PDR Solutions FZC Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has ruled in favor of PDR Solutions FZC, an assessee, by deleting additions made by the Assessing Officer (AO) that sought to tax receipts from ‘domain name registration services’ and ‘web hosting services’ as royalty income. The decision, pronounced in open court on June 13, 2025, clarifies the taxability of such digital services, particularly under the Double Taxation Avoidance Agreement (DTAA) between India and the UAE.
The case originated from an appeal filed by PDR Solutions FZC against the final assessment order dated December 3, 2019, passed by the Deputy Commissioner of Income-tax, Circle, International Taxation, for the Assessment Year 2016-17. The core dispute revolved around whether the income generated from providing domain name registration and web hosting services should be classified as ‘royalty’ under Section 9(1)(vi) of the Income Tax Act, 1961, and Article 12 of the Indo-UAE DTAA.
The ITAT noted that the issues, though contested by the Departmental Representative, are largely settled by a series of judicial precedents. The Tribunal specifically referenced the Hon’ble Delhi High Court’s decision in Godaddy.Com LLC vs. ACIT (2023) 157 taxmann.com 256 (Delhi). In that ruling, the High Court determined that fees received for domain registration services do not give rise to royalty income. This precedent was further reinforced by a coordinate Bench of the Mumbai Tribunal in PDR Solutions FZC’s own case for Assessment Years 2017-18 and 2018-19, reported in (2023) 146 taxmann.com 84 (Mumbai-Trib), which held on December 30, 2024, that income from domain registration services, as per Article 12 of the relevant DTAA, would not be taxable in India.
