AMP transfer pricing adjustment fails where no tangible material shows an international transaction and Bright Line Test cannot create one.

Transfer pricing adjustment for advertisement, marketing and promotion expenses was held unsustainable where the Revenue failed to produce tangible material showing an international transaction between the assessee and its associated enterprise. The Tribunal held that the Bright Line Test cannot, by itself, create such a transaction or supply the statutory basis for an adjustment. It also followed Delhi High Court authority that AMP spend incurred for the assessee's own business in a manufacturing case cannot be recharacterised as an international transaction merely because the brand owner may incidentally benefit. The adjustment was deleted.

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Issues: Whether the transfer pricing adjustment on account of advertisement, marketing and promotion expenses was sustainable in the absence of tangible material showing an international transaction between the assessee and its associated enterprise and whether the Bright Line Test could be used to infer such a transaction and determine the adjustment.

Analysis: The assessee disputed the existence of any international transaction in relation to AMP expenditure. The adjustment was founded on comparison with comparables through the Bright Line Test and on the premise that excess AMP spend created marketing intangibles for the associated enterprise. The Tribunal noted that the Revenue must first discharge the initial burden by producing tangible material showing concerted action or an arrangement between the parties. Mere application of the Bright Line Test does not establish the existence of an international transaction, and the test has no statutory mandate for this purpose. The Tribunal also followed the binding Delhi High Court line of authority holding that, in a manufacturing entity's case, AMP expenditure incurred for the assessee's own business cannot be treated as an international transaction merely because the brand owner incidentally benefits.

Conclusion: The adjustment on account of AMP expenses was held unsustainable and was deleted.

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