Case Law: Commissioner of Income- tax, International Taxation-1 V/s Amazon Web Services, Inc

Introduction:

Assessee, is a company incorporated in the United States of America and is tax resident of that country which is engaged in providing cloud computing services to its customers around the globe. Assessing officer was of the view that the income received by the assesse from Indian entities for providing the cloud computing services was chargeable to tax in India as Royalty/FTS. The Assessee claims that the receipts from Indian entities are for providing standard cloud computing services, which are not chargeable to tax either as royalties or as FTS.

Facts of the case:

 The services offered by Assessee are the standardised services in which Assessee operates a cloud computing platform which comprises hardware as well as software. In this case, the Assessing officer(AO) alleged that, the payment made by the Indian customers to Assessee who is a US resident company, is for ‘use’ or ‘right to use’ scientific equipment and would chargeable as Royalty/FTS due to the following reasons:

• The services provided by the Assessee to its customers as per the agreement is service offerings like “AWS Content” the “AWS Marks” and the “AWS Site” which AO believes that this is technical support and make available clause basis double taxation avoidance agreement is satisfied because of which AO decided that the fees should be taxable as Fees for Technical services/ Fees for Included services (FTS/FIS).
• The amount which has been paid to use the scientific equipment will be chargeable as “Royalties”.

Findings and Conclusion:

The Hon’ble High Court having relied on a few cases like CIT v. Telstra Singapore Pte Ltd: (2024), DIT v. New Skies Satellite BV and few other rulings decided in favour of Assessee. The High court in this regard concluded

• The agreement does not amount to the transfer of any skill, knowledge or know-how but only provides support to the customers to use its cloud computing platform.
• The services rendered were standard, automated services. Further, support services and assistance provided to the customers for availing the services provided by assessee did not satisfy the make available technology or technical skills, know how or other process to its customers hence the fees for using the cloud computing services was not taxable as Fees for Included services (FIS)