Latest news with #TejasKaria
Time of India
2 days ago
- Business
- Time of India
Delhi HC rules in favour of Amazon, says earnings from cloud services not taxable: ‘Customers do not acquire any right…'
Amazon has won a major tax battle as the Delhi High Court has ruled that cloud payments made by Indian companies are not taxable. The court said that payments made by Indian companies to foreign cloud service providers for standard cloud computing services do not constitute royalty or fees for technical services (FTS) under the Income Tax Act, 1961, or the India-United States Double Taxation Avoidance Agreement (DTAA). This decision is set to have significant implications for the taxation of cloud services in India. A Division Bench comprising Justices Vibhu Bakhru and Tejas Karia delivered the verdict in a series of appeals filed by the Commissioner of Income Tax (International Taxation) against US-based cloud giant Amazon Web Services (AWS). According to a report by Live Law, the Court rejected the IT department's argument that receipts from Indian clients by AWS should be taxed as royalty or FTS simply because the services involve access to servers, APIs, or data infrastructure. The ruling clarifies the tax treatment of payments for standardised cloud offerings. What the Delhi High Court judges said in the ruling Agreeing with the Income Tax Appellate Tribunal (ITAT) that ruled in favour of Amazon, the judges said (as reported by Live Law): 'The customers do not acquire any right or title or any IPR that would entitle them to exploit or commercially monetise the said assets on their own. There is no material to establish that a grant of such service entails transfer of any technical know-how, skill, knowledge or process… The customers of the assessee do not acquire any right to commercially exploit any of the assessee's IPRs. The fact that the assessee lends certain support and assistance to its customers… does not in any manner support the view that the assessee makes available technology or technical skills. The issue involved in the present appeal is also covered in favour of the assessee…We find no merit in the contention that the amount received by the assessee for providing services would be taxable as equipment royalty.' The dispute stemmed from reassessment proceedings against AWS for assessment years 2014–15 and 2016–17, where the Indian tax authorities claimed that AWS' earnings from Indian clients were taxable as royalty or fees for technical services (FTS). The Department argued that AWS' cloud services involved the use of scientific equipment and software, making the payments liable under Section 9 of the Income Tax Act and Article 12 of the India-US DTAA. AWS maintained that it provided standardised, automated cloud services through pre-set contracts and interfaces, without transferring technical knowledge, intellectual property, or usage rights. The Court upheld the ITAT's view, stating that AWS' services were automated, offered remotely without human input or transfer of proprietary rights. It found no transfer of technical know-how, no access to infrastructure by customers, and no sharing of source code. The Court also dismissed the claim that AWS' support services constituted technical or consultancy services that made technology available to customers. iPhone 16e: 5 Reasons to buy the most affordable iPhone 16 series model! AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Time of India
3 days ago
- Business
- Time of India
AWS cloud payments not taxable as royalty or technical fees: Delhi HC
Payments received by US firm Amazon Web Services , from Indian entities for rendering cloud computing services are not taxable as royalty and fees for technical service (FTS), the Delhi High Court held on Thursday. A Division Bench of justices Vibhu Bakhru and Tejas Karia dismissed the income tax department's petition holding that rendering such services by Amazon cannot be taxed either under the Income Tax Act or the India-US Avoidance of Double Taxation and Prevention of Fiscal evasion with respect to taxes on income. 'We find no merit in the contention (of department) that the amount received by the assessee for providing services would be taxable as equipment royalty.' The court said that Amazon' customers did not acquire any right of using the infrastructure and software of the US service provider for the purposes of commercial exploitation. The charges paid by Amazon's customers are for availing services, which the company provides by using its proprietary equipment and other assets, it added. "No part of its equipment or IPRs ( Intellectual Property Rights ) are alienated by the assessee (Amazon Web Services) in favour of its customers for their use," the court said in its 36-page judgment said. Therefore, the payments received cannot be considered as royalties within the meaning of Article 12(3) of the India-US Double Taxation Avoidance Agreement , it added. Live Events The assessee had received certain payments from Indian entities for rendering cloud computing services, which, according to the income tax Assessing Officer (AO) were chargeable to tax as royalty and FTS under the Act as well as the DTAA. Discover the stories of your interest Blockchain 5 Stories Cyber-safety 7 Stories Fintech 9 Stories E-comm 9 Stories ML 8 Stories Edtech 6 Stories Amazon contended to the contrary and claimed that its receipts were for providing standard cloud computing services, which cannot be chargeable to tax either as royalties or as FTS, thus it did not file its return of income. The company's customers that had remitted the charges to the assessee for services had not withheld any tax under Section 195 of the Act for the same reason. The Revenue had initiated proceedings under Section 201/201(1A) in case of M/s Snapdeal (erstwhile Jasper Infotech), which had availed of the Amazon's services and had remitted funds to the latter as charges for the services rendered by the US company. The AO was of the opinion that the amounts received by Amazon were chargeable to tax under Act. Accordingly, the assessing officer issued notices to Amazon under Section 148 and commenced proceedings for re-assessment for assessment years (AYs) 2014-15 and 2016- 17. In its final assessment order in 2023, the AO determined Amazon's income chargeable to tax at Rs 247.68 crore in respect of AY 2014-15 and Rs 1007.81 crore for AY 2016-17. On appeal, the Income Tax Appellate Tribunal in August 2023 ruled in favour of Amazon, saying the customers were granted only a non-exclusive and non-transferable license to access the standard automated services offered by Amazon. The tribunal's order was challenged by the department before the HC.
