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GOOGLE LOSES 6 YEAR-OLD TAX BATTLE

Taxes are one of the rooted sources of revenue for a country and corporate taxes play a vital role.
Multinationals tend to be more profitable than the domestic firms, implying that MNCs should also pay higher taxes. But that does not always happen. Who likes to give a considerable part of their earnings as tax? That is when tax evasions comes in picture. 
One such six year-old tax battle was settled on Tuesday, bringing bad news for the world's favourite search engine, when the Indian tax office gained an upper hand with Google India in a ruling that would set a precedence for some of the other multinational companies.
The rift owes its origin to the flow of funds between Google India and Google Ireland in the name of advertisement revenue.
When the income-tax department in Bengaluru noticed that for years Google India had been routinely remitting a chunk of the advertisement revenue generated from India to Google Ireland, it put a question mark on the transactions.
According to the tax office, since no tax was deducted by Google India while remitting funds to Google Ireland, it was a clear case of tax evasion.
Google India contested the claim, coming out with arguments in six appeals pertaining to the assessment years 2007-08 to 2012-13. All the appeals were dismissed on Tuesday by the Income-Tax Appellate Tribunal (ITAT).
Google India is a subsidiary of Google International LLC, US. It uses the patented technology from Google Ireland, 'Adwords' programme — a product through which an advertiser is able to publish advertisements on the Google website. 
And according to the law, the remittance to the foreign entity is royalty which, is to be taxed in the contracting state which is India.
As per reports, Google India faces taxation on Rs 1,457 crore of revenue that was transacted between 2007-08 to 2012-13 from Google India to Google Ireland.
This ruling could emerge as a benchmark for MNCs (such as Google Ireland) which may not have a permanent establishment or physical presence in India but come under the glare of local tax authorities due to income generated in India.

     - Devyanshi Agarwal

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