Petition allowed, order set aside for fresh consideration. DRP directed to address objections and provide reasoned conclusions.

The writ petition was allowed, setting aside the DRP's order and remitting the matter back for fresh consideration. The Court emphasized the need for the DRP to address the petitioner's objections and provide reasoned conclusions. The DRP's failure to consider the petitioner's arguments and reliance on a previous decision without proper reasoning constituted a jurisdictional error. The Court directed the DRP to pass a reasoned order within eight weeks, allowing the petitioner to seek further remedies if still aggrieved. No costs were imposed, and the pending application was disposed of.

---

---

Issues Involved:
1. Maintainability of the writ petition.
2. Taxability of income from Domain Name Registration Services and Web Hosting Services under the India-UAE Double Taxation Avoidance Agreement (DTAA).

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:

The primary contention from the Revenue was the objection to the maintainability of the writ petition on the grounds of an alternative efficacious remedy being available under the statute. The Revenue argued that the petitioner should have approached the Income Tax Appellate Tribunal (ITAT) under Section 253(1)(d) of the Income Tax Act, 1961, instead of filing a writ petition. The Revenue relied on the Doctrine of Election, suggesting that the petitioner, having chosen the Dispute Resolution Panel (DRP) route, cannot bypass the statutory mechanism by approaching the High Court. The Revenue also cited the judgment of the Supreme Court in Mumbai International Airport Ltd. v. Golden Chariot Airport to support its stance.

The Court, however, noted that the jurisdiction under Article 226 of the Constitution of India is broad but discretionary. It is generally not exercised if an alternate statutory remedy is available unless there are exceptional circumstances such as a fundamental error in the exercise of jurisdiction by the statutory authority. The Court referred to several precedents, including CIT v. Chhabil Das Aggarwal, which highlighted exceptions to the rule of alternative remedy, such as when the statutory authority has not acted in accordance with the law or has violated the principles of natural justice.

In this case, the Court found that the DRP had failed to consider the petitioner’s plea regarding the non-taxability of income under the India-UAE DTAA, which constituted a jurisdictional error. Therefore, the writ petition was deemed maintainable as the petitioner was seeking correction of a jurisdictional error, and no assessment order had yet been passed by the Assessing Officer.

2. Taxability of Income from Domain Name Registration Services and Web Hosting Services:

The petitioner, a tax resident of UAE, challenged the draft assessment order passed by the Assistant Commissioner of Income Tax, which treated the income from Domain Name Registration Services and Web Hosting Services as taxable under the Income Tax Act, 1961, and the India-UAE DTAA. The petitioner argued that its income from these services should not be treated as royalty under the India-UAE DTAA.

The DRP, in its order, relied on the decision of the ITAT in the case of GoDaddy.com LLC, which treated domain name registration charges as royalty under Section 9(1)(vi) of the Act. The DRP held that web-hosting services were interlinked with domain registration and were ancillary and subsidiary to the application or enjoyment of the right for which payment was received as royalty. Consequently, the payments received for web-hosting services were also considered as royalty.

The Court observed that the DRP had not adjudicated upon the petitioner’s objection regarding the non-taxability of income under the India-UAE DTAA and had instead blindly followed the decision in GoDaddy.com LLC without considering the petitioner’s specific arguments. The Court noted that the definition of royalty under the Act is broader than that under the Treaty, and the DRP had failed to address this distinction.

The Court held that the DRP’s failure to consider the petitioner’s objections and its reliance on the GoDaddy.com LLC decision without proper reasoning constituted a failure to exercise jurisdiction. The Court emphasized that the DRP should have evaluated the petitioner’s submissions and provided reasons for its conclusions.

Conclusion:

The writ petition was allowed, and the impugned order of the DRP was set aside. The matter was remitted back to the DRP for fresh consideration of the petitioner’s objections and for passing a reasoned order on merits in accordance with law. The DRP was directed to hear the petitioner and pass the order within eight weeks. The Court clarified that it was not expressing any view on the merits of the petitioner’s claims or the findings of the Transfer Pricing Officer. The petitioner was given the liberty to avail of further remedies if still aggrieved by the fresh order. No costs were imposed, and the pending application was disposed of.

---