CIT Vs Amazon Web Services (Delhi High Court)
Delhi High Court held that amount received by assessee (Amazon Web Services) from Indian entities for rendering cloud computing services are not taxable as equipment royalty thus the payments received cannot be considered as royalties within the meaning of Article 12(3) of the India-US DTAA.
Facts- The Assessee is a company incorporated in the United States of America and is a tax resident of that country. The Assessee had received certain sums of money from Indian entities for rendering cloud computing services, which, according to the AO are chargeable to tax as royalty and fees for technical service [FTS] under the Act as well as “the Convention between the Government of the United States of America and the Government of the Republic of India for the Avoidance of Double Taxation and Prevention of Fiscal evasion with respect to taxes on income” [India-US DTAA].
Conclusion- Held that we find no merit in the contention that the amount received by the Assessee for providing services would be taxable as equipment royalty. As noted before, the Assessee’s customers do not acquire any right of using the infrastructure and software of the Assessee for the purposes of commercially exploitation. The charges paid by the Assessee’s customers are for availing services, which the Assessee provides by using its proprietary equipment and other assets. No part of its equipment or IPRs are alienated by the Assessee in favour of its customers for their use. Therefore, the payments received cannot be considered as royalties within the meaning of Article 12(3) of the India-US DTAA.
