Bright Line Test cannot justify AMP transfer pricing adjustment without proof of a specific arrangement or international transaction.

The Tribunal held that the Bright Line Test cannot be used to establish the existence of an international transaction or to determine the arm's length price of advertisement, marketing and promotion expenditure. It found that the Revenue had not discharged the initial burden of showing any specific arrangement or understanding between the assessee and its associated enterprise, and that mere high AMP spend or incidental brand benefit was insufficient to justify the adjustment. In the absence of independent, cogent material apart from the Bright Line Test, the transfer pricing adjustment was unsustainable in law and was set aside, with the matter remitted for fresh action if required in light of the final view of the higher court.

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Issues: Whether the adjustment made towards advertisement, marketing and promotion expenses by applying the Bright Line Test and treating such expenditure as an international transaction was sustainable.

Analysis: The Tribunal held that the Bright Line Test could not be used to determine either the existence of an international transaction or the arm's length price of AMP expenditure. It noted that the Revenue had not discharged the initial burden of proving a specific arrangement or understanding between the assessee and its associated enterprise, and that mere high AMP spend or brand benefit was insufficient to sustain the adjustment. In the absence of cogent material independent of the Bright Line Test, the transfer pricing adjustment could not stand.

Conclusion: The AMP adjustment was held to be unsustainable in law, and the matter was set aside to the Assessing Officer for fresh action if required in light of the final view of the higher court.

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