India: Taxpayer treated as limited-risk distributor and use of transactional net margin method upheld (tribunal decision)
Taxpayer’s role was contractually and functionally confined to distributing access to foreign affiliates’ digital streaming content in India.
The Mumbai Bench of the Income-tax Appellate Tribunal held that the taxpayer, an Indian affiliate of a U.S. company, was properly treated as a limited-risk distributor (LRD) and that use of the transactional net margin method (TNMM) to allocate profits to the taxpayer produced an arm’s length result appropriate under both domestic law and the OECD Transfer Pricing Guidelines.
The tribunal found that treatment of the taxpayer as an LRD was valid because the taxpayer’s role was contractually and functionally confined to distributing access to its foreign affiliates’ digital streaming content in India, with all intellectual property (IP), content, and technology owned and controlled by its foreign associated enterprises.
The tribunal further found that the TNMM was an appropriate allocation method because its use was supported by functional comparability, and product or market comparability was not essential.
The case is: Netflix Entertainment Services India LLP v. DCIT
Read a November 2025 report prepared by the KPMG member firm in India