AMP transfer pricing adjustment fails without proof of an international transaction; Bright Line Test cannot substitute for statutory basis.

AMP expenditure could not be treated as an international transaction for transfer pricing purposes without first proving a factual basis for such transaction, and the Bright Line Test had no statutory mandate. The Tribunal followed the jurisdictional High Court's view that the Revenue must discharge the initial burden of establishing an international transaction before any arm's length price exercise can begin. As the record showed no independent foundation beyond comparable-based and BLT reasoning, the adjustment was held unsustainable in law, with the matter restored to the Assessing Officer for fresh action depending on the outcome of pending higher-court proceedings.

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Issues: Whether the transfer pricing adjustment made on account of advertisement, marketing and sales promotion expenses was sustainable in the absence of proof of an international transaction and whether the Bright Line Test could be used to benchmark such expenditure.

Analysis: The dispute concerned AMP expenditure treated by the Revenue as an international transaction on the footing that spend above a comparable level created marketing intangibles for the associated enterprise. The Tribunal noted that the jurisdictional High Court had already held in the assessee's own case that the Bright Line Test had no statutory mandate and that the Revenue must first discharge the burden of showing the existence of an international transaction between the assessee and the associated enterprise before any arm's length price exercise can begin. On the facts, the business model and AMP arrangements remained materially the same, and the record did not show any independent factual foundation for the adjustment apart from comparison with comparables and BLT-based reasoning.

Conclusion: The adjustment for AMP expenditure was held to be unsustainable in law; the assessee succeeded substantially, though the matter was restored to the Assessing Officer for fresh action depending on the outcome of the pending higher-court proceedings.

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