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Amazon Web Services India Pvt Ltd & Anr vs Income Tax Officer & Anr on 1 March, 2023

Author: Vibhu Bakhru

Bench: Vibhu Bakhru

                          $~30
                          *    IN THE HIGH COURT OF DELHI AT NEW DELHI
                          +    W.P.(C) 2335/2023
                               AMAZON WEB SERVICES INDIA PVT LTD
                               & ANR.                            ..... Petitioners
                                                      Through:      Mr. Porus Kaka, Sr. Adv. with Mr.
                                                                    Rohit Jain, Mr. Aniket D Agrawal,
                                                                    Mr. Samarth Chaudhari & Mr.
                                                                    Manish K, Advs.
                                               versus
                                 INCOME TAX OFFICER & ANR.                               ..... Respondents
                                                      Through:      Mr. Ruchir Bhatia, SSC.
                                 CORAM:
                                 HON'BLE MR. JUSTICE VIBHU BAKHRU
                                 HON'BLE MR. JUSTICE AMIT MAHAJAN
                                                      ORDER

% 01.03.2023 CM APPL. 8850/2023

1. Exemption is allowed, subject to all just exceptions.

2. The application stands disposed of.

3. Mr. Kaka, learned senior counsel appearing for the petitioners, submitted that the issue of taxability is already covered under the assessment orders passed for the prior assessment years. He submits that the proposed payments by petitioner no.1 to petitioner no.2 for services availed are not taxable as the payee (petitioner no.2) does not have a Permanent Establishment (PE) in India.

4. He also pointed out that there is an apparent error in the impugned order dated 01.02.2023. He drew the attention of this Court to page 50 of the impugned order, wherein it is observed that "Under Section 44DA of the Act, profit of the PE is required to be computed on a net basis i.e. total revenue less allowable expenses." The Assessing Officer had also observed at page 58 of the impugned order, that the operating income for the Financial Year 2021 is around 30% of the Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.03.2023 net sales. However, while computing the amount of TDS, the said calculation has been ignored and the amount of TDS has been calculated on the entire payment.

5. Mr. Kaka states that the amount of withholding tax is required to be computed on the net income - which the Assessing Officer has found to be 30% of the net sales - and not on the entire amount. He states that if this calculation error is corrected, the petitioner no.1 would have no objection to depositing the amount of withholding tax without prejudice to all rights and contentions.

6. Mr. Bhatia, who appears on behalf of the respondents, on advance notice, seeks time to take instructions in this regard.

7. List on 22.03.2023.

8. In the meanwhile, a reply and counter-affidavit, if any, be filed within a period of two weeks from today. Rejoinder, if any, be filed before the next date of hearing.

9. Mr. Kaka states that although the petitioner has been unable to remit the amount; it is, nonetheless, required to deposit the TDS on passing any credit entry in its books. The last date for deposing TDS on the amount credited in the months of January and February is 07.03.2023.

10. In view of the above, it is clarified that non-compliance of the deposit of TDS for the months of January and February till the next date of hearing will not be held to the detriment of the petitioners. This would be subject to further orders that may be passed in this petition.

VIBHU BAKHRU, J AMIT MAHAJAN, J MARCH 1, 2023/Ch Signature Not Verified Digitally Signed By:Dushyant Rawal Signing Date:06.03.2023