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“bright line test”

Transfer PricingSection 92CSection 92C120 judgments

The decision most relied on for bright line test is Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT (374 ITR 118), cited in 499 judgments on BharatTax.

Leading authorities on bright line test

Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT
374 ITR 118 · 2015 · High Court
499
citing judgments

The existence of an international transaction for Advertising and Marketing Promotion (AMP) expenditure requires the revenue to discharge the burden of proof. An explanation inserted under Section 92B does not automatically make AMP expenditure an international transaction.

Maruti Suzuki India Ltd. v. CIT
381 ITR 117 · 2016 · High Court
220
citing judgments

The Bright Line Test (BLT) is not a recognized method under the Income-tax Act and Rules for benchmarking advertising, marketing, and promotion (AMP) expenses or for determining the existence of an international transaction or its Arm's Length Price. The Revenue must first establish the existence and price of an international transaction before seeking an ALP adjustment.

Bausch & Lomb Eye Care (India) Pvt. Ltd. v. Additional CIT
381 ITR 227 · 2016 · High Court
127
citing judgments

The existence of an international transaction must be established before its arm's length price can be determined. An alleged 'excessive' AMP expenditure cannot unilaterally expand the scope of an international transaction if its existence is contested.

Whirlpool of India Ltd. v. DCIT
381 ITR 154 · 2016 · High Court
119
citing judgments

Advertisement, Marketing, and Promotion (AMP) expenditure incurred by an Indian entity directly benefits its own business and cannot be automatically treated as an international transaction for global brand building by associated enterprises without specific statutory provisions or proper analysis.

Maruti Suzuki India Ltd. (MSIL) v. Addl. CIT, TPO
328 ITR 210 · 2010 · High Court
39
citing judgments

AMP expenditure is not an international transaction. The Bright Line Test is not a valid basis for determining the existence of an international transaction or computing the arm's length price.

LG Electronics India Pvt. Ltd. v. ACIT
29 Taxmann.com 300 · 2013 · High Court
37
citing judgments

The 'bright line test' is not an appropriate method for determining the existence of an international transaction for calculating arm's length price. This ruling overrules prior special bench decisions on AMP expenses.

308 ITR 199 (Del) and CIT v. Spice Distribution Ltd.
374 ITR 30 · 2015 · High Court
28
citing judgments

Expenditure on advertisement and sales promotion is generally treated as business expenditure allowable under section 37 of the Income-tax Act. The Assessing Officer cannot treat revenue expenditure as deferred revenue expenditure as the Act does not have such a concept.

LG Electronics v. ACIT
22 ITR 1 · 2013 · Supreme Court
23
citing judgments

The Special Bench decision in LG Electronics v. ACIT affirmed the applicability of the 'Bright Line Test' for determining international transactions related to advertising, marketing, and promotion (AMP) expenses.

Judgments citing bright line test

Astrazeneca Pharma India Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle-1(1)(1), Bangalore

In the result, appeal of the assessee is partly allowed for statistical purposes

ITA 284/BANG/2021[2016-17]Status: DisposedITAT Bangalore25 Jun 2024AY 2016-17

Bench: Shri Chandra Poojari & Shri Soundararajan K.

For Appellant: Sri Nikhil Tiwari, A.RFor Respondent: Ms. Neera Malhotra, D.R
Section 143(3)Section 37Section 37(1)

Court in Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT [2015] 374 ITR 118 was followed and it was held that the bright line test followed by the Revenue in making the AMP TP adjustment cannot be accepted. In the present case also, no material is brought on record

Vodafone India Limited, Mumbai vs. Assistant Commissioner of Income Tax-8(3)(2), Mumbai

ITA 2834/MUM/2017[2012-13]Status: DisposedITAT Mumbai17 May 2024AY 2012-13
For Appellant: Shri P.J. PardiwalaFor Respondent: Shri T. Sankar
Section 115JSection 143(3)Section 144C(13)Section 144C(5)Section 14ASection 234DSection 271(1)(c)Section 36(1)(iii)Section 37Section 40

IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER

Vodafone India Ltd, Mumbai vs. Asst CIT 8(3)(2), Mumbai

ITA 884/MUM/2016[2011-12]Status: DisposedITAT Mumbai17 May 2024AY 2011-12
Section 115JSection 143(3)Section 144C(13)Section 144C(5)Section 14ASection 234DSection 271(1)(c)Section 36(1)(iii)Section 37Section 40

IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER

DCIT 8(3)(2), Mumbai vs. M/S Vodafone Idea Limited (Earlier Known As Vodafone India Limited Which Now Stands Merged With Idea Cellular Limited (Icl) and Consequently Known As Vodafone Idea Limited), Mumbai

ITA 1919/MUM/2016[2011-12]Status: DisposedITAT Mumbai17 May 2024AY 2011-12
For Appellant: Shri P.J. PardiwalaFor Respondent: Shri T. Sankar
Section 115JSection 143(3)Section 144C(13)Section 144C(5)Section 14ASection 234DSection 271(1)(c)Section 36(1)(iii)Section 37Section 40

IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER

Nikon India Private Ltd., Gurgaon vs. ACIT Central Circle-3(1), Gurgaon

In the result, the appeal of the assessee is allowed

ITA 1628/DEL/2022[2018-19]Status: DisposedITAT Delhi19 Mar 2024AY 2018-19

Bench: Shri Saktijit Dey- & Shri Pradip Kumar Kedia-

For Appellant: Shri Vishal Kalra, AdvocateFor Respondent: Shri Rajesh Kumar, CIT (DR)
Section 143(3)Section 144C(13)Section 144C(8)Section 154Section 92BSection 92C

High Courts). 8. That on the facts and circumstances of the case and in law, the AO / TPO grossly erred in applying Bright Line Test ('BLT') for making I.T.A. No.1628/Del/2022 3 transfer pricing adjustment amounting to INR 101,10,35,905, on protective basis, without appreciating that BLT has been

Yokogawa India Limited, Bangalore vs. Deputy Commissioner of Income Tax Large Taxpayers Unit, Bangalore

In the result, the appeal by the assessee is partly allowed

ITA 2088/BANG/2017[2013-14]Status: DisposedITAT Bangalore01 Feb 2024AY 2013-14

Bench: Shri George George K. & Shri Laxmi Prasad Sahu

For Appellant: Shri Nageshwar Rao, AdvocateFor Respondent: Ms. Neera Malhotra, CIT(DR)(ITAT), Bengaluru
Section 143(3)Section 14A

method of Transactional Net Margin Method ("TNNM"). 9. Impugned order inappropriately determines the ALP of payment of GSMAF by using the bright line test which is not a method recognized under the Act. Management Fees ("MF") 10. Impugned order erroneously determines the TP adjustment in relation to MF by concluding ... applying the benefit test. The TPO treated the payments towards GSMAF and proceeded to benchmark the same by using the bright line test. Page 31 of 40 43. The ld. AR has filed written submissions on this issue as under:- 11 This issue has been recurring issue since

Ge Precision Healthcare Llc, Usa vs. The Assistant Commissioner of Income Tax, Circle 1(3)(1), Minto Road, New Delhi

In the result, the appeal of the assessee is allowed

ITA 2623/DEL/2023[AY 2021-22]Status: DisposedITAT Delhi17 Jan 2024

Bench: Sh. Saktijit Deydr. B. R. R. Kumar

For Appellant: Sh. Ravi Sharma, AdvFor Respondent: Sh. Vizay B. Vasanta, CIT-DR
Section 143(3)Section 144C(13)Section 234ASection 234BSection 234FSection 270ASection 56Section 9(1)(vii)

decided on the basis of degree of involvement in the activities by the non-resident taxpayer in a source country. One of the bright line tests is the quantum of business expenses. In this case, admittedly, the assessee has not incurred any business expenses in India. Thus, all the significant

Luxottica India Eyewear Private Ltd., Haryana vs. Circle 13(1), Delhi

ITA 793/DEL/2022[2017-18]Status: DisposedITAT Delhi07 Dec 2023AY 2017-18

Bench: Sh. Shamim Yahya & Sh. Anubhav Sharmaita No. 793/Del/2022, A.Y. 2017-18 Luxottica India Eyewear Pvt. Vs. Dcit Ltd. Circle 13(1), 7Th Floor, Dlf Cyber City, Delhi Gurgaon, Haryana-122002 Pan : Aabcl3871C (Appellant) (Respondent)

For Appellant: Shri Nageswar Rao &For Respondent: Sh. Manvendra Goyal, CIT(DR)
Section 143(3)Section 144BSection 144CSection 92C

Conscious of the fact that the Hon'ble Delhi High Court has rejected the contention of the Revenue on the applicability of the bright line test and the consequent determination of separate ALP of the AMP expenses, the TPO adopted this alternative approach in this year, which has been outlined ... said order is as under: "3.1 The Hon'ble Delhi High Court in the case of Sony Ericsson (supra) rejected the Bright Line Test (BLT) method for computing the arm's length price of the AMP transaction and directed that for the purpose of comparability, the comparable should be identified

Haier Appliances India Private Limited, Delhi vs. DCIT, It & Tp Delhi 2(1)(1), New Delhi

In the result the appeal of the assessee in ITA No

ITA 417/DEL/2022[2017-148]Status: DisposedITAT Delhi17 Oct 2023AY 2017-148

Bench: Shri N.K. Billaiya & Ms Astha Chandra

For Appellant: Shri Nageshwar Rao, AdvFor Respondent: Shri Rajesh Kumar, CIT-DR
Section 143(3)Section 254Section 92BSection 92F

facts and in law by incorrectly holding the AMP expense incurred by the Appellant to be 'non-routine on the basis of a “bright line test”. 13. The TPO / AO erred on facts and in law by considering routine selling expenses for computing the alleged excess AMP expenditure. GROUNDS AGAINST ... adjustment used to adjust net profit margin of comparable companies purportedly to equalise functions, appears to be mere mirror image of already invalidated Bright Line Test (BLT) adopting same ratio, rationale and parameters 20. Without prejudice to any other contentions, the AMP transaction can be benchmarked using the adjusted Resale

Amadeus India Pvt. Ltd., New Delhi vs. DCIT, Circle-1(1), New Delhi

In the result, assessee’s appeal stands partly allowed as above

ITA 468/DEL/2022[2017-18]Status: DisposedITAT Delhi24 Aug 2023AY 2017-18

Bench: SHRI SHAMIM YAHYA (Accountant Member), SHRI CHALLA NAGENDRA PRASAD (Judicial Member)

For Appellant: Shri Tarandeep Singh, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR
Section 14ASection 92BSection 92C(3)Section 92F

holding that there exist a transaction for AMP Brand Promotion, TPO proposed an adjustment to total income as under :- (i) Protective Adjustment applying Bright Line Test (BLT) as under :- 6 ITA No.468/Del./2022 Particulars Amount (Rs.) Value of Gross Sales 138,95,55,834 AMP/Sales of the Comparable 0.39% Amount

Nikon India P.Ltd, Gurgaon vs. ACIT, Circle-3(1), Gurgaon

In the result, the appeal of the assessee is partly allowed and the Stay

ITA 1800/DEL/2022[2017-18]Status: DisposedITAT Delhi27 Jul 2023AY 2017-18

Bench: Shri M. Balaganesh & Shri Yogesh Kumar U.S.Assessment Year: 2017-18 & Stay Application No.256/Del/2022 (Ita No.1800/Del/2022) Assessment Year: 2017-18 Nikon India Pvt. Ltd., Vs Acit, Plot No.71, Sector-32, Circle-3(1), Institutional Area, Gurgaon. Gurgaon, Haryana – 122001. Pan: Aaccn5100F (Appellant) (Respondent) Assessee By : Shri Vishal Kalra & Shri Ankit Sahani, Advocates; & Shri Yishu Goel, Ar Revenue By : Shri Rajesh Kumar, Cit-Dr Date Of Hearing : 19.07.2023 Date Of Pronouncement : 27.07.2023 Order Per M. Balaganesh, Am: The Appeal In Ita No.1800/Del/2022 & The Stay Application In Sa No.256/Del/2022 Filed By The Assessee Arise Out Of The Order Of Assessment Passed U/S 143(3) R.W.S. 144C(13) R.W.S. 144B Of The Income-Tax Act, 1961 Sa No.256/Del/2022 (Hereinafter Referred To As ‘The Act’) Dated 25.07.2022 By The Assessment Unit, Of The Income Tax Department (Hereinafter Referred To As ‘Ld. Ao’).

For Appellant: Shri Vishal Kalra &For Respondent: Shri Rajesh Kumar, CIT-DR
Section 143(3)Section 144C(5)Section 92C

well as protective basis:- Method of Benchmarking Adjustment in INR Substantive Residual Profit Split Method 71,45,33,227 (RBW )- Intensity Test Protective Bright Line Test (BLT) 127,52,94,223 7. The ld. AO passed a draft assessment order u/s 143(3) of the Act on 23.09.2021 by making ... addition on account of transfer pricing adjustment of Rs.127,52,94,223/- was made in respect of AMP expenses on protective basis using Bright Line Test and Rs. 71,45,33,227/- was made on substantive basis using Intensity Test. With regard to the issue of AMP expenses being

Perfetti Van Melle India Pvt. Ltd., Gurgaon vs. ACIT, Circle-3(1), Gurgaon

In the result, the appeals filed by the assessee stand partly allowed

ITA 454/DEL/2022[2017-18]Status: DisposedITAT Delhi30 May 2023AY 2017-18
For Appellant: Shri Deepak Chopra, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR
Section 92B

Salora International Ltd. [2009] 308 ITR 199 (Delhi). 16 ITA Nos.889 & 890/Del./2021 ITA No.454/Del./2022 Accepting the parameters of the "bright line test" and if the said para meters and tests are applied to Indian companies with reputed brands and substantial AMP expenses would lead to difficulty and unforeseen ... both manufacturers and owners of intangible property in the form of brand names. They incur substantial AMP expenditure. If we apply the "bright line test" with reference to indicators mentioned in paragraph 17.4 as well as the ratio expounded by the majority judgment in L. G. Electronics India

Perfetti Van Melle India Pvt. Ltd., Gurgaon vs. ACIT, Circle-3(1), Gurgaon

In the result, the appeals filed by the assessee stand partly allowed

ITA 890/DEL/2021[2012-13]Status: DisposedITAT Delhi30 May 2023AY 2012-13
For Appellant: Shri Deepak Chopra, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR
Section 92B

Salora International Ltd. [2009] 308 ITR 199 (Delhi). 16 ITA Nos.889 & 890/Del./2021 ITA No.454/Del./2022 Accepting the parameters of the "bright line test" and if the said para meters and tests are applied to Indian companies with reputed brands and substantial AMP expenses would lead to difficulty and unforeseen ... both manufacturers and owners of intangible property in the form of brand names. They incur substantial AMP expenditure. If we apply the "bright line test" with reference to indicators mentioned in paragraph 17.4 as well as the ratio expounded by the majority judgment in L. G. Electronics India

Perfetti Van Melle India Pvt. Ltd., Gurgaon vs. ACIT, Circle-3(1), Gurgaon

In the result, the appeals filed by the assessee stand partly allowed

ITA 889/DEL/2021[2011-12]Status: DisposedITAT Delhi30 May 2023AY 2011-12
For Appellant: Shri Deepak Chopra, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR
Section 92B

Salora International Ltd. [2009] 308 ITR 199 (Delhi). 16 ITA Nos.889 & 890/Del./2021 ITA No.454/Del./2022 Accepting the parameters of the "bright line test" and if the said para meters and tests are applied to Indian companies with reputed brands and substantial AMP expenses would lead to difficulty and unforeseen ... both manufacturers and owners of intangible property in the form of brand names. They incur substantial AMP expenditure. If we apply the "bright line test" with reference to indicators mentioned in paragraph 17.4 as well as the ratio expounded by the majority judgment in L. G. Electronics India

L'Oreal India Private Limited, Mumbai vs. Assistant Commissioner of Income Tax Income Tax, Circle-7(1)(1), Mumbai

In the result, the appeal filed by the assessee is partly allowed

ITA 2269/MUM/2022[2018-19]Status: DisposedITAT Mumbai03 May 2023AY 2018-19

Bench: Shri Om Prakash Kant, Am & Ms. Kavitha Rajagopal, Jm L’Oreal India Private Limited Asst. Cit, Circle-7(1)(1) A-Wing, 8Th Floor, Marathon Futurex, Mumbai-400 020 N.M.Joshi Marg, Lower Parel, Vs. Mumbai-400 013

For Appellant: Shri Niraj ShethFor Respondent: Dr. Yogesh Kamat
Section 143(3)Section 4Section 92Section 92BSection 92C

arbitrarily and in an adhoc manner selecting comparable companies for manufacturing and distribution segment without adopting a scientific search process for applying bright line test ('BLT') using 'Other Method to determine the arm's length price of the AMP expenses incurred by the Appellant; Business and commercial expediency 13. Erred

ACIT, Circle- 16(1), New Delhi vs. Timex Group India Ltd., New Delhi

In the result, assessee’s appeals are partly allowed, whereas,

ITA 2015/DEL/2018[2010-11]Status: DisposedITAT Delhi27 Mar 2023AY 2010-11

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Dey

Section 92B

expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order dated ... settled principle of law that existence of international transaction qua AMP expenses requires to be established de hors the "bright line test", particularly when the taxpayer has categorically denied the existence of international transaction and 81% of its 4 | P a g e ITA No.1504 & 1505/Del/2018 ITA No.2013 & 2015/Del/2018 turnover

ACIT, Circle- 16(1), New Delhi vs. Timex Group India Ltd., New Delhi

In the result, assessee’s appeals are partly allowed, whereas,

ITA 2013/DEL/2018[2009-10]Status: DisposedITAT Delhi27 Mar 2023AY 2009-10

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Dey

Section 92B

expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order dated ... settled principle of law that existence of international transaction qua AMP expenses requires to be established de hors the "bright line test", particularly when the taxpayer has categorically denied the existence of international transaction and 81% of its 4 | P a g e ITA No.1504 & 1505/Del/2018 ITA No.2013 & 2015/Del/2018 turnover

Timex Group India Ltd., New Delhi vs. ACIT, Circle- 16(1), New Delhi

In the result, assessee’s appeals are partly allowed, whereas,

ITA 1505/DEL/2018[2010-11]Status: DisposedITAT Delhi27 Mar 2023AY 2010-11

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Dey

Section 92B

expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order dated ... settled principle of law that existence of international transaction qua AMP expenses requires to be established de hors the "bright line test", particularly when the taxpayer has categorically denied the existence of international transaction and 81% of its 4 | P a g e ITA No.1504 & 1505/Del/2018 ITA No.2013 & 2015/Del/2018 turnover

Timex Group India Ltd., New Delhi vs. ACIT, Circle- 16(1), New Delhi

In the result, assessee’s appeals are partly allowed, whereas,

ITA 1504/DEL/2018[2009-10]Status: DisposedITAT Delhi27 Mar 2023AY 2009-10

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Dey

Section 92B

expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order dated ... settled principle of law that existence of international transaction qua AMP expenses requires to be established de hors the "bright line test", particularly when the taxpayer has categorically denied the existence of international transaction and 81% of its 4 | P a g e ITA No.1504 & 1505/Del/2018 ITA No.2013 & 2015/Del/2018 turnover

ACIT Circle-21(1), New Delhi vs. Rayban Sun Optics India Pvt. Ltd., Gurgaon

In the result, the appeals are dismissed

ITA 7589/DEL/2019[2010-11]Status: DisposedITAT Delhi24 Mar 2023AY 2010-11

Bench: Shri G.S. Pannu, Hon’Ble & Shri Saktijit Dey

Court." 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the ‘Bright Line Test’ was not mandated in law and hence impermissible without considering the fact that BLT was not used as a method to determined the price ... expenditure. Being of the view that the AMP expenditure enures benefit to the AE, the TPO proceeded to benchmark the transaction by applying Bright Line Test (BLT) method and suggested adjustment on protective basis in both the assessment years under dispute. While framing the assessment order, the Assessing Officer incorporated