The Tax Publishers

International Taxation--Royalty Income

Income From Domain Name Registration--Whether Constitutes Royalty Income

CA. Manoj Gupta

The domain name is an internet network address that is readable in human language. Domain names are formed by the rules and procedures of the Domain Name System ('DNS'). Any name registered in the DNS is a domain name. Controversy erupted that whether income for Domain Name Registration is royalty or not. On the basis of relevant article in DTAA the different benches of ITAT has opined differently on the issue. The learned author examines the issue.

1. What is domain name

The domain name is an internet network address that is readable in human language. Domain names are formed by the rules and procedures of the Domain Name System ('DNS'). Any name registered in the DNS is a domain name. In general, a domain name represents an Internet Protocol ('IP') resource. Computers or any other internet resources communicate by using numbers, called IP addresses, to contact each other. Domain names serve to identify such internet resources with a text base label that is easier to memorise than the numerical addresses used in the Internet Protocols. Domain names are also used as simple identification labels to indicate ownership or control of a resource. Organisations can choose a domain name that corresponds to their name, helping internet users to reach them easily. Thus, with the domain name, an organisation named ABC can state its website as 'abc.com' instead of 123.876.321/abc/.

2. Domain name registration process

The domain name registration process involves ICANN, Registry, Registrar, and Reseller. The role of each party in this process is as under:

(a) ICANN is an organisation charged with overseeing the name and number systems of the Internet. In addition to ICANN, each Top-Level Domain ('TLD') is maintained and serviced technically by an administrative organisation operating a registry.

(b) The Registry is responsible for maintaining the database of names registered with the TLD it administers. ICANN manages the TLD with the help of hundreds of domain name Registries spread throughout the world. Each of these Registries is certified by and subject to the direct supervision of ICANN. The role of the Registry operators within the internet ecosystem includes accepting registration requests and keeping the master database of all domain names registered in each TLDs. The Registry receives registration information from each domain name Registrar authorised to assign names in the corresponding TLD and publishes the information using a special service.

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