INCOME TAX ACT, 1961

Section 195

Tax deduction at source - Under section 195 - Payments made to Facebook, Ireland towards advertisement fees -

Assessee claimed deduction of payments made to M/s. Facebook, Ireland towards advertisement fees. AO treated said payment as royalty and, therefore, disallowed deduction for want of TDS under section 195. Held: The recipients, i.e., M/s. Facebook and Rocket Science group only allowed assessee to use their facilities for the purpose of creating advertisement contents. The payment was only for using the information technology facilities provided by it, that too billing would depend upon the extent of usage of those facilities. In fact, non-resident companies do not give any specific license for use or right to of any of the facilities (which included software) and those facilities were not going to be used in the business of assessee. The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in case of Facebook. Therefore, payment made by assessee could not be held as royalty and, therefore, assessee was not liable to withhold tax under section 195.

Applied:Urban Ladder Home Decor Solutions (P) Ltd. v. Asstt. CIT (International Taxation) [IT(IT)A No. 615 to 620/Bang/2020, dated 17-8-2021] : 2021 TaxPub(DT) 4578 (Bang-Trib)

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2012-13 to 2015-16

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