Assessee’s Contentions

Revenue’s Contentions

Court’s Judgement

The assessee contended that TNMM was appropriate as uncontrolled transactions involving comparable TV syndication rights and licensed Hollywood content were unavailable. Therefore, it undertook a lateral search and selected software/hardware distribution companies based on functional similarity.

The Revenue contended that the software/hardware comparables were not functionally comparable with the assessee, as the products distributed by them were different from the licensed Hollywood content. Accordingly, the assessee’s TNMM analysis could not be relied upon.

The Tribunal held that merely because the comparables dealt in software/hardware instead of Hollywood content, they could not automatically be rejected. The difference in products was a factor to be examined, but did not by itself invalidate the TNMM analysis.

The assessee furnished an alternative computation under RSM and disputed the TPO’s ad hoc allocation of 10% of revenue to the assessee, contending that there was no economic or scientific basis for such allocation.

The Revenue relied on the TPO’s FAR-based allocation, under which weightages of 15:75:10 were assigned to FAR. It contended that the assessee’s own alternative computation broadly supported the revenue allocation adopted by the TPO.

The Tribunal held that the TPO had not provided reliable evidence supporting the 15:75:10 FAR weightages. The assessee’s alternative computation could not be treated as an admission validating the RSM.