Treaty relief and royalty principles: domain registration and standardised web services were not taxable as royalty or fees for included services.

A fiscally transparent LLC was treated as entitled to India-USA treaty benefits because treaty eligibility turned on liability to tax, not actual foreign tax payment, and a valid tax residency certificate supported access to relief. Domain name registration receipts were not royalty because a registrar only facilitates registration and does not grant a right to use its property or transfer such a right. Web hosting, web designing, SSL certification and on-demand product receipts were not fees for technical services or fees for included services, as the services were standardised and did not make available technical knowledge, skill, know-how or processes. The additions were deleted.

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Issues: (i) Whether a fiscally transparent LLC was entitled to benefits under the India-USA tax treaty; (ii) Whether receipts from domain name registration services were taxable as royalty; (iii) Whether receipts from web hosting, web designing, SSL certification and on-demand products were taxable as fees for technical services or fees for included services, including on the basis of the make available test.

Issue (i): Whether a fiscally transparent LLC was entitled to benefits under the India-USA tax treaty.

Analysis: The assessee was a liable-to-tax entity for treaty purposes notwithstanding that it was fiscally transparent under US domestic law. The relevant inquiry was not actual tax payment in the foreign jurisdiction but liability to taxation. The record and the cited coordinate bench authority supported treaty access where the assessee held a valid tax residency certificate.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether receipts from domain name registration services were taxable as royalty.

Analysis: The assessee acted only as a registrar facilitating registration of domain names and did not own the domain names or possess proprietary rights in them. Mere facilitation of registration did not amount to granting a right to use or transfer the right to use any property of the assessee. On that footing, the receipts could not be characterised as royalty under the domestic law or the treaty.

Conclusion: The issue was decided in favour of the assessee.

Issue (iii): Whether receipts from web hosting, web designing, SSL certification and on-demand products were taxable as fees for technical services or fees for included services, including on the basis of the make available test.

Analysis: Web hosting and allied services were held to be distinct from domain registration and not ancillary or subsidiary to any royalty-bearing right. The services were standardised customer services and did not transmit technical knowledge, skill, know-how or processes so as to satisfy the make available requirement. Accordingly, the receipts did not fall within the treaty definition of fees for included services, nor within the corresponding domestic law provision as applied by the Revenue.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The additions made on account of treaty denial, royalty and fees for technical services were deleted, and the appeals succeeded with consequential relief.

Ratio Decidendi: A domain name registrar that does not own the domain name cannot be treated as granting a right to use its property, and standardised web-related services do not become fees for included services unless they make available technical knowledge or skills to the recipient.

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