This document reviews the Income Tax Appellate Tribunal’s resolution of ITA No. 1913/DEL/2022, concerning the classification of cloud services revenue as ‘Royalty’ by Microsoft Regional Sales Pte. Ltd for the assessment year 2019-20, challenging the orders by the assessing officer under sections 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961.
The case primarily addressed the revenue’s classification from cloud services, which the appellant, represented by Nageshwar Rao, argued should not be considered as ‘Royalty’ under either the domestic law or the bilateral tax treaties with the USA and Singapore. The Dispute Resolution Panel and the assessing officer had previously determined this revenue to be taxable as royalty, a position challenged by the appellant.
Accountant Member Dr. B. R. R. Kumar provided a detailed account of the proceedings and the legal reasoning behind the Tribunal’s decision. The Tribunal highlighted the problematic aspects of the assessing officer’s approach, particularly the inconsistency in tax treatment between different assessment years and entities, leading to a complex and legally unsound tax scenario.
The Tribunal’s decision resulted in the deletion of the addition made to the appellant’s income for the year 2019-20, underlining the need for consistent and legally sound approaches in the classification of cloud computing revenues for tax purposes. The case was dismissed as infructuous for the assessment year 2018-19 and allowed for 2019-20, clarifying the taxation landscape for cloud services in India.
Order pronounced in the open court on January 19, 2023.
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform