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Page - 55 IT(TP)A.1511 to 1516/Bang/2013 The Assessee / Google, is having the access to various data with respect to the age, gender, region, language, taste habits, food habits, cloth preference, the behavior on the website etc. and it uses this information for the purposes of selecting the ad campaign and for maximizing the impression and conversion of the customers to the ads of the advertisers. Thus the activities of the assessee are not merely restricting to display of advertisement but is extended to various other facets as mentioned herein above. In other words, by using the patented algorithm, appellant decides which advertisement is to be shown to which consumer visiting millions of website / search engine. Therefore, in our view, it is not the advertisement or selling of the space rather it is focused targeted marketing for the product/ services of the advertiser by the Assessee/Google with the help of technology for reaching the targeted persons based on the various parameters information etc,. Had it been merely providing the space then the other features as deliberated and discussed hereinabove would not be required. Moreover in our view, the space on search engines / websites are readily available and therefore there was no occasion to market and sell it. Any person with the help of buying the static IP addresses can upload the data/ advertisement in the endless web world. Therefore, in our view, the agreement entered between the assessee and the Google India is not merely for providing the advertisement space but was in the nature of providing the services for displaying and promoting of the advertisement to the targeted consumers.

58. However as per the agreement dt.12.12.2005, the primary responsibility is on the Appellant to provide after or before sale services, after having access to user data, IPRS, secret formula, process, software and confidential information of Google Ireland, in its own capacity under the agreement dt.12.12.2005 and not under the agreement dt.01.04.2004. The appellant, for the purposes of managing its own affairs can afford to provide these services to the advertiser through the route of agreement dt.01.04.2004, but the rendition of services by the appellant to the advertisers in India are obligations under the agreement dt.12.12.2005 and not under the agreement dt.01.04.2004. The substance of the agreements is to be given precedence over the form of the agreements.

As per clause 8 of the agreement dt.12.12.2005 mentioned herein above, the distributor is under an obligation to maintain the user data and therefore is having access to such data. The said user data is being used by the appellant for discharging its obligation towards the advertisers and the claim of the assessee is wrong that it does not have the access to the user data.

60. Now coming to the next argument that space of advertisement is being sold by the assessee to the advertiser, Adword program, is working on various parameters, variables, dynamics and using various permutation and combination to show the advertisement to targeted consumers. The advertisements on Adword program are changing on day to day, week to week or month to month basis. The online bids are required to be placed by the various competitors on dynamic basis. If we assume that the space is sold by the assessee to the advertiser, then there is no question of bidding or out- bidding for running or displaying of the advertisements. The inter-se bidding among the advertisers for displaying the advertisement in real-time basis, clearly shows that the space is not sold by the assessee, rather the placement of the advertisement to a particular targeted consumer at a particular Page - 60 IT(TP)A.1511 to 1516/Bang/2013 time is bided among the advertisers and for that, services were rendered by the appellant with the help of patented Adword program . If one advertiser bid for the particular key word like sport shoes higher than the other competitor, then the advertisement of that sport shoes would be displayed first in comparison to other competitors. However if in the next week there is sale for the product of the second bidder pertaining to sport shoes, the second bidder may bid higher in comparison with the first bidder, In that eventuality, the advertisement of the second bidder would be displayed first on the search result, in comparison to the first advertiser. Thus there was no sale of ad space on the web for displaying of advertisement on a particular place / site. Even otherwise, if we consider that the appellant is selling advertisement space then, at which location/ web place, the said ad- space was sold by the appellant to the advertiser,. It is the case of the assessee that the ads are stored in the servers situated outside India. In our view, the appellant has not sold the storage space on the server outside India nor it has sold the identified / demarcated ad on the web site / search engine. Further if the ad-space is sold, then the Adword program would be incapable of functioning as the advertisement would be shown to various locations, persons and targeted consumers. In our view, there is no sale of space, as concluded hereinabove rather it is a continuous targeted advertisement campaign to the targeted and focused consumer in a particular language to a particular region with the help of digital data and other information with respect to the person browsing the search engine or Page - 61 IT(TP)A.1511 to 1516/Bang/2013 visiting the website. Further, the argument of selling the space is not available to the assessee and we are of the opinion that it is not merely selling the space but it is rendering the services by making available the technology permitted by the Google to the appellant and permitting the same to be used by advertiser. For purpose of targeted focused advertisement campaign by using the gateway of Google India / assessee. Thus the activities clearly fall within the ambit of 'Royalty' as mentioned in Income Tax Act and under DTAA.

64. The appellant cannot be compensated by the GIL for rendering the services to itself or for rendering the services which the appellant is required to render under the distribution agreement. The use of intellectual property is embedded in the Google Adwords programme which is necessary to be used by the appellant for rendering the services prior or post sales of the advisement space under the distribution agreement or service agreement.

65. As is clear from the above, the appellant was using the customer data not only for rendering the services under ITES but also for promoting marketing and distributing the ad space on the search engine and websites. The customer data is a confidential data which is in control of the Google, which is maintained by the appellant as well and the entire Adwords Programme works around customer data, users profile etc. It is inconceivable to run the Google / appellant marketing programme without having access to the customer data.