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Informist, Thursday, Sept. 17, 2026

 

--Delhi HC sets aside tax dept notice to reassess Amazon Web's income 

--HC to tax dept: Pass fresh order if reassessment of Amazon's income needed 

--CONTEXT: Tax dept alleged Amazon's INR-45-bln income escaped assessment 

 

NEW DELHI – The Delhi High Court Thursday set aside an assessing officer's notice to reassess Amazon Web Services Inc.'s income for assessment year 2020-21 (Apr-Mar) on allegation that the company's INR-45-billion transaction of foreign remittance to India remain unassessed. The high court directed the assessing officer to pass a fresh order to decide whether it was a fit case to issue a reassessment notice to Amazon Web. The assessing officer shall fix a date granting personal hearing to Amazon and consider providing one or two opportunities to the company to object to the reassessment proceedings. If the assessing officer's order is prejudicial to the interest of Amazon, the company shall be free to take measures in accordance with law, said the court.

 

The high court noted that the case set up by Amazon was that the assessing officer was seeking to conduct a fishing and roving enquiry in the guise of reassessment proceeding under the Income Tax Act, 1961 and is likely to assess the petitioner for global income which is impermissible in law and the tax department was simply proceeding on change of opinion. The high court said that the dispute in the case was on account of reconciliation of figures as found in risk management strategy regarding original figures, in which Amazon's assessment has been made. The assessing officer's order on reassessment might have happened because of limited time available with it and limited enquiry done by it under Section 148 of the Income Tax Act, said the court.

 

In income tax administration, a risk management strategy refers to the algorithmic, data-driven framework used by tax authorities, such as India's Central Board of Direct Taxes, to screen electronic filings, flag financial irregularities, and prioritise audit or reassessment cases using artificial intelligence and machine learning. 

 

 

The case has its genesis from Amazon arguing that its income for the assessment year 2020-21 (Apr-Mar) has already been assessed by the income tax authorities. In fact, the income tax authorities had already reassessed the income for that assessment year and said that INR 29.66 billion of foreign remittance were left unassessed. These foreign remittances were regarding cloud computing services, which were related to Amazon's Indian arm and parties who had got these services.  

 

The high court in a ruling in 2025 had 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. On this issue, the matter is concluded and, therefore, INR 29.66 billion of foreign remittance remaining unassessed has been settled, said Amazon. However, the income tax department has again issued a notice to reassess the company's income for the same assessment year on the same issue.  

 

The income tax department argued there was a permanent establishment of Amazon in India and, hence, its income can be reassessed by the authorities. A permanent establishment is a fixed place of business or a dependent agent through which a non-resident enterprise wholly or partly carries on its business, granting the host country the right to tax the resulting business profits. 

 

The high court questioned the tax department on what basis they have concluded that there was a permanent establishment of Amazon in India. The court asked the income tax authorities to show whether they had the jurisdiction to proceed against Amazon. Once there is finding that this nature of amount relating to fee for technical services cannot be taxed, the result remains the same and Amazon's income cannot be reassessed based on this issue, said the court. The income tax department said that it does not know whether Amazon's income was royalty or fees for technical services as they had no opportunity to examine the company's replies.  End
 

Reported by Surya Tripathi

Edited by Akul Nishant Akhoury

 

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