Supreme Court to decide Taxability of Amazon’s Cloud Computing Services as Royalty, Hears Revenue's Plea against Delhi HC Order [Read Order]

The Supreme Court has taken up the matter of Amazon Web Services Inc. (AWS) which involves the issue of taxability of cloud computing services as "royalty" in India.

The bench of Justice J.B. Pardiwala and Justice K V Viswanthan is currently hearing a Special Leave Petition (SLP) filed by the Income Tax Department against the Amazon Web Services Inc., challenging a May 2025 judgment of the Delhi High Court that had ruled in favour of AWS.

During a recent hearing on April 24, 2026, the bench noted the initial submissions from both sides and listed the matter for further hearing.

The issue starts from the assessment proceedings where the tax authorities sought to categorize the payments made by Indian entities to AWS as taxable royalty or Fees for Technical Services (FTS) under the Income-tax Act, 1961, and the India-US Double Taxation Avoidance Agreement (DTAA).

The Assessing Officer took the stance that by providing access to huge cloud infrastructure including servers, storage, databases, and networking equipment AWS was essentially granting the "use or right to use equipment."

According to the department, this squarely falls within the legal definition of royalty. Furthermore, the Revenue contended that the technical support and digital tools provided by AWS amounted to "making available" technical knowledge to Indian clients, triggering the FTS provisions.

While defending its business model, AWS has argued that it merely offers standardized, highly automated cloud computing services accessible through a web portal.

Before the High court, the tech giant submitted that it does not transfer any intellectual property rights, technical know-how, or physical control over its infrastructure to its customers.

According to AWS, the subscribers are only granted a limited, non-exclusive, and non-transferable right to access the cloud services. Also, the customers do not acquire any rights to commercially exploit the proprietary technology or physical hardware belonging to AWS.

Both the Income Tax Appellate Tribunal (ITAT) and the Delhi High Court found merit in AWS's arguments. The High Court, while dismissing the Revenue's claims, stated that cloud computing services merely provide access to digital infrastructure, which cannot be equated with the transfer of underlying rights in equipment or intellectual property.

Since the Indian customers neither physically control the said hardware nor receive any proprietary rights, the payments cannot be classified as royalty.

The High Court also rejected the FTS claim of the income tax department, observing that no technical knowledge is "made available" to the users, which is a prerequisite for taxing FTS under the India-US DTAA.

In its judgment, the Delhi High Court relied on the decision of the Supreme Court’s in the Engineering Analysis Centre of Excellence case.

Before the Supreme Court, AWS’s counsel, Adv. Porus Kaka, Senior Advocate submitted that “the issue is squarely covered by the decision of this Court in “Microsoft, Gracemac Corporation as well as Salesforce.com” respectively.”

Adv. Porus also sought notice of the bench that the revenue also came up before the apex court against the Delhi High Court order in the matter of MOL Corporation and the SLP was dismissed.

After hearing the submissions, the Supreme Court bench has posted this matter 4th May 2026.

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