Domain Registration Fee Taxable as Royalty: ITAT [Read Order]

Delhi bench of the Income Tax Appellate Tribunal (ITAT) in M/s Godaddy.com LLC vs. Assistant Commissioner of Income Tax held 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 assessee, M/s Godaddy.com LLC is engaged in the business as accredited domain name registrar authorized by Internet Corporation for Assigned Names and Numbers (ICANN).

The issue before the Tribunal was whether Rs.17,41,54,636/- received by Assessee as income from domain registration fees is taxable in India. The Assessing Officer assessed the same as income from royalty. On appeal by the Assessee, before the Dispute Resolution Panel (DRP) the findings of the Assessing Officer (A.O) were upheld. Aggrieved, an appeal was made to the ITAT.

The main contention of the assessee/appellant was that the Assessing Officer/DRP have incorrectly linked web hosting services with domain name registration services. The Counsel for the assessee stated that these two services have the independent existence. He further contended that for providing domain registration service, none of the employees of the appellant visited India and all services are provided from outside India. The appellant does not have any fixed business presence in India in the form of any branch/liaison office and the business operations are undertaken from outside India. He also stated that the appellant merely facilitates in getting the domain registered in the name of the customer who pays a price for availing such services. Hence, the receipt in respect of domain name registration is not in the nature of royalty under Explanation 2 of Section 9(1) (vi) of the Income-tax Act.

Upon hearing both the parties, the honorable bench of G.D Agrawal & Suchitra Kamble, referred the decision of Supreme Court in Satyam Infoway Ltd. vs. Siffynet Solutions Pvt.Ltd.  & decisions of High Court of Bombay in Rediff Communications Ltd. vs. Cyberbooth and Tata Sons Limited vs. Mr. Manu Kishori & Ors. The Supreme Court in Satyam Infoway Ltd. Vs. Siffynet Solutions Pvt.Ltd. has held that the domain name is a valuable commercial right and it has all the characteristics of a trademark and accordingly, it was held that the domain names are subject to legal norms applicable to trademark. Hon’ble Bombay High Court in the case of Rediff Communications Ltd. held that domain names are of importance and can be a valuable corporate asset and such domain name is more than an internet address and is entitled to protection equal to a trademark. Hon’ble Jurisdictional High Court in the case of Tata Sons Limited held that domain names are entitled to protection as a trademark because they are more than an address.

“Respectfully following the above decisions of Hon’ble Apex Court, Hon’ble Bombay High Court and Hon’ble Jurisdictional High Court, we hold that the rendering of services for domain registration is rendering of services in connection with the use of an intangible property which is similar to the trademark. Therefore, the charges received by the assessee for services rendered in respect of domain name is royalty within the meaning of Clause (vi) read with Clause (iii) of Explanation 2 to Section 9(1) of Income-tax Act. In view of the above, we uphold the orders of the lower authorities on this point” said the Bench, dismissing the appeal.