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2018 (8) TMI 853 - AT - Income TaxAccrual of income in India - managed hosting services - Royalty and / or Fees for Included Services under section 9(i)(vi) / (vii) - India- USA Double Taxation Avoidance Agreement (‘DTAA’). - CIT(A) observed that, the income earned by the Appellant from customers for providing managed hosting services constituted consideration for use or right to use equipment. Held that:- A payment cannot be said to be consideration for use of scientific equipment when person making the payment does not have an independent right to use such an equipment and physical access to it. In the present case also, what the assessee is providing is essentially web hosting service, though with the help of sophisticated scientific equipment, in the virtual world. The scientific equipment used by the assessee enable rendition of such a service, and such a use, which is not even by the Indian entity, is not an end in itself. In this view of the matter, even though the services rendered by the assessee to the Indian entities may involve use of certain scientific equipment, the receipts by the assessee cannot be treated as "consideration for the use of, or right to use of, scientific equipment" which is a sine qua non for taxability under section 9(l)(vi) read with Explanation 2 (iva) thereto. The income is not taxable in India - Decided in favor of assessee.
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