2026 (3) TMI 1495 - AT - Income Tax

Bright line test cannot sustain transfer pricing adjustment for AMP expenses where prior decisions cover the issue.

The Delhi ITAT reiterated that delay in filing an appeal may be condoned where administrative transfer of charge and other stated circumstances furnish ... Transfer pricing adjustment on AMP expenses - Bright Line Test applicability - Consistency with earlier and subsequent years - international transaction of AMP expenses - HELD THAT: - The Tribunal found that the Department could not distinguish the facts from the assessee's preceding and subsequent assessment years, in which the same controversy had already been considered. It also noted the absence of any subsequent development in law to displace the basis adopted by the Commissioner (Appeals). Since the adjustment rested on application of the Bright Line Test, which stood disapproved in the binding precedent noticed by the Tribunal, and the appellate authority had followed decisions in the assessee's own case, no interference was warranted. [Paras 3, 4] The deletion of the AMP-related transfer pricing adjustment was upheld and the Revenue's appeal was dismissed. Final Conclusion: Tribunal upheld the relief granted by the Commissioner (Appeals). The Revenue's challenge to the deletion of the AMP transfer pricing adjustment for AY: 2012-13 failed. Issues: (i) Whether the delay of 520 days in filing the appeal deserved to be condoned; (ii) Whether transfer pricing adjustment could be sustained in respect of advertising, marketing and promotion expenses on application of the bright line test.Issue (i): Whether the delay of 520 days in filing the appeal deserved to be condoned.Analysis: The delay was explained as arising from administrative circumstances, including transfer of charge among officers. The length of delay was substantial, but the reasons furnished were accepted as sufficient for the purpose of condonation.Conclusion: The delay was condoned.Issue (ii): Whether transfer pricing adjustment could be sustained in respect of advertising, marketing and promotion expenses on application of the bright line test.Analysis: The issue had already been considered in the assessee's own earlier and subsequent assessment years, and the consistent view, including reliance on the Delhi High Court decision in Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT, was that the bright line test could not be applied for making an adjustment in respect of AMP expenses. No factual distinction or subsequent change in law was shown to justify a different view.Conclusion: The transfer pricing adjustment on AMP expenses was not sustainable and the relief granted by the first appellate authority called for no interference.Final Conclusion: The appeal was dismissed and the order granting relief to the assessee was sustained.Ratio Decidendi: A transfer pricing adjustment in respect of AMP expenses cannot be made by applying the bright line test where the issue stands covered by earlier binding or consistent decisions and no distinguishing facts or change in law is shown.