Domain Name Registration Services Not Royalty: Delhi High Court Rules in Favor of GoDaddy

In a significant legal decision, the Delhi High Court has ruled in favor of GoDaddy, a leading US-based company, stating that income received for providing domain name registration services cannot be categorized as 'royalty' under the Income Tax Act, 1961.

The judgment, delivered by Hon'ble Justices Rajiv Shakdher and Girish Kathpalia, has far-reaching implications for the taxation of domain name registration services in India. The court's decision hinged on the fundamental distinction between the domain registrar and the domain name owner, highlighting that GoDaddy, in its role as a Registrar, does not have ownership rights over the registered domain names.

The court observed, "Mere registration of a domain name does not create any proprietary right for the Registrar or any other person in the name used as a domain name or the domain name registration." This crucial point emphasized that GoDaddy acts as an intermediary, facilitating domain name registrations for its customers.

Furthermore, the court rejected the comparison between domain names and trademarks, noting that domain names are created through a registration process and serve a different purpose. The judgment clarified that the fee received by GoDaddy for domain registration services does not involve the transfer of rights to use the domain names.

The court also referred to the Supreme Court's decision in Satyam Infoway, which highlighted that domain name registrants, not Registrars like GoDaddy, own the domain names and can protect their rights through legal actions.

Delhi High Court's ruling establishes a clear distinction between domain name registration services and royalty, offering relief to GoDaddy and potentially setting a precedent for similar cases in the future.

Date of Decision: December 11, 2023

GODADDY.COM LLC VS ASSISTANT COMMISSIONER OF INCOME TAX.