Quick Summary
In a significant victory for Netflix Entertainment Services India LLP, the Income Tax Appellate Tribunal (ITAT), Mumbai, has dismissed a Rs 445-crore tax demand raised by the Income Tax Department for the AY 2021-22. The Tribunal ruled that Netflix India operates merely as a limited-risk distributor
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FAQ :
The Income Tax Department had raised a tax demand of Rs 445 crore against Netflix India for the assessment year 2021-22.
The ITAT Mumbai quashed the Rs 445 crore tax demand, ruling in favour of Netflix India.
The tribunal determined that Netflix India operates as a limited-risk distributor, performing only marketing, promotion, and customer support functions, and does not own or develop content or technology.
The department alleged that Netflix India should be treated as an entrepreneurial content and technology service provider, attributing 43% of global subscription revenue to the Indian entity.
No, the ITAT found that Netflix India holds no intangible assets, and all operational risks are indemnified by its associated enterprises.
The decision sets a precedent in transfer pricing, reinforcing that subsidiaries performing routine support functions cannot be deemed profit-generating entrepreneurial entities.
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