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(C) Payments made to Amazon Web Services Inc., US 6.5 The assessee company has availed cloud computing services from Amazon Web Services Inc (AWS) for its online business needs.

Cloud computing is an arrangement in which the cloud provider hosts the shared computing resources such as hardware, software applications etc., and the cloud user accesses them for storage, data processing etc., via internet on a need basis. In view of Cloud computing technology, Enterprises need not make investment in IT infrastructure (hardware, storage space, application softwares, IT(IT)A No.615 to 620/Bang/2020 M/s. Urban Ladder Home Décor Solutions Pvt. Ltd., Bangalore other IT resources etc.) and they can use the required IT resources on payment of charges.

5. As elaborated above, the payments of Rs.18,71,643/- made by the Assessee Company during the FY 2014-15 to ("AWS") for cloud computing services is clearly taxable in India as Royalty. As the Assessee Company has failed to deduct tax at source as stipulated u/s 195 on the payments made towards cloud computing services for the F.Y 2014-15 relevant to Assessment year 2015-16, the assessee is held to be an assessee in default as per the provisions of section 201(1) of the Income tax Act, 1961 for non-

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9. The Ld CIT(A) also held that the payments made for use of software is royalty under the provisions of Income tax Act also. In this regard, the Ld CIT(A) has observed as under:-

"8. I find that the decision of Hon'ble Karnataka High Court in the case of Samsung (supra) is applicable in the facts of the case. Accordingly, the claim that use of software is not royalty within the I T Act is rejected."

Finally, the Ld CIT(A) concluded as under:-

"31. In view of the above, the argument of the appellant that consideration paid for purchase of software, cloud computing, cloud space hiring, (involving transfer of the right to use the software) is not royalty is not acceptable. The grounds in this respect are therefore dismissed."

19. Now, another issue which needs to be seen is whether charges paid to Amazon for various services provided by it are in the nature of royalty, if any, or not. The assessee has placed on record the copy of agreement with Amazon, which we have referred in the paras hereinabove. He has also placed on record the copies of bills raised by Amazon online. The perusal of details filed by assessee of monthly charges paid, it transpires that the same are fluctuating from month to month and there is no regular payment being made to Amazon. In case of provision of royalty to a person, then as seen from the terms and conditions of various agreements, there is fixation of price to be paid and there may be variation on account of use of certain services but first there has to be basic price fixed. However, in the facts of present case, looking at the documentation, the billing is segregated into various services i.e. AWS services, storage services, etc. and the assessee before us has filed a chart of summary of services availed. The first such services are on account of service charges for Elastic Compute Cloud. As per clause 1, it is on account of use of service provider Linux; as per clause 1.2, Windows and as per clause 1.3, Windows & SQL Server stanard and clause 1.4 of Bandwidth. The total service charges for Elastic Compute Cloud are USD 40,253.17. The month-wise details of said payments made by assessee from September, 2009 to March, 2010 reflected that in the first month, charges totaled to USD 4269.02, in October at USD 5599.36 and there on.