Bright Line Test cannot sustain transfer pricing adjustment on AMP expenses, so the protective addition was deleted.

Transfer pricing adjustment on Advertisement, Marketing and Promotion expenses could not be sustained where it was benchmarked by applying the Bright Line Test, because that method has no statutory mandate for determining arm's length price of AMP expenditure. The alleged excess spend could not be treated as compensation payable by the associated enterprise on that basis, including on a protective basis. The protective adjustment was therefore deleted.

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Issues: Whether transfer pricing adjustment on account of Advertisement, Marketing and Promotion expenses could be sustained by applying the Bright Line Test on a protective basis.

Analysis: The adjustment was made by benchmarking AMP expenditure through the Bright Line Test and treating the alleged excess spend as compensation payable by the associated enterprise. The settled position relied upon was that the Bright Line Test has no statutory mandate for determining the arm's length price of AMP expenses, and therefore a transfer pricing adjustment cannot be founded on that method, including on a protective basis.

Conclusion: The protective transfer pricing adjustment on AMP expenses by application of the Bright Line Test was not sustainable and was deleted.

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