Amazon Web Services (AWS) India, a subsidiary of Amazon India, said it will challenge the tax demand of Rs 549 crore issued by the Income Tax Department. The demand is based on fees earned by AWS from its cloud computing services.
According to a spokesperson for AWS, the company considers the decision by the Indian Tax Department to be “without merit.” The spokesperson added that the company intends to defend its position vigorously and expects to recoup taxes paid.
The demand notice was reportedly issued by the Income Tax Department to AWS, a subsidiary of the Amazon group, for the recovery of Rs 549 crore tax on account of income earned by the company from cloud computing services. The department has raised the demand for Rs 190.85 crore tax for 2014-15 and Rs 358.27 crore for 2016-17 by invoking Section 147 of the Income-tax Act.
The I-T Department has argued that the fees earned by AWS from its cloud computing services are in the nature of royalty and fees for technical services (FTS) and are therefore taxable in India. The department has also sent notices to other companies suspected of evading taxes by sending large amounts in the name of royalty payments to their parent companies.
This is not the first time that the Income Tax Department has taken action against companies for alleged tax violations. In January, the department launched an investigation against pharmaceutical company Cipla for similar allegations of tax evasion. Last year, the department provisionally attached the fixed deposit accounts of Xiaomi India on grounds of attempted tax evasion.
The outcome of the dispute between AWS and the ITA remains to be seen. However, it is clear that the Indian government is taking a firm stance against companies suspected of evading taxes in the country.
