TaxTMI 
TaxTMI 
TaxTMI 
2022 (8) TMI 1418
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....appeal taken by the assessee read as under :- "1. That on the facts and in the circumstances of the case and in law, the Assistant 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 175,50,75,667 as against the returned income of INR Nil. 2. Taxability of revenue from sale of software 2.1 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 and received from sale of software by Microsoft Regional Sales Pte. Ltd. ('MRS') amounting to INR 44,17,46,478 is taxable in India as "Royalty" in the hands of the Appellant without appreciating tha....
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.... in appellant's hands under the Act! India-USA DT AA as the same was earned outside of India. 3. Taxability of consideration from cloud services 3.1 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 1,3.1,33,29,189 is taxable as "Royalty" in India in the hands of the Appellant without appreciating that the same is not in the nature of "Royalty" under the Act or India - USA DTAA. 3.2 Ld. DRP and Ld. AO erred in failing to appreciate that receipt of INR 1,31,33,29,189 is not taxable as 'Royalty' or 'otherwise' in the hands of Appellant, under the Act or India - USA DTAA. Other Ground....
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....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 read as under :- "13. Following the directions of the Hon'ble DRP, the total income of the assessee is assessed at Rs.175,50,75,667/- (44,17,46,478/- + 1,31,33,29,189/-) on substantive basis as royalty income taxable @ 10% as per Income Tax Act, 1961 along with applicable surcharge and cess. Charge interest u/s 234A, 234B, 234C &....
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....s 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 assessment in the hands of present assessee was made on protective basis while the substantive assessment was in the hands of MOLC. The assessment in the hands of Gracemac which stands amalgamated with MOLC stands set aside in regard to assessment years 2005-06, 2006-07 and 2007-08 by the co-ordinate Bench's judgment dated 16.11.2020 which have been further upheld by Hon'ble Delhi High Court by judgment dated 07.03.2022. The same were based on the princi....
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....e 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 ld. AO has fallen in error in interpreting it as licensing of the right to use the above Cloud Computing Infrastructure and Software (para 10.5 of the Ld. AO order). Thus the subscription fee is not royalty but merely a consideration for online access of the cloud computing services for process a....