Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether TDS Is Required For Advertising On E-portal?

QUERY: Whether TDS u/s. 195 is required for advertisement on Facebook, Google etc?

In the era of e-commerce and social networking, a lot of Indian Companies are using social marketing by placing advertisement on sites like Facebook, Google etc. These sites are owned by non-residents and payments are usually made using credit cards. Whether TDS provision u/s. 195 are applicable to such payments? Further website neither allows any reduction in payments nor their PAN is available with the payer. In such scenario how TDS obligation is to be discharged?
ANSWER: No TDS is required to be deducted, as neither of the above companies have PE in India and payments made to them for advertisement cannot be considered as ‘royalty’ as held by the Mumbai Tribunal in ITA No. 4332/Mum/2009 dated July 18, 2012, following its earlier decisions in ITA No. 506/Mum/2008 wherein the Tribunal had held as under:

“As noted by us, the payment made by the assessee in the present case to Yahoo Holdings (Hong Kong) Ltd. was for services rendered for uploading and display of the banner advertisement of the Department of Tourism of India on its portal. The banner advertisement hosting services did not involve use or right to use by the assessee any industrial, commercial or scientific equipment and no such use was actually granted by Yahoo Holdings (Hong Kong) Ltd, to assessee company. Uploading and display of banner advertisement on its portal was entirely the responsibility of Yahoo Holdings (Hong Kong) Ltd., and the assessee company was only required to provide the banner advertisement to Yahoo Holdings (Hong Kong) Ltd., for uploading the same on its portal. Assessee thus had no right to access the portal of Yahoo Holding (Hong Kong) Ltd., and there is nothing to show any positive act of utilisation or employment of the portal of Yahoo Holdings (Hong Kong) Ltd., by the assessee company. Having regards to all this fact of the case and keeping in view the decision of the Authority of Advance Rulings in case of ISRO Satellite Centre 307 ITR 59 and Dell International Services (India) P. Ltd., 305 ITR 37, we are of the view that the payment made by assessee to Yahoo Holdings (Hong Kong) Ltd., for the services rendered for uploading and display of the banner advertisement of the Department of Tourism of India on its portal was not in the nature of royalty but the same was in the nature of business profit and in the absence of any PE of Yahoo Holdings (Hong Kong) Ltd., in India, it was not chargeable to tax in India. Assessee thus was not liable to deduct tax at source from the payment made to Yahoo Holdings (Hong Kong) Ltd., for such services”.
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Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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