AMP expenditure cannot be benchmarked absent an international transaction; incidental benefit to the foreign group entity is insufficient.

AMP expenditure was not treated as an international transaction for transfer pricing purposes because no formal or informal arrangement showed that the assessee incurred the spend on behalf of the associated enterprise. The Tribunal held that an incidental benefit to the foreign group entity was insufficient to establish the foundational international transaction required under Chapter X, so benchmarking the AMP spend and applying the bright line test did not arise. The objection on admission of new evidence was not supported by the order and did not call for separate adjudication.

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Issues: Whether expenditure on advertising, marketing and promotion (AMP) constituted an international transaction capable of transfer pricing adjustment and whether any ALP adjustment could be sustained thereon.

Analysis: The Tribunal noted that a transfer pricing adjustment under Chapter X requires the prior existence of an international transaction between associated enterprises. It held that the record did not show any formal or informal agreement obliging the assessee to incur AMP expenditure on behalf of the associated enterprise, and that an incidental benefit to the foreign group entity was not enough to characterise the spend as an international transaction. The Tribunal followed its earlier decisions in the assessee's own case and reiterated that, in the absence of the foundational international transaction, the question of benchmarking the AMP spend or applying the bright line test did not arise. The objection regarding admission of new evidence was not found to be supported by the order and did not lead to any separate adjudication.

Conclusion: AMP expenditure was not an international transaction and no transfer pricing adjustment could be made in respect of it; the assessee succeeded on this issue.

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