Godaddy. com LLC Vs DCIT (ITAT Delhi)
Hon’ble Apex Court in the case of Satyam Infoway Ltd. (supra) 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. (supra) 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 (supra) 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 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.
FULL TEXT OF THE ITAT JUDGMENT
This appeal is filed by the assessee against the Assessment Order dated 26.10.2017 passed by the DCIT, Circle-(1)(3)(1), New Delhi for Assessment Year 15.
2. The grounds of appeal are as under:-
“Appeal against the order under section 143(3) read with Section 144C(13) of the Income- tax Act, 1961 (“the Act”) dated 26 October 2017 for the Assessment Year 2014-15 passed by the Deputy Commissioner of Income Tax, Circle 1(3)(1), Intl. Taxation, New Delhi (“AO”) pursuant to the directions of Dispute Resolution Panel-I (“DRP”)
1. That on the facts and in the circumstances of the case and in law, the impugned order of assessment framed by the AO pursuant to the directions of the DRP is erroneous and bad in law as well as in facts.
2. That on the facts and in the circumstances of the case and in law, the AO/DRP has wrongly alleged that 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 11 5A of the Act.
3. That on the facts and circumstances of the case and in law, the AO/DRP has erred in holding that the web hosting services provided/rendered by the Appellant qualify as fees for included services as per Article 1 2(4)(a) of the India-USA Tax Treaty as well as under Section 9 (l) (vii) of the Act.
4. That on the facts and circumstances of the case and in law, the AO/DRP has erred in not appreciating that the Appellant has characterized income from web hosting services as royalty and already offered the same to tax as per the provisions of section 9(l)(vi) read with section 11 5A of the Act.
5. That on the facts and circumstances of the case and in law, the A. O/DRP has erred in holding that the appellant has concealed its particulars of income or has not disclosed accurate particulars of income and has separately initiated penalty proceedings u/s 271 (1)(c)
6. That on the facts and circumstances of the case and in law the AO/DRP has erred in charging interest under section 234B and 234C of the Act to the “
3. The assessee, M/s Godaddy.comLLC has filed a return of income for A.Y. 20 14-15 on 30.09.20 14 declaring income of Rs. 41,19,81,166/- as royalty and FTS for web hosting services/on demand sale and web designing/SSL Certification services respectively. The case was selected for scrutiny. Notice u/s 143(2) of the Act was issued dated 01.09.2015 and served upon the assessee. Subsequently, notice under Section 142(1) issued on 12.04.2016 and served upon the assessee. The assessee through CAs attended the proceedings and filed various details which were examined by the Assessing Officer. Thus, the draft Assessment order was passed on 14.12.20 16 against which the objections were filed by the Assessee before the DRP. The DRP vide directions dated 22.09.20 17 directed the Assessing Officer to complete the assessment as per the directions given therein. The Assessing Officer vide order dated 26.10.2017 held that the payment for domain name registration is for use of server of the assessee and hence amounts to royalty as per Section 9(1) (vi) of the Income Tax Act, 1961 as well as Article 12(3)(a) of the India-US Tax Treaty. This view was also taken for earlier Assessment Year 20 13-14 by the Assessing Officer. Being aggrieved by the same the Assessee filed appeal before us. During the hearing the Ld. DR pointed out that for A.Y. 20 13-14, the Tribunal vide order dated 03.04.20 18 held this issue against the assessee being ITA No. 1878/Del/20 17.
4. The Ld. AR put up his written submission and the same are as under:-
Background
1. The Appellant, a Delaware Limited Liability Company, (located in Arizona, USA), is the world’s largest ICANN (Internet Corporation for Assigned Names and Numbers) accredited domain name registrar. During the captioned year, the Appellant earned revenues from the following services rendered to Indian customers [Refer Para 3.2 final assessment order at Page 81 of Appeal Set]:
