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TMI Blog2023 (9) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the law. It would, prima facie, follow that if there is already a determination in the payee s own case; the AO would normally give due consideration to the same, in considering the application under Section 195(2) - in this case it appears that the AO has proceeded on the exercise of a de novo assessment in proceedings, completely disregarding the orders of the ITAT arising from the assessment proceedings relating to AWS USA s. We also find merit in the Revenue s contention that AWS India had not provided AWS USA s financial information for the preceding years, which may be essential in determining the application under Section 195(2) of the Act. We are unable to appreciate AWS India s response that the entire information related to AWS USA is available on the portal of the Department and thus could be retrieved by the AO. For the purpose of Section 195(2) of the Act, the applicant is required to provide the necessary information. It would not be open for the applicant to refrain from providing the same on the ground that AO may be able to access the same otherwise. Revenue has already issued notices u/s 148 of the Act for re-opening the assessments of AWS USA. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive reseller of web services on a principal to principal basis. In terms of the said Reseller Agreement, AWS India claims that it is authorized to resell web services to its customers in India. It claims that it independently enters into contracts in its own name with Indian customers and raises invoices directly on such customers. It also receives funds from its customers directly. AWS India makes payments to AWS USA for the purchase of web services, for the purpose of reselling the same to its customers. According to AWS India, such payments are not chargeable to tax in the hands of AWS USA. In its application, AWS India claimed that AWS USA s receipts are chargeable to the Equalisation Levy under Section 165A of the Finance Act, 2016 which was paid. It claimed that the payments made by it are not chargeable to income tax under the Act either as fees for technical services (FTS) or royalty under Section 9 of the Act or under the Double Taxation Avoidance Agreement between India and the United States of America (hereafter Indo-US DTAA ). 5. In view of the aforesaid claims, AWS India sought a certificate from the AO for nil withholding of tax in respect of the reseller fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y zones, data centres located in India, which constitute its PE in India; the AO held that the payments made by AWS India to AWS USA were attributable to its PE in India. 12. The AO then ascertained the information as available in the public domain, in particular, the consolidated financial statement of the holding company (Amazon.com) for the financial year 2021 as available on the internet. He found that the income of Amazon Web Services (AWS) was around 30% of the net sales. He proceeded on the assumption that the financial figures of AWS as reflected in the consolidated accounts related to AWS USA. 13. The AO also observed that a necessary adjustment was required to be carried out, as AWS USA had received several concessions from the State Government which would have a positive impact on its profit margins. He estimated the profit margin to be 10% higher than that of AWS as disclosed by the financial accounts of AWS USA. Accordingly, he estimated 40 % of the reseller fess paid by AWS India to AWS USA was the profit margin of AWS USA. 14. Accordingly, the AO directed AWS India to withhold 16% of the remittance on account of reseller fee paid to AWS USA for the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vicing clients in India through its PE, but also servicing clients overseas from its PE in India. He contended that sufficient material was now available with the Department to hold that AWS USA had PE in India. 20. Next, he contended that although AWS India was claiming to be a mere reseller, it had registered itself with the Ministry of Information and Technology as a cloud service provider. Thus, AWS India was an extension of AWS USA in India. He also submitted that the petitioners have not provided the necessary information as demanded and, thus, were precluded from claiming the certificate of withholding tax at a nil rate. 21. He also submitted that the decision in the assessment proceedings relating to AWS USA cannot be relied upon as the Department had already initiated proceedings for reopening of the said assessments and the same are pending. 22. We have heard Mr. Kaka, learned senior counsel and Mr. Venkatraman at some length. 23. It is apparent from the plain reading of the impugned order that the AO had decided AWS India s application based on information in the public domain and on the basis of certain assumptions which are ex-facie erroneous. The AO procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings under Section 195(2) of the Act are only for the purpose of determining the proportion of income chargeable to tax for the limited purpose of determining the withholding of tax. The determination under Section 195(2) of the Act does not constrain the Revenue in any manner from correctly assessing the payee s income chargeable to tax in accordance with the law. It would, prima facie, follow that if there is already a determination in the payee s own case; the AO would normally give due consideration to the same, in considering the application under Section 195(2) of the Act. However, in this case it appears that the AO has proceeded on the exercise of a de novo assessment in proceedings, completely disregarding the orders of the ITAT arising from the assessment proceedings relating to AWS USA s. 28. Having stated the above, we also find merit in the Revenue s contention that AWS India had not provided AWS USA s financial information for the preceding years, which may be essential in determining the application under Section 195(2) of the Act. We are unable to appreciate AWS India s response that the entire information related to AWS USA is available on the portal of the Dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. 35. In view of the above, the impugned order is modified to the aforesaid extent. AWS India shall withhold 8% of payments, payable or paid to AWS USA, for the period in question and deposit the same with the Revenue authorities. 36. AWS India had filed an application in September, 2022, which was disposed of by the impugned order. The learned counsel for the petitioners states that the present order be confined to the period from 01.11.2022 to 31.03.2023 as the payments for the period prior to that have already been made. 37. In view of the above, we consider it apposite to modify the impugned order to be applicable only for the limited period from 01.11.2022 to 31.03.2023. However, it is clarified that the Revenue is not precluded from taking any measures for the period prior to 01.11.2022 on the basis that neither any application under Section 195(2) of the Act was filed for the aforesaid period nor was it considered by the AO. 38. We further direct that the withheld tax in terms of the impugned order as modified in the aforesaid terms be deposited with the concerned tax authorities within a period of one week from today. In the event that the amount is so deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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