AMP expenditure was not an international transaction absent evidence of an arrangement to promote the foreign associated enterprise.

Advertisement, marketing and promotion expenditure was not treated as an international transaction under the transfer pricing provisions where no material showed an arrangement or understanding to promote the foreign associated enterprise's brand. The Delhi HC noted that the same issue had already been decided in the assessee's favour in earlier assessment years, that no distinguishable change in facts was shown, and that consistency in tax administration supported the same result. On those facts, the transfer pricing adjustment based on higher AMP spend for the benefit of the foreign enterprise was not sustainable.

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Issues: Whether expenditure incurred on advertisement, marketing and promotion expenses constituted an international transaction within the meaning of the transfer pricing provisions.

Analysis: The assessment year in question involved the same agreement and materially the same facts as earlier and later assessment years in the assessee's own case. The transfer pricing adjustment rested on the premise that higher AMP spend was incurred for the benefit of the foreign associated enterprise. The Court found that the same issue had already been decided in the assessee's favour in earlier years, that no distinguishable factual change was shown, and that the settled law in this jurisdiction did not treat AMP expenditure, by itself, as an international transaction in the absence of material showing an arrangement or understanding to promote the foreign enterprise's brand. The Court also applied the principle of consistency in tax administration.

Conclusion: AMP expenditure was not an international transaction on the facts of the case, and the transfer pricing addition was not sustainable.

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