Case Law Details
MOL Corporation Vs DCIT (International Taxation) Circle (ITAT Delhi)
Bench is of considered view that the cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer. The assessee’s cloud base services are though based on patents / copyright but the subscriber does not get any right of reproduction. The services are provided online via data centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through internet to the provider’s system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (para 10.5 of the Ld. AO order). Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications.
FULL TEXT OF THE ORDER OF ITAT DELHI
The appeal has been preferred against the order dated 23.12.2015 of Dispute Resolution Panel-1, New Delhi for assessment year 2012-13 u/s 144C(5) of the Income Tax Act, 1961 and assessment order dated 19.02.2016 passed by Dy. Commissioner of Income Tax, International Tax, Gurgaon u/s 143(3) read with section 144C(13) of the Act.
2. The facts with regard to the matter in hand as can be picked from record are that Microsoft Corporation, USA, (‘MS Corp’) is the ultimate parent entity of assessee MOL Corporation (‘MOLC’) which itself is a company incorporated in the United States of America, having its registered office in USA. Gracemac Corporation (‘Gracemac’), is a corporation incorporated in the USA and a Wholly Owned Subsidiary of MS Corp which got merged with MOLC with effect from 2ndOctober 2006. All the rights and obligations of Gracemac got merged into the affairs of MOLC.
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