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The Delhi High Court has reportedly ruled that payments received by Amazon Web Services (AWS) from Indian entities for cloud computing services are not taxable as royalty or fees for technical services (FTS).
A Bar and Bench report said that the Indian tax authorities argued that such payments should be taxed as either “royalty” or “fees for technical services” under both the Income Tax Act, 1961, and the India–US Double Taxation Avoidance Agreement (DTAA)
In response, AWS contended that its services were standardised, automated, and delivered through pre-set contracts, without any transfer of technical know-how, intellectual property (IP), or rights to use its infrastructure.
AWS emphasised that customers merely received access to cloud services and not the underlying technology or assets.
The court agreed, observing that customers only obtain a non-exclusive, non-transferable license to access these services. They do not receive any right, title, or IP that would enable them to commercially exploit or monetise AWS’s infrastructure or software.
It further noted that such payments do not qualify as “royalty” under Article 12(3) of the India-US DTAA, as there is no right to use, or commercial exploitation of, AWS’s IP or infrastructure by customers.
“The issue involved in the present appeal is also covered in favour of the assessee… We find no merit in the contention that the amount received by the assessee for providing services would be taxable as equipment royalty,” the Delhi HC said, citing Supreme Court and other High Court rulings.
The verdict upholds an earlier decision by the Income Tax Appellate Tribunal (ITAT), which had also ruled in favour of AWS. The development marks a significant milestone in the ongoing discourse around the taxation of payments made by Indian companies to foreign cloud service providers.
(The story will be updated soon.)
The post Cloud Payments Made To AWS Are Not Taxable As Royalty Or Technical Fees: Delhi HC appeared first on Inc42 Media.
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