TaxTMI 
TaxTMI 
2023 (8) TMI 331
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.... Assessing Officer ("AO") dated 27.01.2023, passed under section 144C read with section 147 of the Income-tax Act, 1961 (the Act), is without jurisdiction, illegal, bad in law, unsustainable and liable to be quashed 1:1 That on the facts and circumstances of the case and in law, the proceedings under section 147 of the Act ("Reassessment Proceedings) having been initiated on the basis of incorrect facts and without there being reason to believe that income of the appellant had escaped assessment, 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 ci....
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.... AO/DRP erred in concluding that the appellant's receipts from customers in India result in 'right to use of equipment' as specified under clause (iva) of Explanation 2 to section 9(1)(vi) of the Act, read with Explanation 5 to section 9(1)(vi) of the Act 3.3 That on the facts and circumstances of the case and in law, the AO/ DRP failed to appreciate that the payments do not qualify as royalty under Article 12 of the Tax Treaty since the customer does not have control or possession on any hardware/ infrastructure comprising 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))) ....
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....having been initiated on the basis of incorrect facts and without there being reason to believe that income of the appellant had escaped assessment, 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 circumstance....
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.... appreciate that the payments do not qualify as royalty under Article 12 of the Tax Treaty since the customer does not have control or possession on any hardware/ infrastructure comprising 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 serv....
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....the India-USA Double Taxation Avoidance Agreement ("India-USA DTAA"). M/s. Snapdeal Private Limited had made foreign remittances towards "Hosting and Bandwidth Charges" and no tax has been withheld on this remittance which clearly falls under the purview of royalty as per the Act as well as India-USA DTAA. However, neither TDS has been deducted by the remitter nor the assessee filed ITR for the relevant AYs. Accordingly, notice under section 148 of the Act was issued to the assessee on 31.03.2021 in response to which the assessee filed its return of income for both the AYs under consideration on 28.04.2021 declaring income of Rs. Nil. Thereafter statutory notices were issued to the assessee 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 c....
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....der Act has not been pressed. In view of this, the only issue that needs to be adjudicated is whether the "cloud service fee" received by the assessee from customers in India is liable to tax in India being in the nature of royalty and FTS/FIS under the provisions of the Act and the India-USA DTAA as well. 6.2 It is an undisputed fact that the assessee is a tax resident of USA and hence it has opted to be governed by the provisions of India-USA DTAA, being more beneficial to it in terms of section 90(2) of the Act. Accordingly, we have examined and considered the taxability of the impugned receipts in the hands of the assessee under the provisions of India-USA DTAA. 7. At the outset, the Ld. 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 t....
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....uld qualify as 'equipment royalty' under the Act and the India-USA DTAA. 7.3 The Ld. AR then referred to the relevant clauses of the sample agreement entered into by the assessee with its customers ("Customer Agreement") which is on record and submitted that the terms of the said Customer Agreement clearly shows that the assessee is primarily providing automated cloud computing services which are in the nature of standard and automated computing services and that none of the above findings/allegations of the Ld. AO stands correct in view of the following factual reasoning: - a. The customers do not receive any exclusive or commercial right to use the copyrights or other intellectual property involved in AWS 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....
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....technical support provided/ included in AWS Services does not include code development, debugging, performing administrative tasks etc. [AWS Support Guidelines, pages 557 to 567 of the Paper Book] 7.4 As regards the issue of taxability of the impugned receipts by the assessee from rendering cloud services as royalty, the Ld. AR submitted that the impugned issue is covered in favour of the assessee by the decision of the Delhi Tribunal in the case of Microsoft Regional Sales Pte. Ltd./MOL Corporation which has been affirmed by the Hon'ble Delhi High Court in the case of CIT vs. MOL Corporation 99/2023 dated 16.02.2023 (Del). 7.5 He further submitted that the assessee's case is also squarely covered by the decision of the various benches of the Tribunal 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....
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....itutes an Equipment Royalty. The Hon'ble Madras High Court in Poompuhar Shipping Corporation Ltd. v ITO [2013] 38 taxmann.com 150 (Madras) highlighted the need for construing 'equipment' widely, so as to embrace every article employed by the employer for the purposes of his business. 'Equipment', in whatever name called either as an apparatus or as plant or machinery, so long as they are employed for the purposes of one's income. 9. The agreement with the customers explicitly lays down that the customer /user has sole access /sole authority to use the account, Further, the assessee would not bear any responsibility in case of any unauthorized access. Furthermore, third party has a free hand to display its content to the users, signifying that the user has a significant 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 buil....
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.... to use" as used throughout Article 12(3). After all, the physical possession and control of the other items covered by the provisions such as copyrights, patents, trademarks, designs or models plans, secret formulas or processes, is not key to qualifying payments for their use a royalties. In fact, the concept of physical possession and control is alien to many such items. 11. In this regard, reliance is placed on the decision of Delhi Tribunal in Asia Satellite Communication Co. Ltd. vs DCIT [2003] 85 ITD 478 (Delhi), wherein the Tribunal held follows: "So far as applicability of section 9(1)(vi) was concerned, a view was canvassed by the assessee that the term 'use', as contained in said provisions should be confined to physical user and as in the instant case nothing was physically 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 modern....
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....ophisticated platform for a complete range of services that enable the clients (forwarders) to manage their time-critical transactions with major carriers. It offers global online-access convenience to a comprehensive range of functions and complete management solution for cargo booking and subsequent multi-carrier track and trace facility. The portal designed by the applicant is hosted on its server in Singapore with Internet accessibility on one side to different airways. The portal which is a complex, commercial, Internet site provides a gateway for processing request for cargo booking to different airlines, and obtaining their acceptance. The use of portal is not possible without the use of server that provides internet access to the cargo agents/subscribers, on the one hand, and to different airlines, on the other 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 IM....
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....#39;Fees for technical services' as used in article 12(4)(a). In view of this position, the payments being made by the agents/subscribers (residents) to the applicant (a non-resident) are chargeable to tax in India, under article 12 as also under section 9. [Paras 8 and 9] Inasmuch as it is concluded that the payments made by the subscribers to the applicant are in the nature of 'Royalties and fees for technical services' and taxable under article 12, the said payments cannot, therefore, be treated as business income. [Para 10] In the light of the foregoing discussion, it is ruled that the payments made by the Indian subscriber to the applicant at Singapore, for providing a password to access and use the portal hosted from Singapore, are taxable in India and subject to deduction of tax at source. [Para 14]" 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 ....
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....s position on the OECD Model has always been clear that India does not agree with the definition of royalty as provided in the OECD Model Convention. Therefore, the definition of 'royalty' as provided in the Act clearly demonstrates India's position on royalty and has to be read into the treaty as well." 9. In rebuttal to the specific contentions raised in the written submissions of the Ld. DR, the Ld. AR submitted a para-wise brief rejoinder which is reproduced below:- "Para 5 and 6 The appellant has filed detailed submissions/rebuttal on this aspect at pages 05 to 06 of the broad proposition dated 16.05 2023, which is not reiterated here for the sake of brevity. However, the specific conventions of the Ld. DR are rebutted as under: o Under the Trademark Guidelines, the appellant has granted a limited, non-exclusive, 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 exp....
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....ent in so far as no tangible equipment has been adverted to or referred in the Customer Agreements which the appellant can be associated with Customers are merely able to access a standard off the shelf software. They neither have any right or domain over any hardware nor any copyright in any software at any time. Para 13 and Para 14 In this regard, it is respectfully submitted that retrospective amendment made in section 9(1)(vi) of the Act by way of insertion of Explanation 5 thereto cannot be read into the Tax Treaty. The jurisdictional Delhi High Court in the case of DIT vs New Skies Satellite BV: 382 ITR 114 (Del), held in context with retrospective amendment in section 91Xvi) of the Act that any amendment in the Act would not override the provisions of a Tax Treaty unless respective changes are also made in such Tax Treaty. (Also refer. DIT vs Ericsson AB 343 ITR 470 (Del HC) & 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 ame....
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.... for provision of services and there was no right to use of the appellant's equipment by any of its customers. Re: Dishnet Wireless Limited: AAR No 863 of 2010 @ para 10 of submission) This is also a decision of the AAR, which as submitted above, is not at all binding on the appellant. That apart, the said decision is distinguishable on facts in so far as in the said case, payment made to UAE company for right to use a high-capacity submarine telecommunication fiber-optic cable system was held to constitute royalty taxable in India. Further, the binding decision of the Delhi High Court in the case of Asia Satellite (supra) has not at all been considered in the said case. Further, the said decision is no longer good law in view of the ruling of the Delhi High Court in the case of New Skies (supra). Re: Poompuhar Shipping Corporation Ltd, vs. ITO: 38 baxmann.com 150 (Mad) @ para 8 of submission) The aforesaid 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 th....
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....mated services which are all publically available online to anyone. These services are all standardised and there is no customisation done for any particular customer. We have perused the sample Customer Agreement and the relevant extracts of the Customer Agreement (pages 173 - 185 and 535- 547 of the Paper Book) which are reproduced below:- Relevant excerpts from Clause-1 of the Customer Agreement (page 173/535 of Paper Book) 1.3 Support to you. If you would like support for the Services other than the support we generally provide to other users of the Service without charge, you may enroll for customer support in accordance with the terms of the AWS Support Guidelines. "AWS Support Guidelines" means the guidelines currently available at http: co\ s. amazon.com/premiumsupport/guidelines, as they may be updated by us from time to time. ( a pgs. 183/545 of PB) Relevant excerpts from Clause 4 of the Customer Agreement ( pages 174/ 536 of Paper 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 prope....
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....r exceeding usage limits or quotas, or (d) resell or sublicense the Service Offerings. All licenses granted to you in this Agreement are conditional on your continued compliance this Agreement, and will immediately and automatically terminate if you do not comply with any term or condition of this Agreement. During and after the Term, you will not assert, nor will you authorize, assist, or encourage any third party to assert, against us or any of our affiliates, customers, vendors, business partners, or licensors, any patent infringement or other intellectual property infringement claim regarding any Service Offerings you have used. You may only use the AWS Marks in accordance with the Trademark Use Guidelines. 12.1 The relevant terms on AWS Trademark Guidelines is reproduced below: (pages 548-556 of Paper Book, relevant at 548-550 and 553) "1. Introduction. These Amazon Web Services ("AWS") Trademark Guidelines (the "Trademark Guidelines") form an integral part of the AWS Customer Agreement (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....
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....nt of the Logo b. Color. The Logo may be represented in the following formats: FULL COLOR (1) light backgrounds-squid ink type with Amazon Orange smile; (ii) dark backgrounds-white type with Amazon Orange smile; or for single-color applications; SINGLE COLOR (i) light backgrounds Squid Ink type with Squid Ink smile (preferred): GRAYSCALE (iv) light backgrounds-Black type with Black smile; (v) dark backgrounds-white type with white smile. No alternate color representation or combination will be acceptable. 9. Permissible Uses of the AWS Marks. Except for the Logo (with respect to which the formatting requirements are set forth above), you may only use the AWS Marks: (1) in a relational phrase using "for" or one of the limited number of equivalent naming conventions, as set forth below; or (ii) to the right of the top level domain name in a URL in the format set forth below... 13. Attribution. You must include the following statement in any materials that include the AWS Marks: "Amazon Web Services, the "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 an....
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....ces does not include code development, debugging, forming administrative task etc. 14. Now, coming to various judicial precedents relied upon by the Ld. AR, we observe that the impugned issue is squarely covered by decision of the various benches of the Tribunal wherein the Tribunal considered the identical terms of the standard customer agreement that the assessee enters into with its customers (terms of agreement specially referred to and analysed in the orders of the Tribunal) and held that the payments made to the assessee are not in the nature of royalty. 14.1 In the case of EPRSS Prepaid Recharge Services India (P.) Ltd v. ITO [2018] 100 taxmann.com 52 (Pune - Trib.), the Pune Tribunal, relying on the order of the Hon'ble Madras High Court in the case of Skycell Communications Ltd. v. DCIT 251 ITR 53 held that payments made to the assessee for cloud computing services do not qualify as royalty under the India-USA DTAA. The relevant findings and observations of the Tribunal are reproduced below: "11. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is in respect of charges paid by assessee to AWS The assess....
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....nce with this agreement; and (ii) copy and use the AWS Content solely in connection with your permitted use of the Services. " "19. Now, another issue which needs to be seen is whether charges paid to Amazon for various services provided by it are in the nature of royalty, if any, or not. The assessee has placed on record the copy of agreement with Amazon, which we have referred in the paras hereinabove. He has also placed on record the copies of bills raised by Amazon online. The perusal of details filed by assessee of monthly charges paid, it transpires that the same are fluctuating from month to month and there is no regular payment being made to Amazon. In case of provision of royalty to a person, then as seen from the terms and conditions of various agreements, there is fixation of price to be paid and there may be variation on account of use of certain services but first there has to be basic price fixed. However, in the facts of Present case looking at the documentation, the billing is segregated into various services i.e. AWS services, storage services, etc. and the assessee before us has filed a chart of summary of services availed. The first such service....
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....ct, cannot make the assessee liable to deduct tax at source. In other words, the assessee is not liable to deduct withholding tax and such non deduction of withholding tax does not render the assessee in default and consequently, no disallowance of amount paid as web hosting charges is to be made in the hands of assessee for such non deduction of withholding tax and hence, provisions of section 40(a)(i) of the Act are not attracted. The grounds of appeal raised by assessee are thus, allowed." 14.2 In the case of Urban Ladder Home Decor Solutions Pvt. Ltd vs ACIT (IT) TS-773-ITAT- 2021(Bang), the Bangalore Bench of the Tribunal, in appeal against proceedings under section 201 of the Act, analyzed payments made by the assessee therein, to three major IT companies, which included Amazon Web Services, Inc., assessee in the present case, the Tribunal while referring to the decision in the case of EPRSS (supra) held as under: "21....The payment made to Amazon Web Services (A WSJ is only for using the information technology facilities provided by it, that too the billing would depend upon the extent of usage of those facilities. In fact, these non-resident companies do not giv....
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....ny right of reproduction. The services, in our opinion, merely facilitate the flow of user data from the front run user through internet to the providers system and back. Therefore, the subscription fee in our opinion is merely a consideration for the online access of the cloud computing services for process and storage of data or run the applications but cannot be considered as Royalty within the meaning of section 9(l)(vi) of the Act." 15. It is seen that the issue of taxability of receipts from cloud services is also covered by the order of the Delhi Tribunal in the case of Microsoft Regional Sales Pte. Ltd. vs. ACIT (2022) 145 taxmann.com 29 (Del) wherein the Hon'ble Tribunal recorded its finding in para 6-7 and held as under:- "6-7 Next coming to Ground no. I read with Ground no. 3 with its sub grounds, it can be observed that in assessee's own case for AY 2012-13, vide ITA no. 1553/Del/2016 the issue has culminated in favour of assessee by following relevant findings: "7 It was submitted for the assessee that Ld. Tax Authorities below have failed to appreciate the functional aspects of Cloud base service while holding the subscription to cloud base se....
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.... are only using the services provided by the assessee 7.3 The Mumbai Tribunal in the case of TT v. Savvis Communication Corporation [2016] 69 laxmann.com 106.(Mumbai Trib.) has held that payment received for providing web hosting services though involving use of certain scientific equipment cannot be treated as 'consideration for use of, or right to use of, scientific equipment which is a wine qua non for taxability under section 9(1)(vi), read with Explanation 2 (ive) thereto as also article 12 of Indo-US DTAA. The Chennai Tribunal in the case of ACIT vs. Vishwak Solutions Pvt. Ltd. ITA Nos. 1935 & 1936/MDS/2010 dated 30-1-2015 has upheld the findings of CIT(A) that "the amount paid to the non-resident is towards hiring of storage space." The aforesaid squarely covers the controversy in regard to the present assessee also. In the light aforesaid, the Bench is of considered view that the Id. Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty income." No distinction on facts or law could be pointed by Ld. DR. Therefore, following aforesaid findings in favor of the assessee these grounds are de....
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....the above factual matrix and legal propositions and in view of the various judicial precedents cited above, 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. Accordingly, ground No. 3 along with its sub-grounds 3.1 to 3.4, ground No. 4 and ground No. 5 along with its sub-ground 5.1 r.w ground No. 2 are allowed. 19. Coming to the other allegation of the Ld. AO that the impugned receipts are taxable as FIS under the provisions of Article 12(4)(b) of the India-USA DTAA, the Ld. 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. In this regard he also invited our attention to the Protocol contained in the India-US DTAA which provides useful guidance with respect to the clauses contained in the DTAA, including the "make available" clause. 19.1 The Ld. AR submitted that the AWS Services provided by the assess....
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....Ld. AO has alleged that the assessee by providing support and troubleshooting etc. is providing technical services to its customers. He submitted that such services provided by the assessee are general support services not involving any transfer of technology or knowledge thereby resulting in FTS/FIS. The support services were provided to the customers to enable them to effectively access the AWS services offered by the assessee in an appropriate and efficient manner. These support services in no way resulted in transfer of technology which enabled the customers to develop and provide cloud computing services on their own in future. Thus, in the absence of any transfer of technology, the incidental support by way of troubleshooting, answering queries etc. provided by the assessee to its customers in India cannot be considered to be in the nature of technical services. 19.6 The Ld. AR referred to the copy of the webpage for AWS support at pages 553 to 563 of the Paper Book and submitted that these webpages show how to use services meaning thereby how to use services is the support that is being provided by the assessee and no technical service is imparted. He drew our attention t....
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....lications and solutions that the customers develop and build. The assessee provides with highly trained engineers, large network of subject matter experts that are well versed in DevOps technologies, automation, infrastructure orchestration, configuration management and continuous integration. These engineers stay with Support cases from the start all the way through to resolution. Under support plans, the assessee provides for various types of technical supports such as developer support, business support, enterprise support. The Customers testimonials clearly show that support is provided in development of content and architectural guidance on development of content. The Scope of service mentioned also shows support in development and production of content. Thus, from the above, it is abundantly clear that assessee is providing technical support to its customers and also making available technology and thus the amount received is taxable as Fee for Technical Services under the Indian Income Tax Act and as Fee for Included Services under Article 12 of the India USA DTAA. In view of the same, the receipts of the assessee are considered to be FTS, both under the Act as well....
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....ing a customer on how to use AWS Services. The provision of AWS content is purely incidental to the provision of AWS services and does not involve the transfer of technical plans or designs to the customers. No technology/underlying code or IP is 'made available' to the customers. o Every customer of AWS Services is offered a free 'Basic Support (Refer clause 1.3 of the Customer Agreement). Other support plans viz. developer support, business support and enterprise support are merely enhanced AWS Support tiers available as an option to the customer. These enhanced support tiers provide customers a shorter response time to their queries. All tiers of support services are provided to customers to enable them to effectively use the standard services offered by the appellant in an appropriate and efficient manner. Support is primarily answering queries of customers and/or troubleshooting in order to utilize AWS Services subscribed by them to the fullest extent. o These support services in no way "make available" any technical knowledge, skills, knowhow, etc., in relation to cloud computing, in as much as the customer is not able to recreate or provide the ....
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.... it is submitted that the support services provided by the appellant cannot be regarded as FTS/FIS under the Act or the India-US DTAA" 22. We have carefully considered the rival submissions of both the parties and perused the material on record. Article 12(4)(b) of the India-USA DTAA reads as under:- "Article 12 4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience. skill, know-how, or processes. or consist of the development and transfer of a technical plan or technical design. " 23. The term 'make available' is not defined under the India-USA DTAA. The relevant extract of the Protocol contained in the India-USA DTAA providing guidance on the 'make available' clause is reproduced below:- "Paragraph 4(b....
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....Article 12(4) of the India-USA DTAA. 26. On the other hand, the Ld. AR has filed detailed rejoinder to the above allegations of the revenue inter alia submitting that the AWS content, documentation etc. are primarily akin to 'user manuals' to guide customers how to use AWS services which is purely incidental to the provision of AWS services and does not involve transfer of technology/technical plans/designs to the customers. Similarly, support services offered by the assessee do not enable the customer to recreate or provide the service itself and thus these services in no way make available any technical knowledge, skills, know-how etc. in relation to cloud computing. These services are in the form of general support, trouble shooting etc. which in no way resulted in transfer of technology or knowledge which enabled the customer to develop and provide cloud computing services on their own in future. 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 k....