GoDaddy liable to pay Income Tax on 40 Crore Rupees received as Royalty: ITAT [Read Order]

Domain Registration - GoDaddy - Taxscan

The Income Tax Appellate Tribunal ( ITAT ), Delhi bench has refused to grant relief to the US- Based GoDaddy, world’s largest domain name registrar and is accredited with the Internet Corporation for Assigned Names and Numbers (ICANN) by holding that the rendering of services for domain registration can be taxed as royalty because such rendering of services in connection with the use of an intangible property is similar to the trademark.

The bench, like its earlier order in April, held that the above income is subject to tax according to the Indo-US tax treaty.

The Assessing Officer, while completing assessment against the Company had observed that the receipts from domain name registration amounting to INR 437,761,396 should be charged to tax as royalty as per the provisions of section 9(l)(vi) read with section 115A of the Act.

Before the Tribunal, the assessee argued that, the ITAT while passing order for AY 2013-14 has not appreciated that the owner of the domain name is the ultimate customer and not the assessee and consequently, clause (iii) of Explanation 2 to Section 9(l)(vi) of the Income Tax Act will not apply since the assessee wasn’t competent to grant the right to use in the said property which was owned by the ultimate customers. Hence, clause (vi) of Explanation 2 to section 9(l)(vi) of the Act will not apply.

Overruling the contentions, the bench noted that this aspect was also dealt by the Tribunal for A.Y. 2013-14.

The bench, further strongly relied on its previous order and held that the web hosting services provided/rendered by the Appellant qualify as fees for included services as per Article 12(4)(a) of the India-USA Tax Treaty as well as under Section 9(1)(vii) of the Income Tax Act.

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