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TMI Blog2022 (6) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer Pricing Officer (TPO) for respective assessment years. 2. Since issues are common and the appeals were heard together, these are being disposed off by this common order. 3. For the sake of reference, we are referring facts of appeal in ITA No. 7855/Del/2019 for Assessment Year 2015-16. 4. The grounds of appeal taken by the assessee read as under:- Grounds "1. That on the facts and in the circumstances of the case and in law, the Deputy Commissioner of Income Tax, Circle - 2(2)(1). International Taxation. Delhi ('Ld. AO') has erred in computing the total income of the Appellant at INR 1632,49,90,405 as against NIL income reported in the return of income by the Appellant. 2. That on the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Establishment of the Appellant in India. 4.3 That on the facts and in the circumstances of the case and in law. the Ld. DRP and the Ld. AO have erred in law in disregarding decisions of Hon'ble Courts and routinely holding to the contrary. 4.4 Ld. DR and Ld. AO erred in failing to appreciate that receipts by MRS of INR 14,57,54,90,041 is not taxable as 'Royalty' or 'otherwise' in the hands of Appellant, under the Act or India - USA DTAA. 5. Taxability of consideration from cloud services 5.1 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 by MRS from cloud services amounting to INR 1,74,95,00,364 is taxable as "Royalty" in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration is a company incorporated in the United States of America having its registered office at C/o. Corporation Services Company, 2215-B, Renaissance Drive, Las Vegas, Nevada 89119, USA. Microsoft Corporation, USA is the ultimate parent entity of the assessee. Assessee is a tax resident of USA and therefore, it is entitled to claim the applicability of beneficial provisions of the Double Taxation Avoidance Agreement entered into between India and US (India - US tax treaty) vis-à-vis. the provisions of the Income-tax Act, 1961 (for short 'the Act'). The AO/TPO made adjustment/addition to the returned income which was confirmed by DRP based upon earlier year similar direction of DRP. The addition made as per AO's order r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in the case of Gracemac Corporation which stands amalgamated with MOL Corporation for the assessment year 2005-06, 2006-07 and 2007-08 the Co-ordinate Bench B at Delhi by order dated 16.12.2020 has allowed the appeals which have been further upheld by Hon'ble Delhi High Court by judgment dated 07.03.2022. The Ld. DR supported the findings of Tax authorities below. 6.1 Giving thoughtful consideration to the matter on record, the Bench is of considered opinion that the revenue has been following a persistent approach in regard to assessee and its sister assessee subsidiaries of MS Corp holding sale of MS Retail Software Products to Indian Distributors as royalty under the Act as well as under DTAA between India and US. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4915/DEL/2016 [A.Y. 2010-11] with six other connected was relied to contend that subscription to the cloud computing services do not give rise royalty income. The Ld. DR supported the findings of Tax authorities below. 7.1 Giving thoughtful consideration to the matter on record, the bench is of considered view that the cloud base services do not involve any transfer of rights to the customers in any process. The grant of right to install and use the software included with the subscription does not include providing any copy of the said software to the customer. The assessee's cloud base services are though based on patents/copyright but the subscriber does not get any right of reproduction. The services are provided online via data ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re only using the services provided by the assessee." 7.3 The Mumbai Tribunal in the case of DDIT v. Sawis Communication Corporation [2016] 69 taxmann.com 106 (Mumbai-Trib.) has held that payment received for providing web hosting services though involving use 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 under section 9(1)(vi), read with Explanation 2(iva) thereto as also article 12 of Indo-US DTAA. The Chennai Tribunal in the case of ACIT v. Vishwak Solutions Pvt. Ltd. ITA No. 1935 & 1936/MDS/2010 dated 30.01.2015 has upheld the findings of CIT(A) that "the amount paid to the non-resident is towards hiring of storag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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