TMI Blog2023 (12) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... y the courts where domain name registrations are brought about in bad faith or to perpetuate fraud. The courts tend to grant injunctive relief where the defendant, in such actions, is seen to be feeding off the plaintiff's goodwill and causing confusion amongst its customers regarding the origin of the subject goods and services. Such reliefs are granted on the basis that the definition of the expression mark includes a name , and in turn, the expression trademark so defined to include a mark, distinguishes the goods and services of one person from those of others. Therefore it is possible in a given situation that a domain name may have the attributes of a trademark. [See Section 2m read with Section 2zb of Trademarks Act, 1999 ]. The Supreme Court, in Satyam Infoway [ 2004 (5) TMI 529 - SUPREME COURT] held that it is the registrant (and not the Registrar) who owns the domain name, and can protect its goodwill by initiating passing off action against a subsequent registrant of the same domain name/a deceptively similar domain name. SC was concerned only with the rights of the domain name owner and not the Registrar, while determining whether passing off action can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 891/2018. 5. The record discloses that a draft assessment order was passed on 31.03.2016 by the Assessing Officer (AO) under Section 144C(1) read with Section 143(3) of the Act. The draft assessment order proposed an addition concerning the income of the appellant/assessee received against domain name registration services offered to its customers by construing the same as royalty. 5.1 In this context, the draft assessment order alluded to Section 9(1)(vi) of the Act. Being aggrieved, the appellant/assessee preferred objections qua the same before the Dispute Resolution Panel [in short, DRP ]. 6. The objections to the draft assessment order were preferred under Section 144C(2) of the Act. The DRP sustained the view taken by the AO in the assessment order and, thus, rejected the objections raised by the appellant/assessee via its order dated 23.12.2016. 7. Furthermore, the DRP also approved the imposition of interest under Sections 234B 234C of the Act. Consequentially, the DRP directed the AO to complete the assessment as per the directions contained in its aforementioned order. The DRP directed the AO to incorporate the reasons given by it concerning variou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistrar, having a back-to-back arrangement with ICANN and the registry appointed by it. The customer would not have been able to engage with another Registrar had the appellant/assessee been the domain name's owner. (iv) The Tribunal has erred in concluding that a domain name is like a trademark. This view is based on a misappreciation of the ratio of the judgment rendered by the Supreme Court in Satyam Infoway Ltd. and the judgment of this court in Tata Sons. (v) The appellant/assessee does not transfer any right to use the domain name to the customer, i.e., the registrant. It is the registrant who owns the domain name, and hence, if at all, the customer/the registrant can transfer the domain name. (vi) The appellant/assessee is only an intermediary, as submitted above, and in this context renders registration services. The appellant/assessee thus does not have any right in the property or trademark in the domain name. The consideration received by the appellant/assessee as a fee is not received for use or right to use the domain name or even for transfer of all or any right of such domain name. [ See Satyam Infoway Ltd., People Interactive (India) Pvt. Ltd vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the registrar of companies or registration of patents and trademarks with the concerned registrars appointed under the relevant statute. (xi) The Tribunal's reliance on Clause (vi) of Explanation 2 appended to Section 9(1) is misconceived. Clause (vi) of Explanation 2 alludes to the consideration received for rendering services in connection with activities referred to in sub-clauses (i) to (iv), (iva) and (v) of the very same Explanation. Thus, only those services are covered in Clause (vi) of Explanation 2, which are rendered in connection with activities referred to in the previous sub-clauses of the same Explanation. [ See Reebok India Company v. DCIT, (2017) 56 ITR(T) 211 (Delhi Trib.), an order affirmed by this court in (2009) 319 ITR 228 (AAR).] (xii) For the consideration received by the appellant/assessee to come within the ambit of the Expression Royalty as defined in Explanation 2 appended to Section 9(1) (vi) of the Act, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 IndoUS 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to ICANN and the Registry. 14.3. The database concerning domain names and IP addresses is maintained in the servers owned by the appellant/assessee. 14.4. In effect, what a domain name does for the customer is to provide an easy-to-remember/identify IP address. Typically, an IP address that does not have a domain name registration consists of a series of numbers unique to each website. For example, the numeric IP address for the Supreme Court would be 164.100.229.147. However, its domain name would read as follows: main.sci.gov.in 14.5. To bring home the point that there are, in effect, three entities which are involved, amongst others, the following clauses provided in the Registrar Accreditation Agreement entered into between ICANN and the appellant/assessee dated 14.07.2013 [in short, Accreditation Agreement ] need to be set forth. 1.17 The word registrar , when appearing without an initial capital letter, refers to a person or entity that contracts with Registered Name Holders and with a Registry Operator and collects registration data about the Registered Name Holders and submits registration information for entry in the Registry Database. xxx xxx xxx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , each gTLD for which it is Accredited. Registrar does not disclaim rights in the dtata elements listed in Subsections 3.2.1.4 through 3.2.1.6 and Subsections 3.3.1.3 through 3.3.1.8 concerning active Registered Names sponsored by it in each gTLD for which it is Accredited, and agrees to grant non-exclusive, irrevocable, royalty-free licenses to make use of and disclose the data elements listed in Subsections 3.2.1.4 through 3.2.1.6 and 3.3.1.3 through 3.3.1.8 for the purpose of providing a service or services (such as a Whois service under Subsection 3.3.4) providing interactive, query-based public access. Upon a change in sponsorship form Registrar of any Registered Name in each gTLD for which it is Accredited, Registrar acknowledges that the registrar gaining sponsorship shall have the rights of an owner to the data elements listed in Subsections 3.2.1.4 through 3.2.1.6 and 3.3.1.3 through 3.3.1.8 concerning that Registered Name, with Registrar also retaining the rights of an owner in that data. Nothing in this Subsection prohibits Registrar from (1) restricting bulk public access to data elements in a manner consistent with this Agreement and any Specifications or Policies or ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods and services. Such reliefs are granted on the basis that the definition of the expression mark includes a name , and in turn, the expression trademark so defined to include a mark, distinguishes the goods and services of one person from those of others. Therefore it is possible in a given situation that a domain name may have the attributes of a trademark. [See Section 2m read with Section 2zb of Trademarks Act, 1999 1 ]. 16.1 The Supreme Court, in Satyam Infoway, held that it is the registrant (and not the Registrar) who owns the domain name, and can protect its goodwill by initiating passing off action against a subsequent registrant of the same domain name/a deceptively similar domain name. The observations made in the following paragraphs of Satyam Infoway, being apposite, are extracted hereafter: What is important for the purposes of the present appeal is the protection given to intellectual property in domain names. A prior registrant can protect its domain name against subsequent registrants. Confusing similarity in domain names may be a ground for complaint and similarity is to be decided on the possibility of deception amongst potential customers. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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