Supreme Court Refuses To Interfere With Delhi HC Ruling On GoDaddy Domain Fees Under India-US DTAA

The Supreme Court on Monday refused to interfere with the Delhi High Court order holding that payments received by GoDaddy.com LLC from Indian customers towards domain-name registration services are not chargeable to income tax in India under the India-US Double Taxation Avoidance Agreement (DTAA).

A Bench of Justices K.V. Viswanathan and Arun Palli after hearing the parties, refused to interfere with the Delhi High Court's order.

The Supreme Court was hearing the Income Tax Department's special leave petition against GoDaddy.com LLC, challenging the Delhi High Court ruling that payments received by GoDaddy for domain-name registration services from Indian customers are not taxable in India under the India-USA Double Taxation Avoidance Agreement (DTAA).

The High Court had also criticised the tax authorities for rejecting GoDaddy's application for a nil withholding-tax certificate under Section 197 of the Income Tax Act, 1961, despite existing judicial precedents on the issue.

The dispute arose from GoDaddy's challenge to the tax authorities' refusal to issue the nil-TDS certificate for payments received from Indian customers towards domain-name registration services.

The Delhi High Court had directed issuance of the nil-TDS certificate and had also criticised the tax authorities for not following existing judicial precedents.

Appearing for the Income Tax Department, ASG S. Dwarkanath clarified that the Department was not pressing the merits of the underlying taxability issue. He submitted:

“I have not a parallel on the merits, My only contention is that the impugned order is even relieved beyond the prayer in the writ.”

He pointed out that the prayer before the High Court was restricted to the relevant assessment year.

“Prayer was only for lesser deduction for the year, 2025-26. But to that extent there is no difficulty. But to give it for future, My Lords, is not acceptable.”, ASG submitted.

Interjecting, the Court indicated, “The authority is already dealing with the subsequent application under Section 197. It cannot be bound by the direction given in paragraph one, if it comes to a conclusion...”

The Bench further indicated that a subsequent application could be considered independently if the tax authorities reached a different conclusion on the relevant tax issues.

The ASG reiterated that the Department was not challenging the merits of the High Court's observations on the permanent-establishment issue. He submitted that circumstances could change in subsequent years, including changes in law or other relevant issues.

The Court however, questioned why the Department should object to the High Court's order insofar as it related to the particular year for which the application had been made.

The Bench observed in substance, that the Department's difficulty appeared to concern the continuation of the relief for future years rather than the decision concerning the particular assessment year.

The ASG submitted, “Not just on the PE issue, there are other issues. There could be a change in law. I am entitled to take a relook at the matter.”

The Bench responded that there was no challenge to the underlying judicial opinion itself and considered whether the High Court's order could properly be understood as foreclosing the Department from examining subsequent applications.

The ASG clarified saying, “I didn't challenge the opinions. Any judgment, as long as it is not immunising the individual verdict, and removing the basic...”

The ASG ultimately maintained that his objection was limited to the prospective operation of the High Court's direction and not to the finding concerning the relevant year.

The Supreme Court after considering the submissions, refused to interfere with the Delhi High Court's order insofar as the dispute before it was concerned.