AMP transfer pricing benchmarking requires functional comparison, not the bright line test, and the matter was sent back for fresh review.

Transfer pricing adjustment for advertising, marketing and promotion expenses was held unsustainable on the existing record because the AMP functions of the assessee and the comparables had not been properly examined or compared. The Tribunal noted that the bright line test could not be applied and that benchmarking must consider the actual AMP functions performed, with different treatment for manufacturers and distributors. As the material on record was insufficient to test these principles, the transfer pricing analysis was set aside and the matter remitted to the AO/TPO for fresh adjudication in accordance with law and the applicable Delhi High Court principles.

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Issues: Whether the addition made on account of transfer pricing adjustment towards advertising, marketing and promotion expenses was sustainable, and whether the matter required fresh examination in the light of the governing principles for benchmarking such expenses.

Analysis: The dispute concerned the treatment of AMP expenditure as an international transaction and the method for determining its arm's length price. The Tribunal noted that the bright line test could not be applied, that AMP functions must be compared with similar AMP functions of comparables, and that the approach in a manufacturer case differs from that in a distributor case. It also noted that the record did not contain the necessary material to assess and compare the AMP functions actually performed by the assessee and the comparables. In these circumstances, the existing transfer pricing analysis could not be affirmed and the matter had to be reconsidered by the AO/TPO in accordance with law and the applicable parts of the Delhi High Court ruling.

Conclusion: The addition was set aside and the matter was remitted to the AO/TPO for fresh adjudication.

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