A recent ruling by the Income Tax Appellate Tribunal will come as a major relief to companies that advertise on Google and Yahoo!
Last month, the tribunal in Kolkata said that a company which pays Google or Yahoo to advertise their business does not have to deduct taxes at source on the money spent for advertising.
This ruling comes as a big relief to many companies who haven’t been able to claim tax on business expenses incurred for advertising on Google and Yahoo.
Ajeet Khurana, the Delhi based Angel investor and mentor who spotted the ruling, explains this clearly in his recent post.
Basically, businesses wanting to advertise on Yahoo or Google had to either pay taxes with their own money or let go of a chance to claim the expense as tax deductible revenues because Google and Yahoo won’t accept taxes being cut from their bill. Neither could they claim tax exemption on the expense.
With this ruling, the Kolkata bench of the tribunal, has cleared the air. While considering an appeal on a tax dispute between a Kolkata based florist which advertised on Google & Yahoo and the Income Tax department, the bench said:
We are of the considered view that there was no failure in deduction of tax at source by assessee before us inasmuch as the assessee did not have any obligation to deduct tax at source under section 195 for the simple reason that income embedded in impugned payments was not exigible to tax in India. Accordingly, the disallowance was uncalled for. (Hat tip: Ajeet Khurana)
The assessing officer had disallowed the florist’s claim to exempt the amount from being taxed and added it to taxable income.
See the full ruling