Delhi HC sets aside Amazon Web Services tax reassessment over ₹4,500 crore remittances, sends case for fresh look

Hearing AWS’s plea against the reassessment order, the court held that the company should be given a personal hearing and an opportunity to explain whether the transactions had already been examined in an earlier assessment.

In a relief to Amazon Web Services Inc. (AWS), the Delhi high court on Thursday set aside an income-tax department order seeking to reopen its assessment over foreign remittances of more than ₹4,500 crore, sending the matter back to the assessing officer for fresh consideration.

Hearing AWS’s plea against the reassessment order, a division bench of justices Dinesh Mehta and Rajneesh Kumar Gupta, held that the company should be given a personal hearing and an opportunity to explain whether the transactions had already been examined in an earlier assessment.

“The assessing officer shall thereafter fix a date for personal hearing and, if the assessee is represented, hear the authorised representative and consider the response in accordance with law,” the court said.

The case relates to assessment year 2020-21. The tax department issued a reassessment notice in March this year after its risk management system (RMS) flagged several transactions involving more than ₹4,000 crore. The department said the transactions may not have been taken into account in the earlier assessment, which involved about ₹2,966 crore, and sought an explanation from the cloud-services arm of Amazon, on the remittances flagged by the system.

The RMS is an internal risk-based system used by the tax department to identify taxpayers, returns, transactions or information that may warrant verification or further examination. An RMS flag by itself does not establish that income has escaped assessment; it can prompt the department to examine the underlying transactions.

In a reassessment process, the tax department can re-examine an earlier assessment when the assessing officer has information indicating that income chargeable to tax may have escaped assessment.

In its plea before the court, AWS argued that the income for the relevant assessment year had already been examined by the income-tax authorities. The earlier assessment had identified about ₹2,966 crore in foreign remittances relating to cloud-computing services and considered the company’s global income while determining the portion attributable to India.

According to AWS’s senior lawyer Porus Kaka, the earlier assessing officer first examined AWS’s global financials and determined worldwide revenue of about $9.2 billion. The officer then used the proportion of AWS’s data centres in India to work out the income attributable to India.

Kaka argued that the department had started with AWS’s complete global income and then worked out the share attributable to India. The department, he argued, could not subsequently pick out individual payments made from India and treat them as fresh income that had escaped assessment, without first establishing what remained to be examined.

“The department hasn’t gone on individual remittances. They have assessed my global income in the United States on a proportionate basis across the globe. What is left to be assessed? … What is left to be assessed in India?” Kaka remarked.

The high court also questioned the revenue department on what remained to be examined and the basis for determining whether AWS had a permanent establishment (PE) in India, as well as whether the department had jurisdiction to proceed against the company.

The tax department maintained that the earlier assessment did not, by itself, establish that every transaction now reflected in the RMS information had been examined. It sought a transaction-wise reconciliation from AWS to determine whether the payments flagged by the system had already been accounted for.

The revenue department also said it had not yet been able to determine whether the payments constituted royalty, fees for technical services or another form of taxable income because it had not received an opportunity to examine AWS’s response in the reassessment proceedings.

The issue also relates to a separate AWS tax matter in which the Delhi High Court in 2025 held that payments received by the company from Indian entities for cloud computing services could not be treated as royalties under the India-US tax treaty. AWS relied on the ruling to argue that the taxability of such cloud-service payments had already been settled.

The income-tax department, however, subsequently relied on information available through its RMS system, which showed foreign remittances of more than ₹4,500 crore on which tax had not been deducted. The department sought to examine whether these payments had already been included in AWS’s earlier assessment. This led to the current reassessment proceedings.

According to Moneycontrol, AWS India’s revenue crossed ₹20,000 crore in FY26, reaching ₹20,335 crore, up 20.5% from ₹16,877 crore in FY25, according to its filings. AWS is among the leading cloud providers in India and is the country’s second-largest hyperscaler in the overall public-cloud services market, behind Microsoft Azure. It leads the infrastructure-as-a-service (IaaS) segment with nearly 52% market share, according to IDC data cited by Moneycontrol.

Queries emailed to Amazon India and the Income Tax Department remained unanswered until press time.

Krishna Yadav is a Senior Correspondent at Mint, based in New Delhi, and part of the corporate bureau. He joined the newsroom as a trainee in 2023 and quickly grew into his current role. He writes on legal and regulatory developments in corporate India, with a focus on insolvency, taxation, company law, and policy. His reporting includes tracking and breaking key legal stories from the Supreme Court, Delhi High Court, NCLT, and NCLAT. With a background in law, Krishna is known for simplifying complex legal developments into clear, accessible stories for readers. His work focuses on trends in corporate law and policy that affect businesses. This ranges from explaining tax disputes—like whether coconut hair oil is edible—to writing on why celebrities are seeking personal rights protection. He closely tracks India’s insolvency system, covering issues such as creditor losses, gaps in the process, and challenges in how the framework works in practice. Krishna also tracks developments within law firms—covering hiring trends, how firms help companies navigate global challenges, and how the legal industry is adapting to artificial intelligence. Beyond legal reporting, he has written long-form pieces, including on-ground coverage of the 2024 general elections, capturing the scale and logistics of polling across India. Outside work, he enjoys travelling, exploring new places, and reading about geopolitics and history.