In a relief to Microsoft, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) has allowed a TDS claim of Rs. 9 Crores to the Microsoft Regional Sales Pte Ltd.
The Assessee had filed a return of income declaring Nil income on 31.10.2017 claiming TDS of Rs. 9,28,94,483/- and a revised return declaring the same Nil income claiming TDS of Rs. 9,74,72,239/- was filed on 29.03.2019.The AO held the payments made by the users as the consideration for the use or the right to use of such patents, Software and Cloud Infrastructure covering them in the definition of royalty both by clause 9 (1)(vi) Explanation 2 sub-clause (iii) and (v) of the Income Tax Act, 1961 and also Article 12 (3) of the India US, DTAA. Addition was made accordingly.
Relying on the past judicial decisions,ITAT President Mrr. G.S.Pannu, Sh. Anubhav Sharma (Judicial Member) has held thatthepayment 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 sine qua non for taxability under section 9(1)(vi), read with Explanation 2 (iva) thereto as also article 12 of Indo-US DTAA.
“The Chennai Tribunal in the case of ACIT v Vishwak Solutions Pvt. Ltd ITA No. 1935 & 1936/MDS/2010 dated 30.01.2015 has upheld the findings of CIT(A) that “the amount paid to the nonresident 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 ld. Tax Authorities below had fallen in error in considering the subscription received towards Cloud Services to be royalty income,” the Tribunal said.
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