ITAT: No Equalisation Levy on Google Ads Due to Foreign Audience

Recently the Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) stated that the equalization levy is not eligible to be payable on the payments of advertising when the target audiences, as well as the advertisers, are located outside of India.

The bench of Dr S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) has seen that there is no correlation between the equalization levy which is being talked about in this case when both the target audience and the advertisers are not from the country India.

The proprietor of Oan Media and Web Solutions which is the assessee here has filed the ITR 3 form mentioning its total income and the same case was brought into scrutiny as per the CASS for “Foreign remittance” and notice under section 143(2).

For the information, the assessee works as a service provider for advertising, digital marketing, and web design and thus gets payment for the consultancy charges and the services given to the clients.

As per the assessing officer, there was a debited amount of INR 8,89,35,558 for the purpose of online advertisement (AdWords) charges which were further transferred to Google Singapore, a non-resident having no permanent enterprise (PE) in India.

The taxpayer furnishes the payment to the non-resident for the purpose of advertisement in the digital mode on the grounds of his clients and also there is no deduction of the tax as an equalization levy on the payment made to the non-resident.

Finance Act, of 2016 has inserted the “equalization levy”. It furnishes the equalization levy of 6% of the amount of consideration to the mentioned services obtained or obtainable via the non-resident that does not have a permanent establishment (PE) in India, via a resident in India who secures business or profession, or from a non-resident having a permanent establishment in India.

The taxpayer needed to show cause the reason why the provision of section 40(a)(ib) should not be invoked and the entire sum of Rs. 8,89,35,558 must not be permitted and sum to the income.

The National Faceless Appeal Centre (NFAC) has removed the addition of Rs. 8,89,35,558 which the Assessing Officer has made for the non-charging of the equalization levy.

The council claimed that the payment for a digital advertisement does count under Section 165 (1) of the Finance Act of 2016 and did not treat it as an exception.

Section 165 of the Finance Act, 2016 imposes the tax called the equalization levy on payments incurred for precise services to non-residents having no PE in India.

The taxpayer has obtained the money via a foreign client for acting as a conduit for their advertisements, which are not put in the Indian territory and not in the target audience under the mandate given to Google Singapore.

The taxpayer mentioned that the payment he provided to Google Singapore, a non-resident without a PE in India shall not be a concern for the equalization levy. The tax heads, not having the jurisdiction to tax transactions as his customers via whom he obtained the consultant charges, and the target audience of the online advertisement would be situated outside India and does not show the provision of the Finance act 2016 which makes the basis towards the non-attraction of the equalization levy.

ITAT sees that the department has unable to show the method to specify the services that would be furnished to the Indian resident.

The tribunal maintained the order which has been issued via the National Faceless Appellate Centre.

Case Title	Deputy Commissioner of Income Tax Versus Prakash Chandra Mishra
Citation	ITA No. 305/JPR/2022
Date	07.10.2022
Counsel For Appellant	CA Rajeev Sogani
Counsel For Respondent	P. R Meena
Jaipur ITAT	Read Order