Case Law Details

Case Name : EPRSS Prepaid Recharge Services India Pvt. Ltd. Vs ITO (ITAT Pune)
Appeal Number : ITA No. 86/PUN/2017
Date of Judgement/Order : 05/12/2018
Related Assessment Year : 2012-13
Courts : All ITAT (6377) ITAT Pune (215)

EPRSS Prepaid Recharge Services India Pvt. Ltd. Vs ITO (ITAT Pune)

Tribunal further observed that there was no amendment in the DTAA between the two countries analogous to the Explanation 5 to section 9(1) of the Act and accordingly Amazon was not chargeable to tax in respect of Web hosting charges received from the assessee in India. The Tribunal still further held that the amount paid to Amazon, at the first instance, was not in the nature of royalty itself. The ld. DR fairly admitted that the facts and circumstances prevailing in the instant year are mutatis mutandis similar to those of preceding years. Respectfully following the precedent, I overturn the impugned order on this score and order for the deletion of addition of Rs. 46,28,457/- made and confirmed by the authorities below.

FULL TEXT OF THE ITAT JUDGMENT

This appeal by the assessee arises out of the order passed by the CIT(A)-1, Pune on 06-10-2016 in relation to the assessment year 2012-13.

2. The only issue raised in this appeal is against the confirmation of disallowance of Rs.46,28,457/- made by the Assessing Officer (AO) u/s. 40(a)(i) of the Income-tax Act, 1961 (hereinafter also called as ‘the Act’).

3. Briefly stated, the facts of the case are that the assessee is a Private Limited Company engaged in distribution of recharge pen’s of various DTH providers via online network. The assessee claimed deduction, inter alia, for a sum of Rs.46,28,457/- towards Web hosting charges paid to Amazon Web Services LLC (Amazon) for use of its cloud units on hire basis. The AO observed that no deduction of tax at source was made. Treating such payment as ‘Royalty’ covered u/s. 9(1)(vi) read with Explanation 2 (iva) and Explanation 5, the AO held that the amount of Web hosting charges was liable to tax in the hands of Amazon. Since the assessee failed to withhold tax on the payment made to Amazon, the AO invoked the provisions of section 40(a)(i) of the Act and made disallowance. No relief was allowed in the first appeal.

4. I have heard both the sides and gone through the relevant material on record. It is observed that similar disallowance was made by the authorities below in relation to the two preceding assessment years, namely, 2010-11 and 2011-12. Vide its order dated 24-10-2018, the Tribunal in ITA No. 828/PUN/2016 and ITA No.1204/PUN/2016 has deleted the disallowance by holding that Explanation 5 has been inserted to section 9(1)(vi) by the Finance Act, 2012 with retrospective effect on 01-06-1976 and since the payment had already been made before the insertion of the provision, no deduction of tax at source could have been made. The Tribunal further observed that there was no amendment in the DTAA between the two countries analogous to the Explanation 5 to section 9(1) of the Act and accordingly Amazon was not chargeable to tax in respect of Web hosting charges received from the assessee in India. The Tribunal still further held that the amount paid to Amazon, at the first instance, was not in the nature of royalty itself. The ld. DR fairly admitted that the facts and circumstances prevailing in the instant year are mutatis mutandis similar to those of preceding years. Respectfully following the precedent, I overturn the impugned order on this score and order for the deletion of addition of Rs.46,28,457/- made and confirmed by the authorities below.

5. In the result, the appeal is allowed.

Order pronounced in the Open Court on 05th December, 2018.

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