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Tax Publishers
Arm's Length Pricing (ALP) of media rights -
whether CUP method adopted for one year can be resiled in another year -
Bundled Sports Broadcasting (BSB) rights whether these can be cherry picked and
evaluated instead of aggregating the same
Facts :
Assessee a subsidiary of Star sports was sub-licensed
BSB (Bundled Sports Broadcasting) from its offshore AE for a period of 5 years.
The payout would be 90.5% of the payout what the AE would have done. This was
buttressed with a DCF valuation from independent valuers. During the
earlier AY 2014-15 the assessee adopted the price paid by the AE to be the CUP
ALP and since they ended up paying only 90.5% of it was claimed not to be
against TP provisions. AO gave his reading of the BSB rights and made additions
of 66% of the payout the case went to ITAT and the ITAT remanded it to the AO
for fresh consideration. Pending this adjudication, in the next asst. year AY
2015-16, assessee adopted "other method" in the TP by producing more
than one valuation report and some expert opinions on the ALP value of the BSB
rights. Revenue once again sustained the additions @ 66% of the payouts made by
the assessee alleging that there were cross subisidizations of the BSB
payouts if individually seen and it was a finite period contract and thus
terminal value ought not to be considered in the ALP other method benchmarking.
DRP upheld the additions of AO/TPO. On further appeal, ITAT constituted a
special bench to decide the question - whether the method of ALP can be resiled
from year to year on the same transaction and the computation method by
assessee was correct and was at ALP.
Held in favour of the assessee that they may resile the
method of ALP year on year. The "other method" adopted was the
correct method (thus held the ITAT in a split tie breaker verdict amongst the
members). CUP method was held to be inappropriate in this case. The other
method was held to be at ALP as valuation of media rights is a complex issue
and the assessee had secured expert valuations and manifestations while revenue
could not produce evidences adducing such facts for their TP add backs.
Ed. Note : The
decision is a 120 paged and has path breaking findings and is a worthy case of
a landmark verdict.
Case : Star India
(P) Ltd. v. ACIT 2023 TaxPub(DT) 3505 (Mum-Trib)
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