Delhi High Court Judgments — 2015

The ITAT Special Bench had adopted the Bright Line Test (BLT) for determining the existence and arm's length price of international transactions involving AMP expenses. However, the Delhi High Court in *Sony Ericsson* (which this judgment refers to and follows) rejected the BLT as a standalone method for determining the existence of an international transaction for AMP expenses.

The Delhi High Court, in this appeal against the ITAT order, extensively discussed its previous binding judgment in *Sony Ericsson Mobile Communications India P. Ltd. v. Commissioner of Income Tax*. In *Sony Ericsson*, the High Court had rejected the applicability of the Bright Line Test (BLT) for determining transfer pricing adjustments on AMP expenses, especially when the Transactional Net Margin Method (TNMM) was applied to aggregated transactions. The High Court had also clarified that once TNMM is accepted, treating a particular expenditure like AMP as a separate international transaction without proper segregation is impermissible.