Cloud infrastructure and data recovery receipts were not taxable where no technical know-how was made available to the recipient.

Receipts from cloud infrastructure, colocation, mainframe and data recovery services were examined under section 9(1)(vii) read with section 9(2) and the India-USA DTAA. The services were rendered wholly from facilities in the USA, and the record did not show that any technical knowledge, experience, skill, knowhow or process was made available to the recipient. On that basis, the arrangement was treated as provision of infrastructure and processing facilities rather than transfer of technology, so the receipts were not taxable in India as fees for technical services or included services.

---

---

Issues: Whether the receipts from provision of cloud infrastructure, colocation, mainframe and data recovery services were taxable in India as fees for technical services or fees for included services when the services were rendered from facilities in the USA and the recipient could not independently use any technical knowledge, experience, skill, knowhow or processes.

Analysis: The dispute turned on the application of section 9(1)(vii) of the Income-tax Act, 1961, read with section 9(2) and the India-USA DTAA under section 90(2). The services were found to have been rendered outside India, with the relevant infrastructure and data processing facilities located in the USA. The treaty provision in Article 12(4)(b) required the services to make available technical knowledge, experience, skill, knowhow or processes to the recipient. On the facts recorded, no material showed any transfer of such enablement to the recipient, and the services were characterised as mere facility provision rather than transfer of technology.

Conclusion: The receipts were not taxable in India and the Revenue's challenge failed.

Final Conclusion: The common reasoning adopted earlier for the immediately preceding assessment year was followed, and the CIT(A)'s relief was affirmed.

Ratio Decidendi: Where services are rendered wholly outside India and do not make available technical knowledge, experience, skill, knowhow or processes to the recipient, the receipts are not taxable in India under the domestic deeming provision or the treaty article.

---