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2023 (8) TMI 331 - AT - Income TaxIncome deemed to accrue or arise in India - Taxability of “cloud service fee” received by the assessee from customers in India - payments received by the appellant from Indian customers for standard and automated services - royalty and fee for technical/included services (‘FTS/FIS’) - India-USA DTAA - assessee argued that appellant merely provides standard and automated cloud computing services to its customers which do not make available technical knowledge, know how, skill, experience, etc., to the service recipient so as to fall within the ambit of FTS/ FIS under Article 12(4) of the Tax Treaty - HELD THAT:- It is seen that the issue of taxability of receipts from cloud services is covered by the order of the Delhi Tribunal in the case of Microsoft Regional Sales Pte. Ltd. [2022 (12) TMI 864 - ITAT DELHI], Urban Ladder Home Decor Solutions Pvt. Ltd., [2021 (8) TMI 927 - ITAT BANGALORE] MOL Corporation [2023 (2) TMI 1177 - DELHI HIGH COURT] and Microsoft Regional Sales Pte. Ltd. [2022 (5) TMI 246 - ITAT DELHI] wherein held that consideration for cloud computing services is not chargeable to tax in India. We have also considered various decisions relied upon by the Ld. DR and in our considered view these decisions do not support the Revenue’s contentions being distinguishable on facts than that of the assessee. Thus we hold that the payments received by the assessee from Indian Customer(s) from rendering AWS Services do not qualify as royalty under Article 12(3) of the India-USA DTAA and hence are not taxable in India. Decided in favour of assessee. Taxability of AWS Services provided by the assessee - AR submitted that in terms of Article 12(4)(b) of the India-USA DTAA, payment made towards technical or consultancy services constitutes “fees for technical services” only if such services “make available” technical knowledge, experience, skill, know-how or processes, etc. - HELD THAT:- AWS services provided by the assessee 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 future. We are in agreement with the submission of the Ld. AR that the impugned issue also stands covered by the decision of the Pune Tribunal which was rendered in the context of similar cloud services in the case of M/s Sunguard Availability Services LLP [2022 (11) TMI 1313 - ITAT PUNE] and Rackspace, US Inc. [2020 (2) TMI 63 - ITAT MUMBA] wherein it has been held that rendering cloud computing service cannot be held to be liable to tax in India as FTS/FIS. We are of the view that the impugned receipts of the assessee for AWS services/cloud computing services rendered to the customers in India do not fall within the purview of “FIS” under Article 12(4)(b) of the India-USA DTAA as the same do not satisfy the ‘make available’ clause envisaged therein. Accordingly, we allow ground raised by the assessee in both the AYs.
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