Court rules Tribunal violated natural justice by using undisclosed evidence against Google India.

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Case Name:

M/S Google India Private Ltd. vs. Commissioner of Income Tax (International Taxation) (High Court of Karnataka)

ITA No. 502 of 2018 C/w ITA No. 503 to 507 of 2018 & ITA No. 560 to 564 of 2018

Date: 17th April 2021

Key Takeaways

• The court emphasized the importance of natural justice, stating that all parties must be given the opportunity to rebut evidence used against them.
• The Tribunal’s reliance on external research without notifying Google India was deemed a violation of fair play.
• The ruling reinforces the principle that undisclosed evidence cannot be used to make decisions in tax matters.

Issue

Did the Tribunal violate the principles of natural justice by relying on undisclosed evidence against Google India?

Facts

• Google India Private Ltd. was involved in a tax dispute regarding payments made under a distribution agreement with Google Ireland.
• The assessing officer initiated proceedings under Sections 201 and 201(1A) of the Income Tax Act, claiming Google India failed to deduct tax at source for payments made to Google Ireland.
• The Tribunal confirmed the assessing officer’s order without allowing Google India to contest the evidence used against it, which included research on Google AdWords that was not disclosed to them.

Arguments

• Google India’s Argument: The company argued that the Tribunal did not consider the documents and evidence it submitted. It claimed that the Tribunal relied on external research that was not shared with them, violating their right to a fair hearing.
• Revenue’s Argument: The revenue contended that the material used by the Tribunal was publicly available and that the lack of disclosure did not constitute a violation of natural justice.

Key Legal Precedents

• The court referenced the case of Ramco Industries Ltd. vs. Deputy Commissioner of Income-tax, which established that reliance on undisclosed evidence violates natural justice.
• It also cited Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, which allows for the production of additional evidence only if all parties are notified.

Judgement

The court ruled in favor of Google India, stating that the Tribunal’s order was violative of the principles of natural justice. The court ordered the matter to be remanded back to the Tribunal for a fresh hearing, allowing both parties to present all relevant evidence. The court emphasized that the Tribunal must ensure fair play and transparency in its proceedings.

FAQs

Q1: What does this ruling mean for Google India?

A: The ruling allows Google India to present its case again, ensuring that it can contest all evidence used against it.

Q2: How does this case impact future tax disputes?

A: This case reinforces the necessity for transparency and fairness in tax proceedings, ensuring that all parties have access to the evidence being used against them.

Q3: What are the implications of the court’s emphasis on natural justice?

A: The court’s emphasis on natural justice highlights the importance of fair hearings in legal proceedings, which could influence how future cases are handled in tax matters and beyond.

Regard being had to the similitude in the controversy involved in all these cases, they were heard analogously together and a common judgment is being passed.

2. ITA No.879/2017 is arising out of the order passed by the Income Tax Appellate Tribunal, dated 23.10.2017 in ITA No.1511/Bang/2013 (between M/s Google India Private Ltd., vs. Addl. Commissioner of Income-tax, Range-11, Bengaluru.)

3. The facts of the case reveal that the appellant – company, Google India Private Ltd., is a company incorporated under the Companies Act, 1956. It has been incorporated for providing back end support services for the foreign Associated Enterprises and as such, is engaged in the business of global outsourced Information Technology and IT Enabled Services. It

is also a non-exclusive distributor of the online advertising space under the ‘AdWords programme’ to advertisers in India.

4. In the year 2004 the appellant-company has entered into an IT Enables Services agreement with Google Ireland Limited and the appellant has established its IT Enabled Services division for provision of IT Enables Services which primarily involved rendering support services in administering the Google editorial guidelines in relation to global advertisements and responding to the queries from customers globally. The appellant under the said agreement has been rendering outsourced services for which the appellant is being separately compensated by the Google 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 22.2.2013 passed by the assessing officer for the assessment years 2007-08 to 2012-13 preferred an appeal before the Commissioner of Income-tax (Appeals) and the appeal was dismissed by an order dated 20.9.2013 by the

appellate authority.

7. The appellant-assessee thereafter preferred an appeal before the Income Tax Appellate Tribunal for the assessment year 2007-08 and the Tribunal has also dismissed the appeal of the appellant-assessee.

8. Learned Senior Counsel Sri.Ganesh for the appellant– assessee at the outset has argued before this Court that in order to enable the Tribunal to decide the controversy on merits voluminous documents were filed before the Tribunal and the Tribunal has not looked into the documents filed by the assessee at any point of time. He has drawn the attention of this Court

towards an affidavit filed in the appeal before the Tribunal dated

19.3.2018 sworn by Mr.Hari Raju, Director of the appellant- company during the course of the hearing in the present appeal as well as other connected appeals. He has also drawn the attention of this Court towards the application preferred under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 filed before the Tribunal during the course of the hearing of

ITA.No.1190/Bang/2014 (relating to ITA No.502/2018) and has also drawn the attention of this Court towards the extracts of factual submissions dated 19.3.2018 filed before the Tribunal during the course of the hearing of ITA.No.1190/Banga/2014 (relating to ITA.No.502/2018). His contention is that none of the documents produced on record were looked into.

9. Learned Senior Counsel for the appellant has further stated that the documents filed by the assessee were not looked into and altogether a different approach was adopted by the Tribunal by conducting a research and the material after conducting the research on various platforms have been made to be the basis of the judgment delivered by the Tribunal. His

contention is that it is a well settled proposition of law that if any

material/any document is relied upon, the same has to be given

to all the parties, otherwise it amounts to violation of principles

of natural justice and fair play. He has vehemently argued

before this Court that the material collected behind back of the

assessee was used and relied upon by the Tribunal and therefore, the same amounts to violation of principles 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

has been relied upon by the Tribunal is available on internet and

merely because the material which is available on internet was

not given to the assessee, it does not mean that there is

violation of natural justice and fair play. He has vehemently

opposed the prayer made by the learned Senior Counsel for the

assessee in respect of remand.

12. This Court by an order dated 15.11.2017 has

admitted the present appeal on the following substantial

questions of law;

III(1) Whether the Tribunal erred on facts and in

law in coming to the conclusion that the payments

made by the Appellate under the “Distribution

Agreement” dated 12.12.2005 to GIL constituted

“Royalty” under the provisions of Section 9(1)(vi) of the

Income-tax Act, 1961 and Article 12 of the Double

Taxation Avoidance Agreement between India and

Ireland?

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?

III(4) Whether the Tribunal erred in ignoring

that the initiation of proceedings under section 201 of

the Act was barred by limitation?

III(5) Whether the Tribunal erred in law in

applying the amended provisions relating to limitation

in section 201 to the period under consideration given

that the limitation for completion of such proceedings

had already expired and could not be restored by

subsequent amendments?

III(7) Whether the Tribunal erred in law in not

appreciating that the amended provisions of section

201(3) as amended by Finance Act, 2012 (applicable

with retrospective effect from 1.4.2010), which

bestowed limitation in respect of resident payee’s was

not applicable for the financial year under consideration

and in the absence of any limitation prescribed, a

period of 4 years was a reasonable period for initiation

of proceedings under section 201 of the Act?

13. Learned Senior Counsel for the assessee while

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 an opportunity to the appellant to rebut fresh

evidence especially when the fresh evidence was based on

Google study. The relevant paragraph of the order passed by

the Tribunal i.e., paragraph 38 reads as under;

“38. Beside filling these written submissions, no other

literature or books or documents were filed by the

assessee or by the Revenue for the benefit of the Bench so

that the Bench can appreciate the working of Google

Adword and Google analytics, as the parties have failed to

bring any tangible material except in the form of written

note mentioned herein above, the Bench, had gone

through the books available in public domain on Google

Adword and Google analytics and also gone through the

website of the Google and the Adword links therein. On the

basis of the above, our understanding of how the Google

Adword functions is as under:

i. The Google Adword gives an opportunity to the

advertiser to reach its target audience with the

advertising messages. The text based ads are displayed

on Google search results Page - 45 IT(TP)A.1511 to

1516/Bang/2013 however the Google Adwords can also

be used to message out in other forms including image,

audio and videos. Another way of advertisement is

displaying the advertisement as people browse and

engaged with the content online.

ii. The online advertising is different from the

traditional advertising like advertisement in magazine,

newspaper and Television as the online advertising is

measurable on cost per click basis (CPC) and also gives

the advantage to the advertiser to target the particular

class into age, sex, language, religion, region etc,.

iii. The online advertising (Adwords) is a patent tool

used by the advertiser in conjecture with the various

sophisticated tools and IPR's of Google. Google gives

the platform, techniques, data based, the IPR, I.P.

address and also suggest potential user/client of the

advertiser.

iv. The search advertising with the help of search

engine, allows the advertiser to target the people as

they search for key words. This technique is being used

in the search engine, enable the advertisement pop up

if the key words are searched by the people .

Advertisement would be shown to the target consumer

advertisement with the help of various tools, which

include showing of advertisement with keywords,

phrase, and broad words with generic or same

meaning.

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 Ramco Industries Ltd., (supra) in paragraphs 5 to

10 has held as under;

“5. This Court paid its best attention to the rival

submissions and also perused the materials placed before

it.

6. Sub-section [6] of Section 255 of the Income Tax

Act, 1961, in turn, refers to Section 131 of the Act and

under Sub-section [1] of Section 131 of the Act, the

authorities have the same powers that are vested in a

Court under the Code of Civil Procedure, 1908 - the details

of which, have been enumerated in the earlier paragraphs.

7. Rule 29 of the Income Tax [Appellate Tribunal]

Rules, 1963 also speaks about the production of additional

evidence and Rule 30 speaks about the mode of taking

additional evidence and it is relevant to extract the same:-

Rule 29:-Production of additional evidence before the

Tribunal:- The parties to the appeal shall not be

entitled to produce additional evidence either oral or

documentary before the Tribunal, but if the Tribunal

requires any documents to be produced or any

witness to be examined or any affidavit to be filed to

enable it to pass orders or for any other substantial

cause, or, if the income-tax authorities have decided

the case without giving sufficient opportunity to the

assessee to adduce evidence either on points specified

by them or not specified by them, the Tribunal, for

reasons to be recorded, may allow such document to

be produced or witness to be examined or affidavit to

be filed or may allow such evidence to be adduced.

Rule 30-Mode of taking additional evidence:-

Such document may be produced or such witness

examined or such evidence adduced either before the

Tribunal or before such income-tax authority as the

Tribunal may direct.

8. A perusal and consideration of paragraph No.7 of

the impugned common order passed by ITAT would

disclose that the Tribunal, for reaching the conclusion to

confirm the order of the Assessing Officer, has also done

its part by doing some research on Google Study.

Admittedly, the research done by ITAT in the form of

Google study was not put either to the

appellant/assessee Company or to the said Revenue. As

already pointed out by this Court in the earlier

paragraphs, in the absence of any specific rule including

the applicability of the natural justice, it is a well settled

position of law that adherence to the principles of natural

justice, is implied in 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 to be remanded back to the Tribunal for

hearing it afresh in accordance with law.

21. In light of the aforesaid, the questions are answered

in favour of the assessee and against the revenue and the other

questions are left open. Accordingly, the appeal in

ITA.No.879/2017 is allowed. The order passed by the Tribunal is

set aside. The matter is remanded back to the Tribunal for fresh

adjudication in accordance with law.

22. The parties will appear before the Tribunal on

3.5.2021 and within a period of 15 days the appellant shall be

free to file the documents/additional documents in support of his

contentions and the revenue shall also be free to file

documents/additional submissions in support of their

contentions. In case any other material is being relied upon by

the Tribunal, the same shall also be made available to the

assessee/appellant as well as to the counsel for revenue before

passing a final order. The Tribunal is requested to make all

possible endeavour to decide the matter at an earlier date.

23. In light of the order passed in ITA.No.879/2017, the

connected appeals i.e., ITA.Nos.882/2017, 883/2017, 897/2017,

898/2017 and 899/2017 are also allowed and the order passed

by the Tribunal is set aside and all the matters are remanded

back to the Tribunal to decide the appeals afresh in accordance

with law.

24. The other batch of cases i.e., ITA Nos.502/2018,

505/2018, 549/2018, 550/2018, 504/2018, 503/2018,

507/2018, 560/2018, 562/2018, 561/2018, 563/2018,

564/2018 and 506/2018 are arising out of subsequent orders

passed by the Income Tax Appellate Tribunal.

25. It is pertinent to note that in the first batch of

matters i.e., ITA 879/2017 and connected matters it was

brought to the notice of this Court that other income tax appeals

are pending before the Tribunal and this Court has directed the

Tribunal to decide the matters without being influenced by its

order dated 23.10.2017.

26. The Division Bench of this Court on 15.11.2017 has

passed the following order;

“Heard Dr.A.M.Singhvi, learned Senior Counsel appearing

for Sri Aditya Vikram Bhat, learned counsel for the

appellant. The learned Senior Counsel submits that

substantial questions of law formulated at paras III(1),

III(2), III(3), III(4), III(5) and III(7) in the appeal

memorandum require determination by this Court.

Sri.K.v.Aravind, learned Standing Counsel is directed 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 passed by this

Court directing the Tribunal to decide the matters without being

influenced by its earlier order, the Tribunal infact has repeated

its earlier order. The present appeal and connected appeals

were admitted on the following substantial questions of law.

28. The substantial questions of law framed in

ITA.No.502/2018 and connected appeals by this Court on

28.8.2018 read as under;

“1. Whether the Tribunal erred on facts and in law in

coming to the conclusion that the payments made by the

Appellant under the “Distribution Agreement” dated

12.12.2005 (superseded by Reseller Agreement) to GIL

constituted “Royalty” under the provisions of Section

9(1)(vi) of the Income-tax Act, 1961 and Article 12 of

the Double Taxation Avoidance Agreement between India

and Ireland?

2. Whether the Tribunal’s conclusion that the ITES

and Distribution Agreements are to be read together

and that the functions under the Distribution Agreement

could only be discharged under the ITES Agreement is

perverse given that the same is contrary to facts and

material on record which would demonstrate that the two

Agreements are for separate and distinct purposes?

3. Whether the Tribunal erred in law in not

appreciating that the revenues from the Distribution

Agreement (superseded by Reseller Agreement)

constituted “business income” in the hands of GIL and in

the absence of any Permanent Establishment of GIL in

India, such receipts could not be brought to tax in India

and consequently the provisions of Section 195 and 201

of the Act had no application?

4. Whether the Tribunal completely failed to

appreciate that the rights granted under the

Distribution Agreement were in the nature of

“commercial rights” and did not partake the character

of/or grant any right to use any Intellectual Property

so as to fall within the ambit of Section 9(1)(vi) of the

Act?

5. Whether the Tribunal also erred on facts and in law

in concluding that the entire payment made by the

Appellant constituted “Royalty” under Section 9(1)(vi) of

the Act and Article 12 of the DTAA on the basis that since

the Appellant had the right to use brand features, patent,

technical know-how, IPRs, trademark, process, derivate

work, brand features etc. of GIL?

6. That without prejudice, whether the Tribunal failed

to appreciate that there could not arise any withholding

tax obligations on the 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-à-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 Para 40 page 46: “It gives the

access to the advertiser the tools of the Adword program which can be

accessed through the gateway of Google India/Appellant through the

use of patent technology. Adword Program gives the advertiser to

choose the preferred time, season of the year when the ads are to be

shown. Once advertiser accepts the terms, the appellant gives access to

the various tools of Adwords Program.”

accessed through the gateway of

Google India/appellant. Through the

use of patented technology with the

help of appellant gate way, Adword

platform gives the advertiser to

choose the preferred time, season of

the year when the ads are to be

shown. In fact after advertiser

accept the terms, thereafter assessee

gives the advertiser accesses to the

various tools of Adwards program.”

Para 102 page 126: “The time zone

and display time of the advertisement

is identified and allocated by the

appellant to the advertiser with the

help of Google Adwords Program.

Adword Program is more focused and

targeted in advertisement campaign

which results into more attention,

engagement, delivery and conversion

which is only possible on the Google

network with the access of tools of

search engine and google analytics.”

Para 41 page 47: “The time zone

and display time of advertisement is

identified and allocated by Appellant

to the advertiser with the help of the

assistance of the Google Adword

program. Adwords Program is more

focused and targeted in

advertisement campaign which

results into more attention,

engagement, delivery and

conversion, which is only possible on

the Google network with the access

of tools of search engine and Google

analytics.”

Page 102 page 126 and 27:

“Appellant is having the access to IP

address at desktop or laptop or IP

address of the tablet, photographs,

time spent on website, eating habits,

wearing preferences. With the help

of IP address, Google search engine

is having 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, Google

is also having the access of the

history of the user as well as the

behaviour of the person searching in

google engine.”

Para 42 page 47: “

Appellant/Google is having the access

to the I.P. address of the desktop or

laptop 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

Para 43 page 48:

“Based on various inputs mentioned

above and contents of more than two

million websites the appellant/ Google

was able to provide the effective

focused ad campaign to the

advertisers. The Adword programs

and tools therein give the advertiser

to pick up the key words, phrases

which are similar in nature an

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 of the keyword,

play a pivotal role in the advertising

campaign and for this purpose

appellant has provided the

optimization and technique to the

advertiser. The appellant being a

service provider under the agreement

uses its expertise and the information

within its domain and control, to

suggest the keywords based on

recent marketing material and need

of the advertiser. He appellant also

suggests a periodical review of the

website homepage, product and

services which can be bundled

together. It also suggests the traffic

forecast of the list of keywords,

multiple keywords placed to get the

new keyword ideas. Based on the

initial keywords the advertiser enters,

the tools shows various keywords

suggestion automatically grouped into

different adgroups. This is only

possible if the Appellant is permitted

to use information, data and

keyplanner to the advertiser which is

patent and protected software of the

Google. The keyword planner also

suggests the suitability of the

keywords 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 information and

conversion based on keyword

planners. Based on this information

and forecast, the advertiser is able to

build on the keywords.”

germane, which are in a digitalized

tabulated form/ grouped together.

The advertiser is having the access to

this Google analytics programme

(patented and specialized software)

through the appellant. Whenever one

particular keyword is searched, the

targeted consumers will be shown the

ad and by clicking on the ad, the

consumers will be landed on a web

page. The selection and the display of

the key word, play a pivotal role in

the advertising campaign and for the

purpose, Appellant/Google has

provided the optimization and

technique to the advertiser. Google

(appellant as service provider under

the agreement) uses its expertise and

the information within its domain and

control, to suggest the key words

based on the recent marketing

material and need of the advertiser.

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

Para 44 page 49: “The display of

the advertisement based on the key

words, is dependent upon the auction

price paid by the advertiser. The key

word bid at highest rate by the

by the advertiser would be shown at

the top of search result and

therefore, is likely to fetch more

visibility and attention. With the help

of tools of Google, the advertiser as

well as the appellant have an access

to the impact of change of keywords

on the likely impressions of the

advertisement.”

advertiser would be shown at the top

of the search results and therefore, is

likely to fetch more visibility and

attention.. With the help of tools of

Google, the advertiser as well as the

appellant have an access to the

impact of change of key words on the

likely impressions of the

advertisement...”

Para 103 page 128 and 129: “With

the help of keywords matching,

various approaches are being adopted

by the Google AdWord Program i.e.,

broad match, phrase match and exact

match for example allows the

advertiser to focus on the

optimization phrase on the individual

keywords and it yields the best

results possible. Whereas, the phrase

match is more processing than broad

match and the broad match provides

the greatest possibility of coverage of

the advertisement.”

Para 45 page 49 and 50: “With the

help of key word matching, various

approaches are being adopted by the

Google Adword program i.e. broad

match, phrase match and exact

match. The exact match for example

allows the advertiser to focus on the

optimization phrase on the individual

key words and it yield the best result

possible. Whereas the phrase match

is more processing than the broad

match and the broad match provides

the greatest possibility of coverage of

the advertisement.”

Para 104 page 129: “The appellant

facilitates the advertisers to start the

campaign of advertising initially with

the help of broad match thereafter

with the phrase match and thereafter

with the exact match. With the help

of keyword management, the Google

Adword Program takes care of

misspelling, singular, plural,

abbreviation, achronynms, stemming,

etc. For example, if the

advertisement shows the formal

shoes then the keywords are the

formal plus shows. If it is broad

match keywords then the

advertisement will show formal

shoes, sports shoes, black shoes,

party shoes, etc. However, if the

advertiser had only opted for exact

word match, 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.

“Appellant helps the advertiser with

the help of tools of Adwards program

to include or delete various variation

of the key words in the realm of

advertisement campaign 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 service apartment on

rent basis and only wants the person

surfing to buy the apartment, then

the Appellant can help him by putting

negative words of rent in the keyword

search. Therefore, the only person

who is searching for service

apartment would be lending on the

advertisers website and the person

who is searching for rented service

apartment, would not be visiting the

website of the advertiser i.e.,

advertisement would not be displayed

to him in the searched result.”

For example, if an advertiser does not

want the visit of the a surfer who is

searching the service apartment on

rent basis and only wants that the

person surfing and the person who is

surfing to buy the apartment, then

the appellant can help him by putting

negative words of rent in the key-

word search, therefore the only

person who is searching for service

apartment would be landing on to the

advertiser’s web site and the person

who is searching on rented service

apartment would not be visiting the

web site of advertiser i.e.,

advertisement would not be displayed

to him in the searched results..”

Para 105 page 130: “Likewise, if

the advertiser is selling leather cover

for iPhone, then the advertiser may

not like that the person who is

looking for leather cover for another

branch or item may visit the website

of the advertiser. For that, negative

words can be used to avoid to

improve the CTR (clicked through

rate) with the help of tools of Google.

By using these tools, the Appellant

has been giving various suggestions

to the advertisers to improve various

keywords.”

Para 48 page 51: “ Likewise if the

advertiser is selling in leather cover

for iphone then the advertiser may

not like that the person who is

looking for leather cover for another

brand may visit the website of the

advertiser. Therefore, the negative

words can be used to avoid to

improve the CTR., with the help of

these tools. By using these tools,

Appellant had been giving various

suggestions to the advertiser to

include various key words.”

“ 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

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 of the Google Adword

program, which is maintaining

thousands of different key words

used by the people to search the web

site and based on this user

behaviour, the Google analytics

suggests the appropriate key words

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 key word on

the basis of which an unattended or

unwarranted persons have landed on

the website of the advertiser.

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.,

Appellant is using all these tools in

conjectures with advertisers at the

time of granting the back hand

services to the advertisers, as the

Appellant is having access to all these

data, information etc.”

Para 107 page 131: “If we look into

the advertisement module of the

AdWord Program, we will come to an

irresistible conclusion that it is not

merely an agreement to provide

advertisement space but it is an

agreement for facilitating the display

and publishing of an advertisement to

the targeted customers.”

Para 53 page 54: “If we look into

the advertisement module of Adword

program stated herein above, then

we will come to an irresistible

conclusion that it is not merely an

agreement to provide the

advertisement space but is an

agreement for facilitating the display

and publishing of an advertisement to

the targeted customer.”

Page 108 page 131

(paraphrased): “ We have also

examined the obligations cast upon

the appellant under the agreements

and found the obligation cast upon

the appellant under the Google

Adword distribution agreement can

only be discharged with the help of

the ITES division. Therefore, the

Google Adword distributor agreement

and the service agreement are to be

read together as they are

interconnected with the navel cord

and without resorting to the service

agreement the terms and conditions

under the Google Adword Distribution

Agreement cannot be complied with.

Therefore, in order to understand the

function of Google Adword program,

we have to read both the agreements

together.”

Page 63 page 62: “Therefore, the

services rendered under ITES

agreement cannot be divorced with

the activities undertaken by the

assessee under the distribution

agreement. Both the agreements are

connected with naval chord with each

other. The assessee was duty-bound

to provide as per 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 in some of the paragraphs. It has also been stated by

the Revenue in the written synopsis that the scope of

interference in a case where violation of principles of natural

justice are alleged unless it causes prejudice is quite limited.

33. Reliance has also been placed on a judgment

rendered by the Hon’ble Supreme Court in the case of State of

U.P vs. Sudhir Kumar Singh and Ors., Civil Appeal

No.3498/2020, decided on 16.10.2020.

34. This Court has carefully gone through the aforesaid

judgment. However, the facts of the present cases are

distinguishable. In the present cases, in the first round of

litigation the Tribunal has relied upon the material which was

never given to the assessee. It is undisputed fact that based

upon the first order dated 23.10.2018 the second order has been

passed in another batch of cases. Therefore, the proper course

of action for this Court is to remand all the cases for fresh

hearing as directed earlier.

35. In the considered opinion of this Court as the order

in the present batch of appeals has been passed by repeating

the earlier orders, complete material was not handed over to the

appellant-assessee before the Tribunal based on which the order

has been passed by the Tribunal and in light of the fact that this

Court has remanded the first batch of appeals, the second batch

of appeals are also deserve to be remanded back to the Tribunal

for deciding it afresh on merits without being influenced by its

earlier orders dated 23.10.2017 and 11.5.2018.

36. Net result is, ITA Nos.502/2018, 505/2018,

549/2018, 550/2018, 504/2018, 503/2018, 507/2018,

560/2018, 562/2018, 561/2018, 563/2018, 564/2018 and

506/2018 are allowed. The order passed by the Tribunal in the

said appeals are set aside and the matters are remanded back to

the Tribunal to decide the appeals afresh in accordance with law.

The parties will appear before the Tribunal on 3.5.2021 and

within a period of 15 days the appellant shall be free to file the

documents/additional documents in support of his contentions

and the revenue shall also be free to file documents/additional

submissions in support of their contentions. In case any other

material is being relied upon by the Tribunal, the same shall also

be made available to the assessee/appellant as well as to the

counsel for revenue before passing a final order. The Tribunal is

requested to make all possible endeavour to decide the matters

at an earlier date.

37. ITA.No.125/2020 which is in respect of assessment

year 2008-09 has been filed by the department. It relates to

penalty proceedings and therefore, as in respect of the

assessment year 2008-09 this Court has already remanded

ITA.882/2017 for fresh adjudication, the order impugned dated

6.9.2019 is set aside and the matter is remanded back to the

Tribunal to decide it afresh in accordance with law.

ITA.No.125/2020 also stands allowed accordingly.

Pending IAs, if any, in the appeals stand disposed of.