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TMI Blog2023 (2) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 9(1)(vi) of the Act. On a query from the Bench in course of hearing, learned counsel appearing for the assessee fairly submitted that domain name is in the nature of a trade mark under the Trade Mark Act, 1999. Therefore, based on the decision in the case of Hindustan Unilever Ltd. v. Endurance Domains Technology LLP Ors. [ 2020 (6) TMI 818 - BOMBAY HIGH COURT] the decisions of the Coordinate Benches in assessee s own case for assessment years 2013-14 and 2014-15 cannot be declared as per incuriam, more so, when the Hon ble Jurisdictional High Court is seized of the matter by admitting the substantial question of law on the issue in these assessment years. Thus, the issue in dispute as off now, stands concluded against the assessee by virtue of the decisions of the Tribunal in its own case in assessment years 2013-14 and 2014-15 as discussed earlier. Therefore, in absence of any material difference in factual position in the impugned assessment year and having regard to judicial discipline and propriety, we do not find any valid reason not to follow the earlier decisions of the Tribunal in assessment years 2013-14 and 2014-15. Thus, in assessee s own case [ 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has raised following grounds of appeal: 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 745,066,973 should be charged to tax as royalty as per the provisions of section 9(l)(vi) read with section 115A 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 are taxable as Fee for Technical services under Section 9(l)(vii) of the Act as well as Article 12(4)(a) of the India-USA Tax Treaty as it is ancillary and subsidiary to the application or enjoyment of domain registration. 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of the assessee, the Assessing officer held that the assessee acts as channel between the customers and ICANN for domain name registration. He held that the assessee enabled the customers to get their names registered with ICANN for which it charges a fee from such customers. Though, the Assessing officer was ultimately convinced with the submission of the assessee that the fee received towards domain name registration cannot be regarded as FTS, however, he concluded that the amount received was in the nature of royalty as per Section 9(1)(vi) read with Section 115A of the Act. In the above line, he proposed a draft assessment order. Against the draft assessment order, the assessee filed objections before learned DRP. Primarily relying upon its own decision for assessment year 2014-15, learned DRP upheld the decision of the Assessing Officer in treating the amount received from domain name registration as royalty. 6. Before us, learned counsel appearing for the assessee submitted that royalty has been defined under Explanation 2 to Section 9(1)(vi) of the Act. Drawing our attention to the definition of royalty , he submitted, any payment would be in the nature of roya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts from registrants/ customers. He submitted, once the registrant/ customer wants to register a particular domain name, in case, it is not already registered, the assessee only facilitates the process of such registration with ICANN for a fee. 9. Drawing our attention to clause 3.5 of the Registrar Accreditation Agreement between the assessee and ICANN he emphasized that the assessee does not have any right in the domain name. He submitted, there is a significant difference between licensing of IPR and facilitating the process of registering the IPR. He submitted, though, the consideration for licensing of IPR may give rise to royalty but the act of facilitating the registration of IPR cannot be characterized as royalty. He submitted, the assessee simply helps the customers in the process of registration of domain name and does not engage itself in the business of licensing of such domain name. He submitted, there are more than 2500 ICANN accredited Registrars in the world. A registrant/ customer desirous of registering a domain name can approach any one of these Registrars including the assessee to register its domain name. Therefore, it may be unreasonable to say that all thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of domain name is in the nature of royalty under section 9(1)(vi) of the act, the issue stands covered against the assessee. She submitted, the contention of the assessee that earlier decisions of the Tribunal are per incuriam cannot be accepted. More so, when the appeals filed by the assessee against the decisions of the Tribunal in earlier years are pending for adjudication before the Hon ble High Court. Rebutting assessee s claim that the Accreditation Agreement between assessee and the ICANN was not brought to the notice of the Tribunal in assessment years 2013-14 and 2014-15, learned Departmental Representative submitted, the Tribunal having examined the agreement between assessee and ICANN has decided the issue. In this context, she drew our attention to the decisions of the Tribunal. 12. We have considered rival submissions in the light of the decisions relied upon and perused the material on record. Before we proceed to decide the issue on merit, we must make it clear that learned counsel appearing for the assessee has categorically submitted before us that the assessee is not claiming any benefit under the India-USA Tax Treaty as regards the disputed issue. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalty, any consideration received for transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property, would be regarded as royalty. Further, consideration received for the use of any patent, invention, model, design, secret formula or process or trade mark or similar property, can also be regarded as royalty. Undoubtedly, the assessee registers domain names of the customers who approach the assessee for registering a particular domain name for them. The Revenue s case while treating the amount received by the assessee as royalty is, domain name is an intangible asset similar to trade mark and while registering the domain name in favour of a customer the assessee transfers the right to use the trade mark. Therefore, it is in the nature of royalty under section 9(1)(vi) of the Act. Identical issue came up for consideration before the Coordinate Bench in assessee s own case in assessment year 2013-14. The Tribunal, while deciding the issue in ITA no. 1878/Del/2017 vide order dated 03.04.2018, has held as under: 8. We have carefully considered the arguments of both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India.]. 9. Explanation 2 after the sub-section defines the word royalty ,which reads as under: Explanation 2. - For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for - (i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property; (ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property; (iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property; (iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill; [(iva) the use or right to use any industrial, commercial or scientific equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country. The Courts have consistently applied the law relating to passing off to domain name disputes. Some disputes were between the trademark holders and domain name owners. Some were between domain name owners themselves. These decisions namely Red iff Communication Ltd. v. Cyberbooth and Anr., AIR (2000) Bombay 27, Yahoo Inc. v. Akash Arora, (1999) PTC 19 201, Dr. Reddy s Laboratories Ltd. v. Manu Kosuri, (2001) PTC 859 (Dei), Tata Sons Ltd. v. Manu Kosuri, (2001) PTC 432 (Del.), Acqua Minerals Ltd. v. Pramod Borse Anr., (2001) PTC 619 (Del.), and Info Edge (India) Pvt.Ltd. Anr. 1/. Shai/esh Gupta Anr., (2002) 24 PTC 355 (Del.) correctly reflect the law as enunciated by us. No decision of any court in India has been shown to us which has taken a contrary view. The question formulated at the outset is therefore answered in the affirmative and the submission of the respondent is rejected. (emphasis by underlining supplied by us) 11. That Hon ble Jurisdictional High Court in the case of Tata SonsLimited (supra) has also examined the identical question and held as under: 6. In Yahoo Inc! Vs Akash Arora 1999 PTC 201 while granting an injunction restraining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cyberspace, domain names or Internet sites are entitled to protection as a trade mark because they are more than a mere address. The rendering of Internet services is also entitled to protection in the same way as goods and services are, and trade mark law applies to activities on internet. (emphasis by underlining supplied by us) 12. Learned counsel for the assessee has also relied upon the decision of Hon'ble Jurisdictional High Court in the case of Asia SatelliteTelecommunications Co. Ltd. (supra). However, we find that the facts in that case were altogether different. In the said case, the assessee company carried on the business of private satellite communications and broadcasting facilities. During the relevant assessment year, it was the lessee of a satellite, called Asia-Sat 1 and was the owner of a satellite, called Asia Sat 2. Those satellites were launched by the assessee and were placed in a geostationary orbit in the orbital slots. Those satellites neither used the Indian orbital slots nor were they positioned over Indian airspace. However, the footprint area (the area of earth's surface over which a signal is relayed from satellite) of those sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In view of the above, we uphold the orders of the lower authorities on this point and reject ground no. 2 of the assessee s appeal. 15. A careful analysis of the aforesaid observations of the Coordinate Bench would reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the issue qua the definition of royalty as per Section 9(1)(vi) of the Act. 17. At this stage it is relevant to observe, on a query from the Bench in course of hearing, learned counsel appearing for the assessee fairly submitted that domain name is in the nature of a trade mark under the Trade Mark Act, 1999. Therefore, based on the decision of the Hon ble Bombay High Court in the case of Hindustan Unilever Ltd. v. Endurance Domains Technology LLP Ors. (supra), the decisions of the Coordinate Benches in assessee s own case for assessment years 2013-14 and 2014-15 cannot be declared as per incuriam, more so, when the Hon ble Jurisdictional High Court is seized of the matter by admitting the substantial question of law on the issue in these assessment years. Thus, the issue in dispute as off now, stands concluded against the assessee by virtue of the decisions of the Tribunal in its own case in assessment years 2013-14 and 2014-1, as discussed earlier. Therefore, in absence of any material difference in factual position in the impugned assessment year and having regard to judicial discipline and propriety, we do not find any valid reason not to follow the earlier decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. Whereas, the Assessing officer has treated it as FTS/FIS under section 9(1)(vii) read with Article 12(4)(a) of the Tax Treaty, on the reasoning that such services are ancillary and incidental to the domain name registration services rendered by the assessee, the consideration received from which is in the nature of royalty. It is observed, identical issue came up for consideration before the Coordinate Bench in assessee s own case in assessment year 2013-14. Since the issue did not have any tax implication, the ground was not pressed. Similar decision was taken in assessment year 2014-15 as well. Be that as it may, while deciding ground no. 2 raised by the assessee, we have held that the consideration received by the assessee from domain name registration services is in the nature of royalty. In our view, the amount received by the assessee from web hosting services is ancillary to domain name registration services. That being the position emerging on record, the amount received has to be treated as FTS. In any case, the assessee has not contested the issue in assessment year 2013-14 and 2014-15 as the issue is of mere academic interest considering that the tax rate of roya ..... X X X X Extracts X X X X X X X X Extracts X X X X
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