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Informist, Thursday, May 29, 2025

 

NEW DELHI – The Delhi High Court Thursday held that the payments received by Amazon Web Services, Inc. from Indian entities for rendering cloud computing services were not royalty and, thus, cannot be taxed by the income tax department. 

 

The high court said that Amazon Web Services' customers do not acquire any right of using the infrastructure and software of the company incorporated in the US for the purposes of commercial exploitation. The charges paid by Amazon Web Services' customers are for availing services, which the company provides by using its proprietary equipment and other assets, said the high court.

 

 

"No part of its equipment or IPRs (Intellectual Property Rights) are alienated by the assessee (Amazon Web Services) in favour of its customers for their use," said the bench of Justices Vibhu Bakhru and Tejas Karia. Therefore, the payments received cannot be considered as royalties within the meaning of Article 12(3) of the India-US Double Taxation Avoidance Agreement, said the bench.

 

 

The case has its genesis from the income tax department initiating proceedings against Snapdeal Pvt. Ltd. under Section 201, 201(1A) of the Income Tax Act, 1961. Snapdeal had availed services of Amazon Web Services and had remitted funds to the latter as charges for the services rendered by the US company. The assessing officer was of the view that the amounts received by Amazon Web Services were chargeable to tax under the Income Tax Act. Accordingly, the assessing officer issued notices to Amazon under Section 148 of the Act and commenced proceedings for re-assessment for assessment years 2014-15 and 2016- 17. 

 

In 2023, the assessing officer issued the final assessment order, whereby it determined Amazon's income chargeable to tax at INR 2.48 billion in respect of assessment year 2014-15 and INR 10.07 billion in respect of assessment year 2016-17. Amazon appealed the final assessment orders before the Income Tax Appellate Tribunal. The tribunal allowed the appeals by Amazon and set aside the assessment orders. Challenging the appellate tribunal's order, the income tax department moved the high court, which also ruled in favour of Amazon.  End

 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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