How is Google paying tax but Facebook not: HC asks govt

The Delhi High Court bench asked whether the govt was 'alive' to the issues of sale of data by social media sites

The Delhi High Court on Friday questioned why Facebook Inc is not paying any service tax when Google is doing so and directed the Centre to file a “better affidavit” on the issue.

“How is Google paying (service tax), but not Facebook? How is Facebook exempted? We are finding it difficult to understand,” a bench of justices Badar Durrez Ahmed and Siddharth Mridul said. The bench also asked whether the government was “alive” to the issues of sale of data by social media sites as well as the service of targeted advertisement provided by them.

“Why don’t you know all these? Are you alive to these things or is it beyond your comprehension,” it asked after advocate Virag Gupta, appearing for former Bharatiya Janata Party (BJP) leader K N Govindacharya, raised these  issues before the court.

The government, represented by advocate Sanjeev Narula, said Facebook had no office here, while Facebook India had a office in a special economic zone from where it is exporting services and thus, they are exempted from paying service tax.

The bench, however, sought information from the government on what are the remittances being made to Facebook from India and whether the transactions between the website and various Indian companies are in the nature of services.

“Find out what they (transactions) are? Whether they are chargeable and whether the services provided, if any, are by entities in India or from outside. File a better affidavit on the service tax as well as on the social media guidelines,” the court said in the pre-lunch proceedings.

It also queried whether the government had come out with an email policy, however, as Narula was not present in court in the post-lunch period, the bench re-notified the matter to October 1 and requested the presence of Additional Solicitor General Sanjay Jain to assist the court on that date.

During the pre-lunch proceedings, the government told the court that according to the tax law, companies like Facebook which do not have an office here are exempted from paying service tax but the recipients of the services have to pay the same.

Virag Gupta, however, opposed the contention and alleged that government has been suppressing information regarding service tax liabilities, if any, of Facebook.

The court was hearing a PIL filed by Govindacharya seeking recovery of taxes from the websites on their income from operations in India.

The petition has alleged that the sites have no mechanism for protection of children from online abuse.

It had also submitted that government departments like Delhi Police and the Indian Railways are not entitled to create accounts on social networking sites.

The PIL had claimed that children below 18 years are entering an agreement with the social networking sites to open accounts which is against the Indian Majority Act, the Indian Contract Act and also the Information and Technology Act.

Earlier, Facebook and Google had submitted affidavits in the court detailing the protective measures that are available on their sites to ensure their product is not misused.

They had said their statement of rights and other terms and conditions prohibits children below 13 years of age from registering an account and creating more than one personal account.

They had said they also have strict policies in place to delete any objectionable or misleading content they come across on their sites.

The petitioner in his plea has alleged that due to non-verification of users, more than eight crore of Facebook users across the world were found to be "fake", which the website admitted before a US authority.