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September 2023

Article 12 of India-USA DTAA — Payment received by Amazon for cloud services provided by it is not royalty or fees for included services in terms of Article 12 of DTAA.

By Geeta Jani | Dhishat B. Mehta | Bhaumik Goda
Chartered Accountants
Reading Time 2 mins
5. [2023] 153 taxmann.com 45 (Delhi - Trib.)
Amazon Web Services, Inc. vs. ACIT
[ITA No: 522&523/Del/2023]
A.Y.: 2014-15 & A.Y.: 2016-17            
Dated: 1st August, 2023

Article 12 of India-USA DTAA — Payment received by Amazon for cloud services provided by it is not royalty or fees for included services in terms of Article 12 of DTAA.
 
FACTS

Assessee provided standard and automated cloud computing services named AWS Services to its customers across the globe. The customers electronically executed a standard contract available on its website. Case was reopened under section 147 of the Act. Assessee had contended that its income is not chargeable to tax. However, AO had passed order treating income of assessee as royalty/fees for included services under the Act and DTAA. DRP confirmed addition proposed by AO.
Being aggrieved, assessee appealed to ITAT.

HELD

Vis-à-vis taxation as Royalty
•    AWS Services are standard and automated services. They are publicly available online to everyone who executes a standard contract with the assessee.

•    For the following reasons, receipt is not in nature of royalty:

  •  Customers are granted a non-exclusive and non-transferable license to access servi
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