The assessee contended that the AMP expenditure was not an international transaction and, could not be subjected to a TP adjustment. It relied on the earlier ITAT decisions in its own case, wherein it was held that AMP expenditure was not an international transaction.

The Revenue contended that the CIT(A) erred in holding the Bright Line Test (BLT) unsustainable and argued that BLT is an internationally accepted economic tool for determining the expenditure that would ordinarily be incurred by a routine distributor.

The ITAT held that AMP expenditure was not an international transaction in the assessee’s case and, consequently, no adjustment to the ALP was warranted. It followed the earlier decisions in the assessee’s own case and rejected the Revenue’s grounds.

The assessee’s position was also supported by the principle that the existence of an international transaction must first be established before determining its ALP. A TP adjustment cannot be made merely by assuming that excessive AMP expenditure resulted in a benefit to the associated enterprise

The Revenue further argued that the CIT(A) was incorrect in relying on judicial decisions holding that the existence of an international transaction had to be established before making an AMP adjustment, and questioned the rejection of the TPO’s BLT approach.

Relying on the jurisdictional High Court principles, the ITAT observed that the Revenue bears the burden of establishing the existence of an international transaction. An assumed or notional price cannot form the basis for a TP adjustment.