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Sale of Domain Name amount to Sale of Goods, No Service Tax Leviable: CESTAT

Facts of the case:

  • The appellant is engaged in the business of providing Internet Services to various customers.
  • He is registered with the Service Tax Department under the category of ‘Leased Circuit Services’ & ‘Online Information & Database Access Services’ and regularly filing returns & depositing taxes.
  • The appellant has been purchasing domain names from ICANN accredited Registrars, such as Directi Internet Solutions P. Limited. These domain names are further sold to the appellant‟s customers by charging the price.

Issue Involved:

The department raised demand on the assessee on the amounts received by the appellant for the sale of domain names to various customers. The said demand has been confirmed under the category of ‘computer network services’ or ‘online information and database access or retrieval service’ (‘OIDAR’).

Provisions and Interpretation of Law:

  • Against the demand, the assessee argued that a domain name is required to give an address to a website on the internet, as no data transaction can take place without having a website address.
  • Providing of its domain name is also related to “assess the computer network”, as the domain name is to be linked to internet address by writing computer code. Thus, the domain name has an integral connection or nexus with data transcribed and thus forms part of OIDAR service.
  • After submitting the claim of the assessee the Tribunal held that transaction in the domain name is a transaction in property in the goods and amounts to transaction of sale of goods. The domain name is similar to the trademark, making them the property of the person who owns it.

Conclusion: The issue stands decided in favour of the appellant and the Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that no service tax can be levied on the sale of the domain name as it amounts to the sale of goods.

Author: Niranjan Reddy

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