ESS, a United States based entity having a branch office and headquarters in Singapore, was engaged in the business of owning and operating sports channels in certain territories in Asia including India. Under agreements with third parties (international sports bodies) for various sports events, it held broadcasting rights for sports events for certain number of years with a well-defined year-wise consideration payable each year on the happening of the sports events. The assessee, acquired, the bundle of sport broadcasting rights held by ESS. To substantiate the agreed price of 1211 USD million, the assessee furnished a report of an independent valuer determining the total value of the bundle of sport broadcasting rights considering the finite period value at 663 USD million and the terminal value at 548 USD million adopting the discounted cash flow method. The assessee claimed deduction of Rs. 1013.26 crores on this score for the AY. 2014-15. It applied the comparable uncontrolled price method for demonstrating that the international transaction of acquiring the bundle of sport broadcasting rights was at arm’s length price. For doing so, the assessee adopted the comparable uncontrolled transaction of ESS acquiring such bundle of sport broadcasting rights for a total sum of 1388 USD million. Since the overall purchase price of 1211 USD million agreed between ESS and the assessee was 9.5 percent less than the agreed price between ESS and third parties (international sport bodies), the assessee claimed that the international transaction was at arm’s length. The Transfer Pricing Officer determined the arm’s length price of the international transaction at 411 USD million taking the arm’s length price of the terminal value at nil; and the arm’s length price of the finite period at 411 USD million. The Tribunal held that valuation of the bundle of sport broadcasting rights was a highly technical matter, which could be done only by a person having expertise in the field. It, therefore, set aside the assessment order and remitted the matter with a direction to the Revenue to ascertain the correctness of the assessee’s valuation reports by getting the valuation done through an expert in the field. For the AY. 2015-16, the assessee claimed deduction towards the value of international transaction of “purchase of the bundle of sport broadcasting rights” at Rs. 3075,24,15,714. The assessee had adopted the “other method” in its transfer pricing study report as the most appropriate but argued for adoption of the comparable uncontrolled price before the authorities and the Tribunal. The question was referred to a Special Bench:

As there were no comparable uncontrolled transaction prices available, the comparable uncontrolled price method was not the most appropriate method. There was a transfer of bundle of sports broadcasting rights as per master rights agreement, which was a unique intangible asset, and the “other method” would be more appropriate to value those rights at different point of time based on changes in economic conditions and market situations. The fortiori is that the “other method” should be considered as most appropriate only when none of the other five specific methods is found to be capable of application. The comparable uncontrolled price method would prevail provided the comparable uncontrolled data required for it is available. The mandate of the comparable uncontrolled price method follows that the benchmark price is the actually transacted price in a comparable uncontrolled situation and the benchmark property is the same property transferred, whereas the “other method” covers the price transacted or the price that would have been transacted under same or similar uncontrolled conditions.(AY. 2015-16)