TMI Blog2022 (6) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... of certain scientific equipment cannot be treated as 'consideration for use of, or right to use of, scientific equipment' which is a sine qua non for taxability u/s 9(1)(vi) read with Explanation 2(iva) thereto as also article 12 of Indo-US DTAA. Chennai Tribunal in the case of ACIT v. Vishwak Solutions Pvt. Ltd. [ 2015 (4) TMI 794 - ITAT CHENNAI] has upheld the findings of CIT(A) that the amount paid to the non-resident is towards hiring of storage space. The aforesaid squarely covers the controversy in regard to the present assessee also. In the light aforesaid, the Bench is of considered view that the Ld. Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there are no valid 'reasons to believe' that income has escaped assessment. 3. Without prejudice to other grounds, Ld. DRP and Ld. AO failed 10 appreciate that in any case income is not chargeable in appellant's hands under Income Tax Act, 1961 ('Act') India-USA Double Taxation Avoidance Agreement ('DTAA') as the same was earned outside or India. 4. Taxability of revenue from sale of software 4.1 That on the facts and in the circumstances of the case and in law. the Ld. DRP and the Ld. AO have erred in holding that the revenue earned and received from sale or software by Microsoft Regional Sales Pte. Ltd. ('MRS') amounting to INR 14,57,54,90,041 is taxable in India as Royalty in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that receipt of INR 1,74,95,00,364 is not taxable as 'Royalty' or 'otherwise' in the hands of Appellant under the Act or India - USA DTAA. Other Grounds 6. That on the facts and in the circumstances of the case and in law, the Ld. AO has grossly erred in not transferring the TDS credit claimed by MRS to MOLC despite the directions of Ld. DRP. 7. That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in levying excess interest under section 2348 of the Act. 8. That on the facts and in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act against the Appellant. 5. At the outset in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The income amounting to Rs. 1632,49,90,405/- (Rs. 1457,54,90,041/- from sale of software + Rs. 174,95,00,364/- from cloud services) is assessed substantively as Royalty, to be taxed @ 15% as per India - US DTAA. Interest u/s. 234A, 234B, 234C 234D, as applicable, is to be charged after giving credit to pre-paid taxes. Necessary forms and notices are being issued with this order. Penalty proceedings u/s. 271(1)(c) are being initiated separately. A protective assessment of the same income has been made in the hands of MRSC in the same assessment year. 8. The ITAT in assessee's own case for AY 2012-13 referred above has adjudicated the identical issues as under:- Issue of taxability of revenue from sale of software 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Gracemac which stands amalgamated with MOLC stands set aside in regard to assessment years 2005-06, 2006-07 and 2007-08 by the co-ordinate Bench's judgment dated 16.11.2020 which have been further upheld by Hon'ble Delhi High Court by judgment dated 07.03.2022. The same were based on the principles of law that sale of software products does not give rise to royalty income as laid down by the Hon'ble Delhi High Court in Infrasoft Ltd. case which have now further been affirmed by the Hon'ble Supreme Court of India in the case of Engineering Analysis Centre of Excellence P. Ltd. (supra). 6.2 In the light of aforesaid as there are no distinguishing facts with regard to present assessment years and as this Bench has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provider's system and back. The ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (para 10.5 of the Ld. AO order). Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process and storage of data or run the applications. 7.2 While dealing with similar question in regard to the case of M/s. Salesforce.com Singapore Pte. (supra) where the said assessee was provider of comprehensive customer relationship management servicing to its customer by using Cloud Computing Services/Web Casting Services, the Bench in its order dated 25.03.2022 held as under: 28. Considering the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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