Levy is applicable on consideration for specified servicesreceived or receivable by a person who is a Non-Resident from:- 3.3.i. Person resident in India and carrying on business or profession; or 3.3.ii. Non-Resident having a Permanent Establishment in India. 3.4. For applicability of Section 165(1) , following conditions have to be fulfilled:- 3.4.i. Consideration should be received by the non-resident from the person resident in India . Word consideration has not been defined under the ITA or in the Finance Act, 2016; Consideration is which creates a contractual relationship between the promisor and the promisee , in regard to the performance of promise and in regard to which the parties to the agreement or contract get related to each other; As per Section 2(d) of the Indian Contract Act, 1872, when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; In the present case, the client of the assessee, being outside India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted outside the India for the purpose of online advertisement. 3.6.ii. The businesses for the purpose of which online advertisements were carried out were located in India and the target customers were from India. 3.6.iii. Thus, the online advertising platforms were deriving lot of value, which was directly in relation to business in India. 3.6.iv. Indian Government was not able to recover the taxes on such online advertisement as no tax at source wasdeducted while remitting funds outside India for online advertisements, for the reasons that such advertising platforms, such as Google/Yahoo were not having any Permanent Establishment in India and all the transactions were done online. 3.6.v. Thus, it was felt that although the income was earned by such online advertisers, from India, from the businesses run in India , however, no tax was collected on such payments by the Indian Tax Authorities. 3.6.vi. To plug this loopholes Equalization Levy was introduced so that whatever advertisement revenue is generated by the online platforms from business run in India, that can be recovered by the Indian Tax Authorities at the threshold level itself. This was in line with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om such business shall be deemed to accrue or arise in India. 3.11. Meaning of Significant Economic Presence has been provided in Explanation 2A, which is reproduced here under:- Explanation 2A.-For the removal of doubts, it is hereby declared that the significant economic presence of a non-resident in India shall constitute business connection in India and significant economic presence for this purpose, shall mean- (a) transaction in respect of any goods, services or property carried out by a non-resident with any person in India including provision of download of data or software in India, if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or (b) systematic and continuous soliciting of business activities or engaging in interaction with such number of users in India , as may be prescribed.. 3.12. The other requirement, in Section 165 of the Finance Act, 2016. is that the Non-Resident should have a Permanent Establishment in India. However, in the present case, it was establishment by the assessee before the ld. AO and is also an undisputed fact that the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant reference to the Territorial Nexus Theory and observed that the issue of sufficiency of the territorial connection involved a consideration of two elements, i.e. (i) that the connection must be real and not illusionary and; (ii) that the liability sought to be imposed must be pertaining to that connection. In this regard, Hon ble Apex Court in the case of Ishikawajma-Harima Heavy Industries Limited Vs. Director of Income Tax [2007] 3SCC 481 (SC), where the court while dealing with the applicability of Section 9 of the Income Tax Act to the transaction in question, observed that the territorial Nexus doctrine, plays an important part in assessment of tax. It was observed that only such part of the income as is attributable to the operations carried out in India can be tax in India. 3.17. What is to be seen for applicability of Equalization Levy is that whether the business for which advertisement has been carried out has earned any income from India? 3.17.i. Situation I: If the answer to this question is in negative, then there would not be any liability of Equalization Levy. It is for the reason that in such a scenario the business, in effect, would have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and bring it under the purview of Equalization levy. Whereas, in the Situation II, although the funds have been channelized from Bangladesh by XYZ then also Google Singapore would be considered to have been earned income from India and not from Bangladesh in such a scenario the Indian tax authorities would have the right to tax the online advertisement amount paid by ABC to Google Singapore through XYZ. Google Singapore in such a scenario would be considered to have earned this advertisement income from India and not from Bangladesh. 3.17.iv. The present case, of that of the assessee, falls under Situation I. 4. REBUTTAL OF THE CONTENTIONS RAISED BY LD. AO 4.1. Entire factual position was explained to the ld. AO. It was also submitted that assessee is no one else but an agent working on behalf of Google Singapore on one hand and his client on the other hand. 4.1.i. The transaction between the client of the assessee and Google Singapore were on a Principle to Principal basis and the assessee acted only as a conduit for channelizing the funds for the purpose of payment to Google Singapore, from his clients located outside India. 4.1.ii. Ld. AO disregarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expenses. It is submitted that, merely for the purpose of accounting, whatever amount was received by the assessee for the purpose of online advertisement, from his clients, was shown by the assessee as his revenue and whatever corresponding amount was paid by the assessee to Google Singapore was claimed as expenditure. However, such accounting treatment would not make the transaction entered by the assessee with his client or with Google Singapore to be on a Principal to Principal Basis. 4.3.i. It is established principle that entries in the books of accounts are not decisive of the nature and character of expenses. It is not material and relevant how the assessee treated these expenses in its books of accounts but what is material and relevant is the exact nature of the transaction. This issue was examined by the Hon ble Supreme Court in Kedarnath Jute Mfg Co. Ltd [1971] 82 ITR 363 (SC). In this case the tax authorities and the Hon ble ITAT, denied the deduction of the sales tax liability to the taxpayer contending that the taxpayer denied its liability to pay the sales tax and also, had not made a provision in its books of account for the said liability. Hon ble Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount received by him from Non Resident having no business in India (clients of assessee). 5.3.ix. The clients of assessee carried out their business outside India. 5.3.x. The target audience for whom such online ads were run were located outside India. 5.3.xi. Nothing on account of such business was carried out from India. 5.3.xii. Appellant only was a conduit/agent between his Non- Resident clients and Google Singapore. 5.3.xiii. The Indian jurisdiction was used only for transfer of funds. 5.4. Considering the entire factual and legal position, ld. CIT(A) deleted the entire disallowance made by the ld. AO under Section 40(a)(ib). In view of the above, ld. CIT(A) was correct in law in deleting the disallowance made by the ld. AO under Section 40(a)(ib), amounting to Rs.8,89,35,558. 10. The ld. AR of the assessee in addition to the above written submission further argued that the assessee received the money from their foreign client to act as conduit for their advertisement which are neither placed in Indian territory nor their target audience as per the mandate given to Google Singapore is in India. This fact is not only explained to AO to ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d these details were also shared with the lower authorities and nothing contrary observed. The target audience and decision to make the advertisement were proved to be outside India and the ld. AO has not objected to this proposition that the ultimate business and benefit to this advertisement both are outside India. The relevant findings of the ld. CIT(A) are relied upon and recorded at page 22 to 24 of the order of the ld. CIT(A). The purpose behind levy is target the Indian business and Indian advertisement market and not the world market as explored by the others in India through digital marketing and for this purpose the target area and IP addresses are important to decide about the EL. Even the assessee has paid the money to Google India about the operation that they have done for the Indian target audience and even the purpose of having the company Google India to pay the tax in India on the operations that they carry in India. The ld. AR of the assessee draw our attention to the budgetary provision introduction speech of the Honourable Finance Minister which is extracted here in below for the sake brevity : 151. In order to tap tax on income accruing to foreign e-commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed along the number of hits that has been generated from that targeted audience and thus, the provision of section 165 is not applicable in the present of the case. Here the EL is to be collected on customer target subjected to Indian targeted customer and not on the company s outside Indian target customer. So, looking to the facts of the case on hand the levy is not applicable. In the present set of fact neither the company, assessee or the Google Singapore has digital or economic presence in India which will attract the levy. The assessee is not carrying out any business activity in India based on the set of facts. The levy is on the consideration and consideration is not defined in the Act. Thus, the meaning of the consideration is extracted from the Contract Act, the same is extracted herein below for the sake of brevity: Consideration means something in return , i.e. quid pro quo that is an essential element to find out the genuine intention of the parties of the promise to create legal relationship. Consideration is an essential component of a valid contract. Consideration is the price for the contract. An agreement without consideration is void and thus not enforceabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the equalisation levy is leviable under section 165; or (iii) sales, turnover or gross receipts, as the case may be, of the e-commerce operator from the e-commerce supply or services made or provided or facilitated as referred to in subsection (1) is less than two crore rupees during the previous year. (3) For the purposes of this [section,- (a) specified circumstances mean-] (i) sale of advertisement, which targets a customer, who is resident in India or a customer who accesses the advertisement though internet protocol address located in India; and (ii) sale of data, collected from a person who is resident in India or from a person who uses internet protocol address located in India] [(b) consideration received or receivable from e-commerce supply or services shall include- (i) consideration for sale of goods irrespective of whether the e-commerce operator owns the goods, so, however, that it shall not include consideration for sale of such goods which are owned by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction in India and significant economic presence for this purpose, shall mean- (a) transaction in respect of any goods, services or property carried out by a non-resident with any person in India including provision of download of data or software in India , if the aggregate of payments arising from such transaction or transactions during the previous year exceeds such amount as may be prescribed; or (b) systematic and continuous soliciting of business activities or engaging in interaction with such number of users in India , as may be prescribed : Here in this case no operation are carried out in India. Only the services of id and wallet creation is rendered for which the assessee has already paid the tax in India and is rendering of the services and its reasonableness is not under dispute. Only the payment made to Google Singapore for which there is no income which accrue or arise in India based on the provision of section 9 and section 165 of EL. To support further the ld. AR of the assessee relied upon the decision of the Hon ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Limited 158 Taxman 259 (SC) the relevant extract of the finding is rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present set of case neither the services are utilized in India nor rendered in India and thus the levy of EL on the particular transaction does not arise. This detailed finding is appearing on the order of the ld. CIT(A) at page 18 to 22 and then discussing the business model of the assessee at page 23-24 CIT (A) has deleted the addition made by the AO u/s. 40(a)(ib) for an amount of Rs. 8,89,35,558/- 11. We have considered the rival contentions, perused the material available on record and also gone through the findings of the lower authorities recorded in their respective orders. The bench noted that the only grievance of the revenue is that the assessee has paid a sum of Rs. 8,89,35,558/- on which disallowance u/s. 40(a)(ib) is required to be made, as the assessee fails to deduct equalization levy under the provisions of Chapter VIII of the Finance Act, 2016. The ld. AO made the disallowance of this amount contending that nowhere in the provisions of section 165 it is provided that equalization levy will not be attracted if the residential person makes a payment to non-resident for specified service out of the amount received by him from a non-resident or the targeted cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment made by the assessee to Google Singapore. Therefore, the provisions of Sec.40(a)(ib) of the Act which provide that any consideration paid or payable to non-resident for a specified service on which equalization levy is deductible under the provisions of Chapter VIII of the Finance Act 2016 and such levy has not been deducted or after deduction, has not been paid on or before the due date specified in sub section (1) of section 139 of the Act and thus he disallowed 100 % of the sum paid to Google Singapore, a non-resident having no PE in India. 12. We have also carefully gone through the order of the ld. CIT(A) who has analyzed the contentions raised by the ld. AO and given a detailed and reasoned findings as reiterated here in above. The role of the assessee is that of an agent of Google Singapore whereby the assessee is granted access for the purpose of advertisement to be made on Google. On approaching the assessee, such person gets login credentials, generated by the assessee on the website of google through such credentials, the person on its own runs advertisement on google. Such person on its own decides where the advertisement is to be run on which geographical ..... X X X X Extracts X X X X X X X X Extracts X X X X
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