Fujifilm India Pvt. Ltd. engaged in the business of importing and reselling products procured from its AEs, incurred AMP expenditure during the relevant AY. The TPO treated the AMP expenditure as an international transaction and proposed a TP adjustment by applying the Bright Line Test (BLT). Pursuant to the DRP's directions upholding the application of the Bright Line Test (BLT), the AO passed the final assessment order. Aggrieved, the assessee appealed before the Delhi ITAT
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
The TP adjustment based on the Bright Line Test (BLT) was unsustainable since the Delhi High Court in Sony Ericsson had already rejected BLT for determining the ALP of AMP expenditure. | The AMP expenditure incurred by the assessee for promotion of the "Fuji" brand owned by its AE constituted an international transaction requiring an arm's length adjustment. | The Bright Line Test cannot be applied for determining the ALP of AMP expenditure in view of the binding decision of the Delhi High Court in Sony Ericsson. |
Since no stay had been granted by the Supreme Court against Sony Ericsson, the TP adjustment was liable to be deleted. | As the Revenue's SLP against Sony Ericsson was pending before the Supreme Court, the issue had not attained finality. | In the absence of any contrary decision or stay by the Supreme Court, the Tribunal deleted the TP adjustment while directing that both parties shall be bound by the outcome of the pending SLP before the Supreme Court. |
Ruling Summary -
Delhi ITAT held that TP adjustment on Advertisement, Marketing and Promotion (AMP) expenditure determined by applying the Bright Line Test (BLT) is unsustainable in view of the Delhi High Court's ruling in Sony Ericsson, which rejected BLT as a valid method for benchmarking AMP transactions.
The Tribunal accordingly deleted the TP adjustment while clarifying that the rights and obligations of both parties shall remain subject to the final outcome of the Revenue's pending SLP before the Supreme Court.
