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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 ..... AWS USA is a company, which has its principal place of business in the United States of America and is, inter alia, engaged in the business of providing web services to its customers and resellers world-wide, including AWS India. 3. AWS USA is a tax resident of the United States of America and holds a tax residency certificate (TRC). 4. AWS India claims that in terms of the Reseller Agreement between AWS India and AWS USA, it was appointed as a non-exclusive 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zones constituted ASW USA's fixed place of business through which its core business is carried out. 10. Accordingly, the AO held that the reseller fees paid by AWS India to AWS USA would fall outside the scope of Equalisation Levy and would be chargeable as business income under the provisions of the Act. 11. In view of the conclusion that AWS USA provides cloud computing services through infrastructure in the form of regions, availability 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed ASG appearing for the Revenue has stoutly contested the contentions advanced on behalf of the petitioners (AWS India and AWS USA). He submitted that AWS India had withheld vital information from the Department, including the financial statement of AWS USA for the previous financial years, which would be essential for determining the proportion of income chargeable to tax. He contended that AWS USA was not only servicing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire amount payable by AWS India to AWS USA can be considered as revenue attributable to AWS's PE (if any) in India and that no part of it is attributable towards entities overseas. The exercise conducted by the AO of determining the revenue attributable to a PE, which also requires allowance for deduction of material expenses to be made is clearly flawed. 27. It is also settled law that the proceedings 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 relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uggestion in view of the interim order dated 14.09.2022 passed by the Coordinate Bench of this Court in WP(C) 12045 of 2022 captioned Google Asia Pacific Pte Ltd. v. Commissioner of Income Tax & Ors. 34. The learned counsel for the parties have expressed their willingness to accept the suggestion albeit without prejudice to the rights in the assessment proceedings relating to AWS USA. 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 ..... 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