Subscription received towards Cloud Services is not royalty income

Microsoft Regional Sales Pte. Ltd Vs ACIT (ITAT Delhi)

ITAT Delhi held that cloud services merely facilitates the flow of user data from the front end user through internet to the provider’s system and back. Accordingly, subscription received towards cloud services is not royalty income.

Facts-

Assessee had filed a return of income declaring Nil income on 31.10.2017 claiming TDS of Rs. 9,28,94,483/- and a revised return declaring the same Nil income claiming TDS of Rs. 9,74,72,239/- was filed on 29.03.2019.

AO held the payments made by the users as the consideration for the use or the right to use of such patents, Software and Cloud Infrastructure covering them in the definition of royalty both by clause 9 (1)(vi) Explanation 2 sub-clause (iii) and (v) of the Income Tax Act, 1961 and also Article 12 (3) of the India US, DTAA. The addition in hands of assessee was made on protective basis.

Please become a Premium member. If you are already a Premium member, login here to access the full content.