“Cloud Service Fee” Received By Amazon From Customers In India Is Not Taxable As Royalty, FTS, FIS: ITAT
Mariya Paliwala
3 Aug 2023 11:00 AM IST
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that cloud computing services provided by Amazon Web Services cannot be held liable to tax in India as royalty and fee for technical or included services (FTS/FIS).The bench of G.S. Pannu (President) and Astha Chandra (Judicial Member) has observed that the AWS services provided by Amazon are standardised services that do...
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that cloud computing services provided by Amazon Web Services cannot be held liable to tax in India as royalty and fee for technical or included services (FTS/FIS).
The bench of G.S. Pannu (President) and Astha Chandra (Judicial Member) has observed that the AWS services provided by Amazon are standardised services that do not provide any technical services to its customers nor satisfy the ‘make available’ test as the customer will not be able to make use of the technical knowledge, skill, process, etc. used by the assessee in providing cloud services by itself in its business or for its own benefit without recourse to the assessee in the future.
The appellant/assessee, Amazon Web Services, is a US-based company engaged in providing ‘standard and automated’ cloud computing services (AWS services). The assessee was subjected to reassessment proceedings for AYs 2014–15 and 2016–17, in which the Assessee submitted that it received Rs. 247.68 crore and Rs. 1,007.81 crores, respectively, from its customers in India for providing standard and automated cloud computing services.
The department held the entire receipts for providing standard and automated cloud computing services to be taxable in India as FIS/FTS and royalty.
On FIS/FTS, ITAT reiterated the principle that for taxability, the services should ‘make available’ the technical knowledge, experience, skill, know-how, or processes that enable the service recipient to utilise them in the future on its own without the help of the service provider.
On the taxability of services as royalty, ITAT noted that the services provided by the Assessee are merely standard and automated services that are available online to anyone and that there is no customization done for any particular customer. Based on a sample customer agreement, trademark guidelines, and support services guidelines, ITAT held that the prerequisites for taxation as royalty under Article 12(3) of the India-USA DTAA are not met as the customer does not receive any right to use the copyright or other IP involved in the services.
Case Title: Amazon Web Services Versus ACIT
Case No.: ITA Nos. 522 & 523/Del/2023
Date: 01.08.2023
Counsel For Appellant: Porus Kaka
Counsel For Respondent: Vizay B. Vasanta
