Google has been ordered to pay business taxes on 14,570m rupees ($224m) of profit to the Indian government after losing a six-year legal battle.
The nation's Income Tax Appellate Tribunal (ITAT) decided this week that Google India had engaged in a "clear and conspicuous" case of tax evasion when it sent all of its pay dirt to – get this – Google Ireland.
As it has done repeatedly in Europe, Google Ireland "licenses" the American web giant's Adwords technology, through which it makes most of is money, to other subsidiaries in Europe and then all income derived from those ads are sent to Ireland, where Google has reached a special low-tax deal with the Irish government.
That arrangement has infuriated European officials for years to the extent that there are now serious proposals to change the law to force Google to pay tax on earnings in the country where they are received.
But extending the Google Ireland arrangement halfway across the globe and a different continent to India w was a step too far.
"Despite the duty of the assessee [Google India] to deduct the tax at the time of payment to GIL [Google Ireland], no tax was deducted nor any permission was sought for paying the amount," notes the Indian tax board's decision [PDF] this week. "This is a clear design to skip the liability by both the assessee as well as GIL by having mutual understanding."
It noted that Google purposefully misread Indian tax law to avoid paying taxes: "The proviso is being abused by them as a device to defer the tax for any length of time by mutual understanding of the parties… Therefore, we have no hesitation to hold that the judgment relied upon by the assessee is not applicable to the facts and circumstances of the case."
In other words: get real.
The lengthy 134-page judgment is seemingly designed to be appeal proof with an in-depth review of tax laws and full consideration of Google no less than six appeals as well as multiple cross-appeals. At several points the tribunal stresses that the rules are "clear and unambiguous."
Google has fought the case furiously for years, as noted by the fact that the years under review by the tax board are 2007 to 2013. A spokesperson for the ad goliath was not available for immediate comment. Suffice to say, any slice of $225m is going to be peanuts for Google.
The biz has largely been successful in protecting its elaborate system of subsidiaries. Most notably, it won a similar long-running legal battle against the French government, and escaped a giant €1.12bn ($1.28bn) tax bill after an administrative court in Paris decided Google's presence in the country was not sufficient for the fine to be held against the company. ®