December 22, 2023 In Uncategorized


A recent interesting case filed by GODADDY.COM LLC (Appellant) was decided by a Division Bench of the Delhi High Court vide Judgment dated 11-12-2023 in Godaddy.Com Llc Vs Assistant Commissioner of Income Tax, ITA 891/2018 and other connected matters.

In the said case, the Assessing Officer passed an Order adding the domain registration services offered by GODADDY.COM LLC to its customers by construing the same as ‘royalty’. GODADDY.COM LLC challenged the said assessment of income as ‘royalty’ stating that they were merely registering the domain names and that the domain belongs to the owners of the said domain. GODADDY.COM LLC further stated that registration of domain name is not like a trademark and as such GODADDY.COM LLC does not have any right over the domains that it registers. The domain name owners are customers who seek registration by a Registrar appointed with the Internet Corporation for Assigned Names and Numbers (ICANN), namely, GODADDY.COM LLC. By the process of registration, GODADDY.COM LLC does not transfer any right to use the domain name to the registrant, namely, the customer. The Registrar, GODADDY.COM LLC is only an intermediary having no rights over the property or trademark of its customers. GODADDY.COM LLC further averred that there is a significant difference between the right to use a trademark and facilitating the process of registering the trademark. It further went on to say that they are only engaged in registration of domain names and not issuing licenses for the said domain names.

With reference to why GODADDY.COM LLC should not be assessed for ‘royalty’, their Counsel broadly submitted as follows:

i) GODADDY.COM LLC is a US-based company and works as an accredited registrar for the ICANN.

ii) It provides services such as domain name registration, website design, and web hosting.

iii) The Dispute Resolution Panel (Tribunal) erred in concluding that a domain name is like a trademark.

iv) The Appellant is an assessee that registers domain names for a fee.

v) There is a significant difference between transferring the right to use the trademarks and facilitating the process of registration of trademarks.

vi) The Appellant receives a small fees for registration of domain names, which cannot fall under the definition of ‘royalty’.

vii) The Counsel further stated that in order for the consideration received for registration to come within the definition of ‘royalty’, it must satisfy the following attributes:

(a) A domain name (trademark) must exist.

(b) The domain name/trademark ownership must vest in the assessee.

(c) The assessee must transfer all or any rights, including the right to use such domain name/trademark to its customers.

(d) The assessee must offer some services in connection with the primary transaction, inter alia, concerning the use of such domain name/trademark.

viii) However, these attributes were not attracted to the registration service offered by the Appellant.

The Court after hearing both sides, ruled in favor of Appellant-GODADDY.COM LLC, holding as follows:

12. Having heard the learned counsel for the parties and perused the record before proceeding further, the following facts, which are not in dispute, are required to be noticed.

(i) The appellant/assessee is based in the United States of America (US).

(ii) It does not have a permanent establishment or a fixed place of business in India.

(iii) The appellant/assessee is in the business of providing domain name registration services, web designing and web hosting.

(iv) In the period in issue, it earned an income of Rs.20,42,77,864/- for providing web hosting and web designing services. Although the appellant/assessee had shown the income received towards web hosting as income from royalty, it was characterised by the AO as FTS and accordingly brought to tax @ 10%. The appellant/assessee did not assail the AO’s recharacterization of web hosting services as, according to it, it would not have impacted the rate at which tax was imposed on the said service.

(v) The AO brought to tax the fee received by the appellant/assessee for providing domain registration services as right to use or the use of servers maintained by the appellant/assessee in the country. Thus, according to the AO, the consideration received could be categorized as royalty under Section 9(1)(vi) on this score, as well as under Article 12(3)(a) of the Indo- US Double Taxation Avoidance Agreement [DTAA]. On the other hand, even though the Tribunal has agreed with the conclusion arrived at by the AO—that the consideration received by the appellant/assessee towards services offered by it for domain name registration is royalty—the rationale provided is different. The Tribunal has equated a domain name with a trademark and hence concluded that the consideration received by the appellant/assessee was in the nature of royalty since it involved the right to use or use of a trademark. In reaching this conclusion, the Tribunal has relied upon, as noticed above, the judgments rendered in Satyam Infoway and Tata Sons.

(vi) The dispute in this case is confined to the consideration received by the appellant/assessee for providing services to its customers for obtaining domain name registration. In the period in issue, the appellant/assessee received Rs.17,41,54,636/- for providing registration services qua domain names.

(vii) Concededly, the appellant/assessee is not seeking the benefit of the DTAA, even while contesting the exigibility to tax with regard to the fee received for providing domain name registration services to its customers.

(viii) The appellant/assessee is one of the many registrars who have entered into an accreditation agreement with ICANN. The registrars, in turn, enter into domain name registration agreements with their respective clients.


Sushila Ram Varma

CEO and Chief Consultant

The Indian Lawyer

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