GoTo Technologies Ireland Unlimited Company Vs ACIT (ITAT Delhi)
In the case of GoTo Technologies Ireland Unlimited Company vs. ACIT, the ITAT Delhi ruled on the taxability of subscription fees from cloud services under the India-Ireland Double Tax Avoidance Agreement (DTAA). The Assessing Officer (AO) had previously classified these fees as royalty, subject to a 10% tax rate, leading to a significant discrepancy between the assessed income and the amount reported by the appellant. The appellant, a non-resident Irish company providing software as a service (SaaS), argued that the fees from subscriptions did not constitute royalty income but rather business receipts, which are not taxable under the DTAA. The Tribunal agreed, citing precedents from similar cases, such as CIT vs. MOL Corporation and Amazon Web Services Inc., which confirmed that such subscription fees do not qualify as royalty. The Tribunal directed the AO to delete the additions made on account of royalty income and to address the shortfall in TDS credit. This decision underscores that subscription fees for cloud-based software do not meet the criteria for royalty under Indian tax law and the applicable tax treaty.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the assessee against the order dated 19.09.2023 passed by the AO u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
