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TMI Blog2023 (8) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Ltd. [ 2022 (5) TMI 246 - ITAT DELHI ] wherein held that consideration for cloud computing services is not chargeable to tax in India. We have also considered various decisions relied upon by the Ld. DR and in our considered view these decisions do not support the Revenue s contentions being distinguishable on facts than that of the assessee. Thus we hold that the payments received by the assessee from Indian Customer(s) from rendering AWS Services do not qualify as royalty under Article 12(3) of the India-USA DTAA and hence are not taxable in India. Decided in favour of assessee. Taxability of AWS Services provided by the assessee - AR submitted that in terms of Article 12(4)(b) of the India-USA DTAA, payment made towards technical or consultancy services constitutes fees for technical services only if such services make available technical knowledge, experience, skill, know-how or processes, etc. - HELD THAT:- AWS services provided by the assessee are standardised services that do not provide any technical services to its customers nor satisfy the make available test as the customer will not be able to make use of the technical knowledge, skill, process etc. used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the impugned order is without jurisdiction, illegal. bad in law and liable to be quashed. 1.2 That on the facts and circumstances of the case and in law, the Reassessment Proceedings having been initiated merely on the basis of ex-parte information received, without any independent application of mind by the AO to such information and forming opinion thereof, is illegal, bad in law and liable to be quashed. 1.3 That on the facts and circumstances of the case and in law, order dated 28.02.2022 passed by the AO dismissing the legal objections to reasons for reopening of the assessment of the appellant is not sustainable in law. 1.4 That on the facts and circumstances of the case and in law, reassessment order is illegal and bad in law, since: (a) reasons recorded do not bear any Document Identification Number (DIN) and was not communicated along with the notice; and (b) proper and valid sanction for issuance of notice was not obtained under section 151 of the Act. 1.5 That on the facts and circumstances of the case and in law, the AO/DRP failed to appreciate that once proceedings under section 201 of the Act had already been initiated against the payer (Snap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of server, software, data storage space, networking equipment, databases used by the appellant to provide the services to such customers. 3.4 That the AO/DRP erred in not appreciating that there is no equipment/ dedicated facility/ space provided by the appellant to Indian customers. 4. That the AO/DRP erred in not following this binding precedents of the Hon ble Tribunal) [Refer: Urban Ladder Home Decor Solutions Pvt. Ltd vs ACIT (IT) TS-773-ITAT-2021(Bang), Reasoning Global E-Application Lid ITA No.2028/Hyd./2017 (Hyderabad) and EPRSS Prepaid Recharge Services India Private Limited: [2018] 100 taxmann.com 52 (Pune))) 5. That the AO/DRP erred in not appreciating facts of the case and proceeded, on totally incorrect, perverse, erroneous basis contrary to the record, to allege that (a) the appellant provides technical support to its customers. (b) under the standard terms of the customer agreement the appellant is providing copyright and trademarks services to its Indian customers for commercial exploitation: (c) the Indian customers use or obtain right to use the copyright from appellant as opposed to the Indian customers merely access standard and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, order dated 28.02.2022 passed by the AO dismissing the legal objections to reasons for reopening of the assessment of the appellant is not sustainable in law. 1.4 That on the facts and circumstances of the case and in law, reassessment order is illegal and bad in law, since: (a) reasons recorded do not bear any Document Identification Number (DIN) and was not communicated along with the notice; and (b) proper and valid sanction for issuance of notice was not obtained under section 151 of the Act. 1.5 That on the facts and circumstances of the case and in law, the AO/DRP failed to appreciate that once proceedings under section 201 of the Act had already been initiated against the payer (Snapdeal), there was no warrant to initiate Reassessment Proceedings against the appellant for recovery of the same tax; resulting in double taxation. On Merits-without prejudice 2. That on the facts and circumstances of the case and in tow, the AO/DRP ended in holding that payments received by the appellant from Indian customers amounting to Rs. 1007,81,05,172 is liable to Tax in India as both royalty and fee for technical/included services ( FTS/FIS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21(Bang), Reasoning Global E-Application Lid ITA No.2028/Hyd./2017 (Hyderabad) and EPRSS Prepaid Recharge Services India Private Limited: [2018] 100 taxmann.com 52 (Pune))) 5. That the AO/DRP erred in not appreciating facts of the case and proceeded, on totally incorrect, perverse, erroneous basis contrary to the record, to allege that (a) the appellant provides technical support to its customers. (b) under the standard terms of the customer agreement the appellant is providing copyright and trademarks services to its Indian customers for commercial exploitation: (c) the Indian customers use or obtain right to use the copyright from appellant as opposed to the Indian customers merely access standard and automated services offered by the appellant [refer Engineering Analysis Centre of Excellence (P.) Ltd vs. CIT: 432 ITR 471]; (d) the appellant provides information concerning industrial, commercial or scientific experience to Indian customers and hence constitutes royalty: 5.1 That the AO/DRP erred in levelling false and baseless allegations, on mere conjectures and surmises, by making selective reference to contents on AWS website, support plans etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which the assessee furnished responses from time to time. 3.1 Vide its reply dated 09.03.2022, the assessee submitted that it is based in the US and is engaged in the business of providing standard and automated cloud computing services to customers around the world. During the AY 2014-15 and AY 2016-17 the assessee received an amount of Rs. 2,47,68,23,222/- and Rs. 10,07,81,05,172/- respectively from its customers in India. These receipts relate to providing standard and automated cloud computing services to its customers. 3.2 Thereafter, a Show Cause Notice ( SCN ) dated 17.03.2022 was issued and served upon the assessee which read as under:- In relation to receipts from rendering cloud computing services, you are requested to show cause as to why the entire receipts from India should not be treated as royalty under the provisions of the Act, as well as the DTAA. Further, without prejudice to the above, you are requested to show cause as to why the entire receipts from India should not be treated as fee for technical services under the provisions of the Act, as well as the DTAA. 3.3 In response to the above SCN, the assessee filed detailed submissions alleging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR explained the nature of services and the manner in which the cloud computing services are provided by the assessee globally. The Ld. AR submitted that the cloud computing services provided by the assessee are merely standard and automated services. The facility of different category of cloud computing services provided by the assessee as well as pricing, are all publically available online to anyone. Customers choose from the suite of services available what they need, when they need them. Instead of buying, owning and maintaining own data centres and servers, organisations can access standard and automated facilities as compute power, storage, data basis and other services on an as-needed basis. In this context, he explained that cloud computing services offered to the customers by the assessee are all standardised and there is no customisation for any one particular customer. While providing the standard and automated services / facility, AWS group / affiliates maintains its technology infrastructure in a secure environment and businesses / customers access these standard / common facility via the internet to develop and run their own applications. Capacity can grow or shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services but, instead, only receive a right to access and use the AWS Services itself and consequently, the payments made to the assessee in relation to the AWS Services would not be consideration in exchange for right to use any copyright. [Clause 8.4 of the Customer Agreement, pages 178/540 of Paper Book read with clauses 3 and 17 of AWS Trademark Guidelines, pages 549 to 553 of the Paper Book] b. The assessee only grants access to use various standard AWS Services delivered online to its customers. The customers are only granted a non-exclusive and non-transferable license to access the standard automated services offered by the assessee. The source code of the license which could provide information of the working of the applications/ software would never be shared with the customers. [Clause 8.4 and 8.5 pages 178/540 Service Offerings and License of AWS Customer Agreement, pages 540 of the Paper Book] c. As per the Customer Agreement, the assessee has not provided any dedicated facility/ space to the customers in India. Further, the customers do not acquire any right to use any industrial commercial or scientific equipment nor take possession of or control of or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal wherein after examining and considering the nature of services and clauses of the same AWS s Customer Agreement which has the identical terms, the Tribunal held that payments made by Indian customers to the assessee for usage of the same cloud computing services /AWS Services is not taxable as royalty. The following decisions were relied upon by the Ld. AR:- i) EPRSS Prepaid Recharge Services India P. Ltd. vs. ITO (2018) 100 taxmann.com 52 (Pune-Trib) ii) Urban Ladder Home Decor Solutions Pvt. Ltd. vs. ACIT (IT) TS-773- ITAT-2021(Bang); which was rendered in the context of AY 2016-17 which is also one of the AYs under consideration in the present appeal. iii) Reasoning Global E-Application Ltd. vs. DCIT (2022) 145 taxmann.com 464 (Hyd-Trib) 8. The Ld. DR, on the other hand, filed detailed written submissions alleging that the impugned receipts are taxable as royalty both under the Act as well as India-USA DTAA which are reproduced below:- Royalty: 5. The service offerings of the assessee also covers AWS Marks that covers trademarks, service marks, service or trade names, logos and other designations of AWS. The Trademark use guidelines provide the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant control over the space allotted to him. Hence the payment made to the assessee for cloud computing products and services is essentially towards the usage of the hardware/infrastructure comprising of server, software, data storage space, networking equipment, databases, etc. as well as it provides tools and environment which supports the entire product development cycle right from build, operate and testing of the web applications and services. The above facts clearly point to usage of equipment by the customer- hence satisfying the definition of royalty as laid down in the IT Act as well the India-US Tax Treaty. 10. Further, in relation to 'equipment', Article 12(3)(a) neither defines use of, or right to use nor does it explicitly confine 'use, or right to use, industrial, commercial or scientific equipment' to cases where physical possession or control of the equipment is obtained. Also, the term 'use' is nowhere limited to the legal concepts of rent or lease, which do require obtaining the power to dispose over an item and to use it exclusively. This was also the notion adopted by AAR in its ruling Dishnet Wireless Limited, AAR no. 863 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the customers, so there was no use of any properties as referred to in the clause (iii) of Explanation 2 and resultantly the considerations paid by the customer would not be called royalty. The word 'use' is not defined under section 9. Under these circumstances, the meaning which is understand in common parlance should be adopted In the present age of modernization where numerous developed applications of science have become part of life and the extent of development of technology is so fast, would really be fair to restrict the meaning of the word use to only physical use The plain construction of the word use refers to the deriving advantage out of it by employing for a set purpose. That apart there was physical contact of the signals of the TV channels with the process in the transponder provided by the assessee It was only when those signals came in contact with the process in the transponder that the desired results were produced. 12. Further, reliance is placed on the decision of AAR in Cargo Community Network (P.) Ltd. [2007] 289 ITR 355 (AAR), wherein the assessee, a non-resident company having its registered office at Singapore, was engaged in busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, for to and fro communication. Therefore, the portal and the server together constitute integrated commercial-cum-scientific equipment and for obtaining Internet access to airlines the use of portal without server is unthinkable. Whereas the portal performs complex functions of providing access to different airlines and translation of messages from English to IMP language, the server provides connectivity and internet access for processing request for booking of cargo and subsequent multicarrier trace and track facility, etc. Therefore, the plea of the applicant that cargo booking agent never uses the server of the applicant for processing or obtaining any data, and that the use of the equipment involves at least some degree of domain or control over the equipment, or suit the business needs of the user, is not tenable. The factual position is that a cargo booking agent/subscriber depending on his business needs, can use the portal at will on the server platform of the applicant, at any time according to his needs for processing his request for booking cargo with various airlines and obtaining benefits of other sophisticated services offered by Ezycargo Para (3) of article 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the present case the assessee has provided a dedicated facility /space in the servers to the customers in India. Further, there have been various judicial precedents wherein the Courts have held that that 'right to use' is the right to access the particular segment of a larger system, to use the capacity of the system powered by the equipments of the whole system. Further, the judgments have provided that the consideration paid for this right to access and the right to use and exploit the system, is royalty. Therefore a right to access and exploit a part of segment of a larger system to use the capacity of the system and the consideration paid therefore clearly falls under Clause (iva) of Explanation 2 to Section 9(1)(vi) of the Income Tax Act and hence 'royalty'. The Courts have upheld that use of dedicated facility would invariably amount to usage of equipment. Hence, the receipts from cloud computing services by the assessee would tantamount for consideration for the use of equipment - being taxable as royalty under the IT Act as well as the Tax Treaty. 13. Without prejudice to the above argument, reliance is also placed on Explanation 5 to section 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revocable, non-transferable permission to use AWS marks, to the customer, only to the limited extent to identify that the said customer is using AWS Services for their computing needs (Refer: Clauses 3, 8, 9 of AWS Trademark Guidelines-Refer pgs 545 to 548] o The customer does not have right to use or commercially exploit the IP. It cannot copy, modify or create or derivate work or reverse engineer any part of the software/platform through which it inputs data and retrieves processed information. They only get an access to the standard and automated services/facility subscribed from the list of various such services available. [Refer: Clause 8.5 of AWS Customer Agreements] o The Ld. DR has failed to pin point how the appellant is sharing information concerning industrial, commercial scientific experience with customers, which is without any basis and not borne from records. There is no technical knowhow transferred in relation to cloud computing services. Para 7 to Para 12 o AWS services do not contemplate of involve the supply of any equipment. o The terms of the Customer Agreement clearly provide that the customers have sole access/sole authority for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIT vs Nokia Network OY: 358 ITR 259 (Del HC) The said principle of law has also been affirmed by the Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited vs CIT: 432 ITR 471 (SC)) In view of the above, it is submitted that the unilateral amendment made by the Legislature vide Finance Act, 2012 in section 9(1)(vi) of the Act with retrospective effect shall have no bearing on the definition of royalties provided under Article 12 of the India-US DTAA In so far as the contention of the Ld. DR on India's position on Article 12 of the OECD Model Convention, it is submitted that mere positions taken with respect to the OECD Commentary do not alter the Tax Treaty previsions, unless it is actually amended by way of bilateral re-negotiation [Refer: Engineering Analysis Centre of Excellence Private Limited vs. CIT: 432 ITR 471 (SC) and DIT vs. New Skies Satellite BV:382 ITR 114 (De). It may also be pertinent to note that there is no bilateral amendment in the India-US DTAA to change the definition of royalty contained in the DTAA after India took such positions qua the OECD Commentary. Para 8 and Para 10 to 12 In so far as the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d decision is distinguishable on facts in so far as the issue for adjudication in the said case was whether payments made under time charter agreement amounted to royalty falling under clause (iva) of Explanation 2 to section 9(1)(vi). In this context, the Court rendered certain observations in context with whether a ship can be regarded as 'equipment as covered section 9(1)(vi) of the Act. The said observations are not at all relevant to the facts in the case of the appellant where there is no tangible equipment, per se, at the disposal of the customer. That apart, the aforesaid decision has also been distinguished by the Madras High Court in the case of CIT vs. Van Oord ACZ Equipment BV: T.C.(A) No. 1202 of 2007 (Mad) In view of the above, it is submitted that the aforesaid cases being on its peculiar facts and rendered prior to the decision of the apex Court in the case of Engineering Analysis (supra) and Delhi High Court in the case of New Skies (supra), is not at all applicable in the case of the appellant and deserves to be ignored from consideration. 10. We have heard the Ld. Representatives of the parties, considered their submissions, various judicial precede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Book) 4.1 Your Content. You are solely responsible for the development. content, operation, maintenance, and use of Your Content. 4.2 Other Security and Backup. You are responsible for properly configuring and using the Service Offerings and taking your own steps to maintain appropriate security, protection and backup of Your Content, which may include use of encryption technology to protect Your Content from unauthorized access and routine archiving Your Content. AWS log-in credentials and private keys generated by the Services are for your internal use only and you may not sell, transfer or sub-license them to any other entity or person, except that you may disclose your private key to your agents and subcontractors performing work on your behalf. Relevant terms on Service Offerings and License: (pages 178/ 540 of Paper Book) 8.4 Service Offerings License. As between you and us, we or our affiliates or licensors own and reserve all right, title, and interest in and to the Service Offerings. We grant you a limited, revocable, non-exclusive, non-sublicensable, non-transferrable license to do the following during the Term: (i) access and use the Services solely in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t (the Agreement ) between Amazon Web Services, Inc. or its affiliates (AWS, we, us or our ) and you or the entity you represent ( you ). These Trademark Guidelines provide you a limited permission to use the AWS Marks (as defined in Section 2 below) The AWS Marks are some our most valuable assets and these Trademark Guidelines are intended to preserve the value attached to the AWS Marks 3. Limited Permission. Provided that you are (a) an AWS developer in good standing with a current and valid account for use of the Services or (b) otherwise authorized by AWS in writing and provided, further, that you comply at all time with the terms of both the Agreement and the Trademark Guidelines, we grant you a limited, non-exclusive, revocable, non-transferable permission, under our intellectual property rights in and to the AWS Marks, and only to the limited extent of our intellectual property rights in and to the AWS Marks, to use the AWS Marks for the following limited purpose, and only for such limited purpose; you may utilize the Logo or the appropriate form(s) of the for or equivalent naming convention or URL naming convention, as set forth in Section 9 below, to: (i) ide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Powered by AWS logo, [and name of any other AWS Marks used in such materials] are trademarks of Amazon.com, Inc. or its affiliates in the United States and/or other countries. 17. Reservation of Rights. Except for the limited permission specified in Section 3 above, nothing in the Agreement or these Trademark Guidelines shall grant or be deemed to grant you any right, licenses, title or interest in or to any AWS Mark or any of our or our affiliates other trademarks, service marks, trade names, logos, product names, services names, legends, other designations, or abbreviations of any of the foregoing. You acknowledge and agree that we and our affiliates retain any and all intellectual property and other proprietary rights. 12.2 The relevant extract of the webpage for AWS Support Services is as under:- Our AWS Technical Support tiers cover development and production issues for AWS products and services, along with other key stack components: AWS Support does not include: Code development Debugging custom software Performing system administration tasks Database query tuning Cross-Account Support 13. On perusal of the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the record. The issue which arises in the present appeal is in respect of charges paid by assessee to AWS The assessee was engaged in sale of recharge pens and did not have the facility available with it of high technology equipments i.e. servers. So, in order to carry on its activity of distributorship of recharge pens, it used servers of Amazon, for which it paid web hosting charges. Before using the services available of Amazon online, it entered into an agreement, under which fees structure was provided. Copy of agreement is placed at pages 3 to 22 of Paper Book. The agreement is called AWS Customer Agreement, which contains the terms and conditions that governs assessee's access to and use of Service Offerings. It was agreement between Amazon Web Services, Inc. and you i.e. assessee. It is provided that agreement takes effect when you click an I Accept button. Clause 1.1 lays down that 'you' (assessee) may access and use the Service Offerings in accordance with agreement. In clause 1.2, it is provided that to access services, 'you' (assessee) must create an AWS account associated with a valid e-mail address. Clause 1.3 provides that if you (assessee) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc. and the assessee before us has filed a chart of summary of services availed. The first such services are on account of service charges for Elastic Compute Cloud. As per clause 1, it is on account of use of service provider Linux; as per clause as per clause 1.3, Windows SQL Server standard and clause 1.4 of Bandwidth. The total service charges for Elastic Compute Cloud are USD 40,253.17. The month-wise details of said payments made by assessee from September, 2009 to March, 2010 reflected that in the first month, charges totaled to USD 4269.02, in October at USD 5599.36 and there on. 21 ' The aspect which needs to be seen is whether the assessee is paying consideration for getting any right in respect of any property. The assessee claims that it does not pay for such right but it only pays for the services. The claim of assessee before us was that it was only using services provided by Amazon and was not concerned with the rights in technology. ie fees paid by assessee was for use of technology and cannot be said to be for use of royalty, which stands proved by the factum of charges being not fixed but variable i.e. it varies with the use of technology driven ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pend upon the extent of usage of those facilities. In fact, these non-resident companies do not give any specific license for use or right to of any of the facilities (which include software) and those facilities are not going to be used for the use in the business of the assessee. The right to use those facilities, as stated earlier, is intertwined with the main objective of placing advertisements in the case of Face book and Mailchimp. In the case of AWS, the payment is made only for using of information technology infrastructure facilities on rental basis. Hence the question of transferring the copy right over those facilities does not arise at all. The agreements extracted above also make it clear that the copyright over those facilitating software is not shared with the assessee. In any case, the main purpose of making payment is to place advertisements only and not to use the facilities provided by the non-resident companies. Thus the facilities provided by the non-resident companies are only enabling facilities, which help a person to place his advertisement contents on the platform of Facebook or to use MailChimp facility effectively. In case of AWS, the payment is in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional aspects of Cloud base service while holding the subscription to cloud base service as royalty. In this context, the co-ordinate bench judgment in M/s. Salesforce.com Singapore Pie v. Dy. DIT Circle2(2) ITA No. 4915/DEL/2016 [AY 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 centre located outside India. The Cloud services merely facilitate the flow of user data from the front end users through internet to the provider's system and back. The Id. AO has fallen in error in interpreting it as licensing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said findings in favor of the assessee these grounds are determined in favour of the assessee. 16. Recently, the Hon ble Delhi High Court in the case of CIT vs. MOL Corporation ITA 99/2023 dated 16.02.2023 dismissed the appeal of the Revenue and confirmed the order of the Delhi Tribunal on the impugned issue by observing as under: 3. The following questions of law are proposed by the appellant/revenue: A.... B.... C. Whether on the facts and circumstances of the case and in law, the LA ITAT erred in holding that the subscription received towards Cloud Services is not taxable at Royalty Income under the provisions of Income Tax Act, 19617 4. As would be evident the first two questions of law [i.e.. A and B] relate to income earned from licensing/sale of software, while the third question [i.e., C) relates to subscription received against cloud services offered by the respondent/assessee. 5. The Tribunal has ruled that neither income earned from licensing/sale of software products nor subscription fee earned for providing cloud services, could be construed as royalty. 6. Mr Sanjay Kumar, senior standing counsel, who appears on behalf of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided by the assessee are standardised automated services that do not provide technical services to its customers nor does it satisfy the make available clause as the customer will not be able to make use of the technical knowledge, skill, process etc. used by the assessee in providing cloud computing services, by itself in its business or for its own benefit, without recourse to the assessee in future. 19.2 Citing the decisions in the case of DIT vs Guy Carpenter Co Ltd. 346 ITR 504 (Del); CIT vs De Beers India Minerals (P) Ltd. 346 ITR 467 (Kar); NQA Quality Systems Registrar vs DCIT 92 TTJ 946 (Del Trib.), the Ld. AR submitted that the courts in these decisions have held that in order for payments in respect of managerial, technical or consultancy services to fall within the meaning of FTS/ FIS, such services should make available to the assessee, such technical knowledge, experience, skill, know-how or processes, which enables the recipient of service to utilize the same in future on its own accord without provisioning such similar services from the service provider. 19.3 He further submitted that in so far as the allegation of the Ld. AO that the services pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He drew our attention to the document placed at page 553 of the Paper Book to show that the assessee is providing basic level service support free of charge. He also drew our attention to page 556 of the Paper Book to show the nature of support services provided by the assessee for which payment is made. Further drawing our attention to page 561 of the Paper Book the Ld. AR submitted that though these are technical services, these are standard automated services which are available to anyone who subscribes to it and uses it. 19.7 In support of its above contention, the Ld. AR relied on the following cases:- 1. DIT vs. Sheraton International Inc. 313 ITR 267 (Del HC) 2. ITO vs. Veeda Clinical Research (P.) Ltd. 35 taxmann.com 577 (Ahmd Trib) 3. Vand Oord Dredging and Marine Contractors vs. ADIT ITA No. 7589/Mum/2012 dated 07.10.2016 20. The Ld. DR, on the other hand, strongly contended that the assessee is providing technical support services to its customers and is also making available technology and thus the impugned receipts are taxable as FTS/FIS under the Act as well as under the India-USA DTAA. He placed his written submissions on record on this issue wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. In rebuttal to the above written submissions of the Ld. DR, the Ld. AR submitted a para-wise brief rejoinder which is reproduced below:- Para 3 and 4 The appellant only provides automated and standard cloud computing services ie., AWS Services for which is receives consideration from the customer. There is no right in any intellectual property (IP) provided to the customers Application program interfaces ( APIs ) is an interface that allows two software programs to communicate with each other. This is provided to enable customer systems to interact with AWS Cloud and hence assist in provision of AWS Services . Various terms used in the definition of Service Offerings, that have been misconstrued by the Ld. DR to different/ host of services are explained below- - AWS Site: as defined in the Customer Agreement, the same is nothing but the AWS website- http://aws.amazon.com Refer page 542 of the PB) - AWS Marks: A customer is authorized to use AWS Marks only for the limited purpose of indicating that it is a customer of the appellant and using AWS services. Such right to use AWS Marks is limited, nonexclusive revocable, non-transferable permission. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et. o Support services in the form of general support, troubleshooting etc., in no way resulted in transfer of technology or knowledge which enabled the customers to develop and provide cloud computing services on their own in future and does not result in FTS/FIS [Refer Van Oord Dredging and Marine Contractors BV vs. ADIT: ITA No. 7589/Mum/2012, Murex Southeast Asia Pvt. Ltd vs. DCIT: ITA No. 2338/Mum/2022. ITO vs. Veeda Clinical Research (P) Ltd: 35 taxmann.com 577 (Ahmd Trib.)] o AWS experts and highly trained engineers would use their expertise and knowledge to assist in troubleshooting errors experienced when customers are using the services and answering queries regarding features of AWS services, however it does not result in transmitting any technical knowledge. etc. to the customer. o It may be pertinent to note that development of code is specifically excluded from the scope of support services @page 561 of PB which provides as follows AWS Support does not include : Code development Debugging custom software Performing system administration tasks Accessing control of customer managed accounts or systems o Thus, it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plant or technical design to such person. (For this purpose, the person acquiring the service shall be deemed to include an agent, nominee, or transferee of such person). This category is narrower than the category described in paragraph 4(a) because it excludes any service that does not make technology available to the person acquiring the service. Generally speaking, technology will be considered made available when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skills. etc.. are made available to the person purchasing the service, within the meaning of paragraph 4(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. 24. The bare reading of Article 12(4)(b) of the India-USA DTAA clearly indicates that payment made towards technical or consultancy services has two limbs meaning thereby payment made towards technical or con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on how to use AWS products, features and services together and providing guidance on optimising AWS services and configuration to meet customer s specific means and thus in no way results in making available any technical knowledge or know how to the customers. 27. Further, the AWS Services provided by the assessee is merely a standard and automated facility commonly available to all, without any customisation. In CIT vs. Kotak Securities 383 ITR 1 (SC) which was further followed in DIT vs. A.P. Moller Maersk A S 392 ITR 186 (SC)], the Hon ble Supreme Court has categorically held that the use of standard facility does not amount to technical services, as technical services denote services catering to the special needs of the person using them and not a facility provided to all. Similarly, in Skycell (Supra), the Hon ble Madras High Court held that mere collection of a fee for use of a standard facility provided to all those willing to pay for it does not amount to the fee having been received for the technical services. 28. As regards the contention of the Ld. DR that the assessee by providing support and troubleshooting etc is providing technical services to its custome ..... X X X X Extracts X X X X X X X X Extracts X X X X
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