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India Income Tax Appellate Tribunal Again Holds Domain Name Registration Service Fees Constitute Trademark Royalties Subject to Tax — Orbitax Tax News & Alerts

The Delhi Income Tax Appellate Tribunal (ITAT) issued an order on 23 September 2022 concerning the taxation of domain name registration service fees and web hosting services. The case involved LLC, a provider of web hosting and domain registration services, which appealed an assessment order pertaining to the assessment year 2015-16. GoDaddy raised several grounds of appeal, including that receipts from domain name registration should not be charged to tax as a royalty and that web hosting services should not be treated as taxable fees for technical services (FTS) (GoDaddy offered consideration for web hosting to be taxed as a royalty). The case is very similar to prior appeals concerning the assessment years 2013-14 and 2014-15. Although some new arguments were made by GoDaddy in the present case, the ITAT did not find any valid reason not to follow the decisions for the prior assessment years. As such, the ITAT held that the consideration received by GoDaddy from the registration of domain names is in the nature of a royalty under section 9(1)(vi) of the Income Tax Act and is taxable as such. Further, the ITAT held that web hosting services should be treated as taxable FTS. This is the same as for the prior years, although the issue had not been pressed in prior years since the tax rate for royalties and FTS is the same. In conclusion, the ITAT dismissed GoDaddy's appeal.