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Networking giant Google has said it will continue its fight in a six-year-old tax avoidance case after the Income Tax Appellate Tribunal asked the company to pay ₹1,457 crore in back taxes.
“We comply with all tax laws in India and pay all applicable taxes. We will file an appeal as this ruling is a clear departure from previous judgments on the issue and is not in line with India’s double taxation avoidance agreements,” a Google spokesperson told BusinessLine .
Google’s dispute with the tax authorities began about six years ago when the Income Tax Office noticed that Google India, for years, had been routinely sending a large portion of its ad revenues that it collects through Google Adwords program in India to Google Ireland.
Jitendra Negandhi, Director at tax advisory firm Symco Plus said, “Multinational companies have been evading billions of dollars of taxes in India for years and the poor citizens are penalised for missing out even the smallest of tax payments. This ruling sets a good precedence for others.
He said if Google wants to avoid paying double taxes, it needs to first pay taxes on its income in India and then apply for tax credits in Ireland instead of the other way round.
Google has been fighting similar tax avoidance cases in several countries. It won a tax avoidance case in July in France wherein the French court ruled that Google Ireland Ltd is not taxable from 2005-2010, the period the tax authorities were contesting the company to pay back taxes.
Tax experts say that the ruling in India will set a precedence for large companies that have been using such tax havens to avoid paying taxes in India. Airline leasing companies, for example, have been operating out of Ireland for the same reason. But tax experts said that ruling is not expected to affect aircraft lessors who lease carriers to Indian airlines.
Mark Martin, an aviation analyst, said the India-Ireland Double Tax Avoidance Agreement has a specific exemption for rental income earned from leasing out aircraft and ships. “In these cases, the aircraft is an asset owned in Ireland and the income that accrues from leasing it out in India is only taxable in Ireland, according to the tax treaty.”
(With inputs from Tanya Thomas)
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