Bangalore: Google
India, the Search giant’s Indian arm, has been axed by the income tax
department for Rs 76 crore for flaunting tax rules, reports ET.
The tax office said that the company has misled the department, deflated income, violated accounting norms set by the chartered accountants’ institute and also attempted to show wrong revenues to avoid being subjected to transfer pricing adjustments with respect to its international transactions.
IT department of India has refused to keep the penalty in abeyance after their investigations with the company’s auditor, SR Batliboi and Associates, who have offered the full so-operation in the proceedings.
Google has appealed against the penalty order that is related to assessment year 2008-2009. "If the order is upheld, the total advertisement revenue of Google India will be taxed in India," said a person familiar with the case.
According to the tax officers, Google India had transferred Rs 119.83 crore to Google Ireland Limited, the Google’s subsidiary in Irland, without paying tax at the source in line with the treaty between India and Ireland. "The entire activity of (Google's) AdWords Programme and the revenue earned until now has happened in India with both the advertisers as well as people making use of the advertisements situated in India. To this extent, the income of Google Ireland Limited was held to be accrued as well as arisen in India itself," said the order.
The tax officers tracked the other markets of Google through various sources and media reports, and they were abreast with the nature of the Google Ireland transactions which were aimed at tax evasion. According to the report, Google’s arms in Asia, Middle-East and other reasons routed their money through Netherland office to an entity in Bermuda, a tax heaven.
Google’s denial
The Bermuda outfit is a subsidiary of Google Ireland, the transactions carried out at this unit were called “double Irish” in Tax Parlance. "Google places great importance on following local law and we comply with applicable tax rules in all countries where we operate. We cannot comment further on this," said a Google India spokesperson, in response to an email from ET. The company had earlier clarified that there is no earning which was not reported.
MNC, a branch of TOI, says that Google Ireland “is in the business of selling, marketing and supporting certain Internet search, advertising system, and information organization and management technology products and services".
According to tax department, Google India has "habitually concluded contracts in the name of Google Ireland Limited as well as habitually secured orders in India for Google Ireland Limited", establishing itself as an independent entity and a permanent establishment of Google Ireland Limited in India. And the permanent status drastically changes the tax implications for the entity. The tax office which worked on the Google Ireland activities found that the distribution fees for the company “excessive and unreasonable" and found that the profit shown was deflated.
"And Declaration of revenues on a net basis instead of showing it on a gross basis is directly in violation of the accounting principles given by the Institute of Chartered Accountants of India. To this extent, the assessed company has violated the principles of accounting in declaring the incomes," said the department. Google India had declared the 'AdWords' advertising revenue on a 'gross basis' in 2006-2007 but this system was changed in assessment years 2007-08 and 2008-09.
The tax office said that the company has misled the department, deflated income, violated accounting norms set by the chartered accountants’ institute and also attempted to show wrong revenues to avoid being subjected to transfer pricing adjustments with respect to its international transactions.
IT department of India has refused to keep the penalty in abeyance after their investigations with the company’s auditor, SR Batliboi and Associates, who have offered the full so-operation in the proceedings.
Google has appealed against the penalty order that is related to assessment year 2008-2009. "If the order is upheld, the total advertisement revenue of Google India will be taxed in India," said a person familiar with the case.
According to the tax officers, Google India had transferred Rs 119.83 crore to Google Ireland Limited, the Google’s subsidiary in Irland, without paying tax at the source in line with the treaty between India and Ireland. "The entire activity of (Google's) AdWords Programme and the revenue earned until now has happened in India with both the advertisers as well as people making use of the advertisements situated in India. To this extent, the income of Google Ireland Limited was held to be accrued as well as arisen in India itself," said the order.
The tax officers tracked the other markets of Google through various sources and media reports, and they were abreast with the nature of the Google Ireland transactions which were aimed at tax evasion. According to the report, Google’s arms in Asia, Middle-East and other reasons routed their money through Netherland office to an entity in Bermuda, a tax heaven.
Google’s denial
The Bermuda outfit is a subsidiary of Google Ireland, the transactions carried out at this unit were called “double Irish” in Tax Parlance. "Google places great importance on following local law and we comply with applicable tax rules in all countries where we operate. We cannot comment further on this," said a Google India spokesperson, in response to an email from ET. The company had earlier clarified that there is no earning which was not reported.
MNC, a branch of TOI, says that Google Ireland “is in the business of selling, marketing and supporting certain Internet search, advertising system, and information organization and management technology products and services".
According to tax department, Google India has "habitually concluded contracts in the name of Google Ireland Limited as well as habitually secured orders in India for Google Ireland Limited", establishing itself as an independent entity and a permanent establishment of Google Ireland Limited in India. And the permanent status drastically changes the tax implications for the entity. The tax office which worked on the Google Ireland activities found that the distribution fees for the company “excessive and unreasonable" and found that the profit shown was deflated.
"And Declaration of revenues on a net basis instead of showing it on a gross basis is directly in violation of the accounting principles given by the Institute of Chartered Accountants of India. To this extent, the assessed company has violated the principles of accounting in declaring the incomes," said the department. Google India had declared the 'AdWords' advertising revenue on a 'gross basis' in 2006-2007 but this system was changed in assessment years 2007-08 and 2008-09.
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