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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.

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4.1.8 The AO extracts Explanation 2 to sec. 9(1)(vi) of Income tax Act 4.1.9 The AO extracts the definition of "Royalty" as per paragraph 3(a) of Article 12 of India - US DTAA.

4.1.10 The AO extracts the definition of "fess for included services" as per Paragraph 4 of Article 12 of India - US DTAA.

Then the AO concludes as under:-

4.1.11 In view of the above discussion, even if the cloud computing services are taking the character of Fees for Technical Services (FTS), it is IT(IT)A No.615 to 620/Bang/2020 M/s. Urban Ladder Home Décor Solutions Pvt. Ltd., Bangalore chargeable to tax in India as per the IT Act and also as per the India - US DTAA.
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-
7. This access is provided through various software and processes that are patented. The cloud space and web hosting services are practice of using a network of remote servers hosted on the internet to store, manage and process data, rather than a local server or a personal computer. The appellant used this cloud space and web hosting services to store its data and or applications and software. Using this, the appellant can make its software/products available to any of its users anywhere in the world. The mechanism is adopted by the assessee to avoid incurring huge capital expenditure in purchase of own servers, instead they procure 'right to use' of a server space provided by different agencies like Amazon Web hosting services and incur comparatively a much lower operational expenses.