ITAT : Adwords program payment nothing but 'royalty', rejects Google's equalisation levy defence

Bengaluru ITAT adjudicates issue of taxability of Google’s Adwords program payment in light of HC direction to dispose of appeals independently without being influenced by earlier ITAT order, reconfirms characterization of payment as royalty under the domestic law as well as India-Ireland DTAA; Notes that assessee had entered into distribution agreement as well as service agreement with GIL and under the former, Google India was appointed as an authorized distributor of Adwords programs to the advertisers in India, whereas under the latter, assessee rendered ITES services and software development services for GIL; Perusing all relevant agreements and relevant documentation, ITAT observes that the obligation cast upon the assessee under the Google Adword distribution / reseller agreement can only be discharged with the help of the ITES division, therefore, the distribution agreement and the service agreement are interconnected; Considering the nature of services performed by the assesse with the aid of ITES division, ITAT rules that since the assessee had an access to patent, technical know-how, IPRs, trade mark, the process, derivative works, brand features, etc., of the GIL, “the payments of advertisement fees ... is not the payment simpliciter towards the purchase of AdWord space which may be treated as business profit.. but it is a payment of royalty to the GIL...”; Relies on jurisdictional HC ruling in Synopsys International Ltd., distinguishes ITAT rulings in Pinstorm Technologies Ltd., Right Florist and Yahoo India Ltd. on facts, observes unlike these cases, assessee in the instant case, is not a simpliciter buyer of Adword Space for putting the advertisement for himself or others; Remarks that introduction of equilisation levy would not convert the nature of payment made by the assessee, also rejects assessee’s bona-fide belief stand for non-deduction of TDS observing that the distribution and service agreements were prepared in such a way to give transaction a different colour; With respect to whether GIL is the beneficial owner of royalty income so as to claim concessional tax rate under DTAA, ITAT restores the matter to the AO to re-adjudicate the issue  in the light of the license agreements executed between the parent holdings of GIL:ITAT