Cloud Hosting Services to Indian customers not taxable as ‘Royalty’ as per India-US DTAA

Racksapce Us, Inc. Vs DCIT (ITAT Mumbai)

Conclusion: Cloud hosting services provided USA company to its Indian customers were not covered under the definition of ‘royalties’ as per India-US Tax Treaty as the agreement was to provide hosting services simpliciter and was not for the purpose of giving the underlying equipment on hire or lease and accordingly, it could not be said as royalty within the meaning of Explanation (2) to Section 9(1)(vi) as well as Article 12(3)(b) of the Indo-USA Data by AO and DRP.

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