India: Payments for online advertisements not taxable in India (tribunal decision)

Payments made by a taxpayer for online banner advertisements were not taxable in India.

Payments made by a taxpayer for online banner advertisements were not taxable in India.

The Mumbai Bench of the Income-tax Appellate Tribunal held that payments made by a taxpayer for online banner advertisements were not taxable in India, and thus the taxpayer was not required to withhold tax (deduct tax at source) with respect to such payments.

The case is: Play Games 24X7 Private Limited v. DCIT.

The taxpayer was in the business of providing an online platform for gaming (specifically, the Rummy platform) and made payments for banner advertisements to a foreign company that provides an online social networking platform.

The tribunal based its decision that such payments were not taxable in India on the following facts:

  • The foreign company owned and managed the server through which the banner advertisements were uploaded.
  • The server was not located in India.
  • The taxpayer did not have any economic or possessory rights to the server, and the server was not at its disposal.
  • No dedicated server was earmarked for the taxpayer.
  • The taxpayer had no involvement in the managerial activities of the foreign company.

Read an April 2022 report [PDF 413 KB] prepared by the KPMG member firm in India

 

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