The Income Tax department has slapped Google India Private Limited, the Indian subsidiary of Google, with a Rs 76 crore penalty for misleading the department with deflated income, reports Times of India.
According to the report, the tax office has refused to back down on the penalty after listening to the company’s explanation and interacting with its auditor, SR Batliboi & Associates. The authorities have said that Google India misled the authorities, deflated its income, violated accounting rules laid down by the chartered accountants’ institute and also reported incorrect revenues in order to avoid being subjected to transfer pricing adjustments with respect to its international transactions.
Google India had credited Rs 119.83 crore for the year 2008-09 to Google Ireland Ltd towards distribution fees without deducting taxes on them in line with the tax treaty between India and Ireland. In December 2011, the tax department had sent a notice to Google India for not revealing correct revenues. For the assessment year 2008-09, Google India admitted revenues of Rs 7.49 crore instead of showing the correct revenue of Rs 167.32 crore from its advertising business. According to the tax department, Google India runs its Adwords business where it sells advertisements in India to Indian businesses, which tax authorities believes makes Google India a separate entity and this liable for taxation on its full income. Apart from that, it also found that the distribution fees to Google Ireland were excessive and unreasonable.
Speaking to The Economic Times, a Google India Spokesperson said that Google complies with local laws and with applicable tax rules in all countries where they operate. Apart from that, Google India had earlier reported to the tax authorities that it has disclosed all of its revenues.
It’s not the first time that Google’s in the dock for tax evasion. Earlier this month, French tax authorities charged Google France for avoiding taxes via Ireland and have asked Google to pay $1.3 billion (€1 billion) in tax penalties. What’s happening here is that Google India is routing its earnings through Google Ireland Ltd, which is owned by Google Ireland Holdings – headquartered in Bermuda. Google’s European and other Asian arms also route its earning through its Ireland office. However, in order to save tax, Google Ireland Limited pays royalties to Google Ireland Holdings and routes the money from Ireland to Netherlands and then to Bermuda, which assigns no tax, thus saving tax on the income.