Godaddy.com LLC vs. ACIT
ITA No 1878/Del/2017
A.Y: 2013-14
Date of Order: 3rd April 2018
Facts
The Taxpayer was a LLC in USA. However, it was not a tax resident of
USA. It was engaged in the businesses of an accredited domain name registrar
and providing web hosting services. During the relevant year, the Taxpayer had
two streams of income. First, receipts from web hosting services/on demand
sale. Second, receipts from domain registration services.
The Taxpayer had contended that: domain registration services were
provided from outside India; the business operations were undertaken from
outside India; none of its employees had visited India for this purpose; the
Taxpayer did not have any fixed business presence in India in the form of any
branch/liaison office; and the Taxpayer merely facilitated in getting domain
registered in the name of the customer who paid the consideration for availing
such services. Accordingly, the receipts in respect of domain name registration
were not in the nature of royalty as defined in Explanation 2 to section
9(1)(vi) of the Act. In support of its contention, the Taxpayer relied on the
decisions of Delhi High Court in Asia Satellite Telecommunications Co. Ltd
vs. DIT [2011] 197 Taxman 263 (Delhi) and of AAR in Dell International
Services (India) Private Limited [2008] 218 CTR 209 (AAR).
On appeal, DRP upheld the finding of the AO.
Held
– The limited question was whether the domain
registration fee received by the Taxpayer was in the nature of royalty.
– While the facts in Asia Satellite
Telecommunications Co. Ltd. were totally different, in Satyam Infoway Ltd.
vs. Siffynet Solutions Pvt. Ltd. [2004] Supp (2) SCR 465 (SC), the Supreme
Court held that the domain name is a valuable commercial right, which has all
the characteristics of a trademark. Accordingly, the Supreme Court held that
the domain name was subject to legal norms applicable to trademark. In Rediff
Communications Ltd vs. Cyberbooth AIR 2000 Bombay 27, Bombay High Court
held that domain name being more than an address, was entitled to protection as
trademark.
– It follows from the aforementioned decisions
that domain registration services are similar to services in connection with
the use of an intangible property similar to trademark. Therefore, the receipts
of the Taxpayer for domain registration services were in the nature of royalty
within the meaning of section 9(1) (vi) of the Act, read with Explanation
2(iii) thereto.
Note: In terms of Explanation 2(iii) to
section 9(1)(vi) of the Act, “royalty means consideration
for the use of any patent, invention, model, design, secret formula or
process or trade mark or similar property”.
The decision does not make it clear how mere domain registration services
result in “use of … … trademark or similar property.
