“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

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

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

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

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

Lenovo (India) Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-4(1)(1), Bangalore

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes

ITA 452/BANG/2017[2012-13]Status: DisposedITAT Bangalore05 May 2022AY 2012-13

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaranit(Tp)A No.452/Bang/2017 Assessment Year: 2012-13

For Appellant: Shri Padam Chand Khincha, A.RFor Respondent: Shri T. Roumuan Paite, D.R

Section 143(3)

international transaction, as it was incurred in India for distribution segment. The TPO did not accept the same and he applied bright line test and accordingly made transfer pricing adjustment of Rs.111.68 crores. The same was upheld by Ld. DRP and accordingly, the A.O. also made the addition

Alcon Laboratories India Pvt Ltd, Bangalore vs. Income Tax Officer Ward-1(1)(4), Bangalore

In the result the appeal filed by the assessee stands allowed as indicated herein above

ITA 726/BANG/2017[2012-13]Status: DisposedITAT Bangalore29 Apr 2022AY 2012-13

Bench: Shri. B.R. Baskaran & Smt. Beena Pillaiit(Tp)A No. 726/Bang/2017 Assessment Year : 2012-13 M/S. Alcon Laboratories (India) The Deputy Pvt. Ltd., Commissioner Of 11Th Floor, Rmz Azure, Income Tax, Bellary Road, Hebbal, Circle – 1(1)(1), Bangalore – 560 092. Vs. Bangalore. Pan: Aacca3430F Appellant Respondent : Shri Percy Pardiwala, Sr. Assessee By Advocate : Dr. Manjunath Karkihalli, Cit Revenue By (Dr) Date Of Hearing : 12-04-2022 Date Of Pronouncement : 29-04-2022 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against The Final Assessment Order Dated 23/01/2017 Passed By The Ld.Ito, Ward-1(1)(4), Bangalore For Assessment Year 2012-13 On Following Revised Grounds Of Appeal: “Based On The Facts & Circumstances Of The Case & In Law, Alcon Laboratories (India) Private Limited (Hereinafter Referred To As "Appellant”), Respectfully Craves Leave To Prefer An Appeal Against The Order Passed By The Learned Assessing Officer [Hereinafter Referred To As The "Learned Ao”] In Pursuance To The Directions Issued By Hon'Ble

For Respondent: Shri Percy Pardiwala, Sr

Section 143(3)Section 144C

have erred, in law and in facts. in computing the excessive or extraordinary AMP expenditure while computing the transfer pricing adjustment using the Bright Line Test ('BLT") which is not recognized under the Indian transfer pricing regulations: 9. Without prejudice to the above grounds. the learned ... 726/Bang/2017 7. In Ground no.2-10, the assessee is challenging the addition made in respect of AMP spent by using the bright line test which is not recognized under the TP regulations. 8. In the Grounds 11 to 22, the assessee is seeking exclusion of only two comparables being Persistent systems

M/S Lenovo India Private Limited, Bangalore vs. Assistant Commissioner of Income Tax Circle-4(1)(1), Bangalore

In the result, the appeal filed by assessee stands allowed

ITA 2833/BANG/2017[2013-14]Status: DisposedITAT Bangalore21 Mar 2022AY 2013-14

For Appellant: Shri Padamchand Khincha, CA

Section 143(3)Section 144C(13)Section 92C

distinctive functions and requires to be remunerated separately. 3.2.2 The Hon’ble DRP and learned AO / TPO have erred in applying the Bright Line Test (“BLT”) as a methodology to quantify the brand promotion service alleged to have been rendered by the Appellant

Kellogg India P.Ltd, Mumbai vs. Assistant Commissioner of Income Tax 15(2)(1), Mumbai

In the result, the appeal of the assessee is allowed

ITA 7342/MUM/2018[2014-15]Status: DisposedITAT Mumbai16 Feb 2022AY 2014-15

Section 143(3)Section 144C(5)Section 92C

Lacs in its order dated 28-10-2016. In other words, the Ld. TPO chose to benchmark the same primarily by using Bright Line Test (BLT) method. The working of the adjustment has been provided in para-18 of Ld. TPO's order. The TP adjustment, thus proposed, were incorporated ... identical with earlier years. The ld DR tried to distinguish the decision taken supra by stating that the tribunal had held that Bright Line Test (BLT) method adopted by the ld. TPO in earlier year was not a valid method to benchmark the transactions , and that during the year under

Ibm India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle-3(1)(1), Bangalore

In the result, appeal by the assessee stands allowed as indicated hereinabove

ITA 289/BANG/2021[2015-16]Status: DisposedITAT Bangalore14 Feb 2022AY 2015-16

Bench: Shri. B.R. Baskaran & Smt. Beena Pillaiit(Tp)A No. 289/Bang/2021 Assessment Year : 2015-16 M/S. Ibm India Pvt. Ltd., The Deputy No. 12, Subramanya Commissioner Of Arcade, Income-Tax, Bannerghatta Road, Circle 3 (1)(1), Bangalore – 560 029. Vs. Bangalore. Pan: Aaaci4403L Appellant Respondent Assessee By : Shri Ajay Roti, Ca Revenue By : Shri Pradeep Kumar, Cit Dr Date Of Hearing : 12-01-2022 Date Of Pronouncement : 14-02-2022 Order Per Beena Pillaipresent Appeal By The Assessee Has Been Filed By Assessee Against The Final Assessment Order Dated 30.04.2021 U/S. 143(3) R.W.S. 144C(13) R.W.S. 144B Of The Act Passed By The National Faceless Assessment Centre, Delhi Relating To Assessment Year 2015-16 On Following Grounds Of Appeal: “The Grounds Stated Hereunder Are Independent Of & Without Prejudice To One Another. The Appellant Submits As Under: 1. Assessment Order Bad In Law 1.1. At The Outset, M/S Ibm India Private Limited (Hereinafter Referred To As 'The Appellant' Or 'The Company') Prays That The Order Dated April 30. 2021

For Appellant: Shri Ajay Roti, CAFor Respondent: Shri Pradeep Kumar, CIT DR

Section 10ASection 143(3)Section 144BSection 144C(13)

same. 9.6. The learned TPO/ learned JAO erred on facts and in law in applying the Other method (which is similar to bright line test). which is not a method prescribed under section 92C of the Act read with Rule 10B of the Income-tax Rules. 1962 ('the Rules

Transitions Optical Distribution Pvt Ltd (Erswhile Transitions Optical India Pvt Ltd, Since Merged), Bangalore vs. Deputy Commissioner of Income Tax, Circle-7(1)(1), Bangalore

The appeal of the assessee is partly allowed for statistical purposes

ITA 1697/BANG/2017[2013-14]Status: DisposedITAT Bangalore09 Feb 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Ramakrishnan B., ARFor Respondent: Shri Manjunath Karkihalli, CIT(DR)(ITAT), Bengaluru

ratio of the assessee against the comparable companies' AMP expenses to sales ratio IT(TP)A No.1697/Bang/2017 Page 3 of 5 using the Bright Line Test ('BLT') Method. Based on such comparison, the. TPO held that the assessee’s higher AMP expenses benefitted the AE as the 'Transitions' brand

Olympus Medical Systems India Pvt. Ltd., Gurugram vs. ACIT, Circle- 3(1), Gurugram

In the result, appeal of the assessee in ITA No

ITA 873/DEL/2021[2016-17]Status: HeardITAT Delhi13 Jan 2022AY 2016-17

Bench: Shri Saktijit Dey & Shri N.K. Billaiya

For Appellant: Shri Nageshwar Rao, AdvFor Respondent: Shri Mahesh Shah, CIT-DR

Section 143(3)Section 144B

Most Appropriate Method (“MAM”) given multiple fallacies in application of the method. 17. while applying PSM, Ld. TPO again resorted to Bright Line Test in order to compute non-routine AMP expenditure, which has been overruled by the Hon’ble High Court. 18. in the absence of any supernormal profits ... rejecting companies based on inappropriate and unreasonable criteria. GROUNDS PERTAINING TO PROTECTIVE ADJUSTMENT MADE IN RELATION TO ADVERTISEMENT, MARKETING AND PROMOTION (“AMP”) EXPENSES - BRIGHT LINE TEST (“BLT”) 22. That Ld. AO / TPO / DRP erred in law in making adjustment on a protective basis using BLT as the most appropriate method

ACIT, Circle-4(1), New Delhi vs. Bausch & Lomb India Pvt. Ltd., Gurgaon

In the result, appeal of the Revenue is dismissed

ITA 2535/DEL/2018[2013-14]Status: DisposedITAT Delhi02 Dec 2021AY 2013-14

Bench: Sh. Anil Chaturvedi & Sh. Kul Bharat(Through Video Conferencing) Acit Vs. Bauch & Lomb India Pvt. Circle - 4(1) Ltd., New Delhi 4Th Floor, Tower – B, Unitech Business Park, South City-1, Gurgaon Pan : Aabcb 3877 E Haryana – 122 001 (Appellant) (Respondent) Assessee By Sh. Salil Kapoor, Adv. Ms. Ananya Kapoor, Adv. Revenue By Sh. Mrinal Kumar Das, Sr. D.R Date Of Hearing: 24.11.2021 Date Of Pronouncement: 02.12.2021 Order Per Anil Chaturvedi, Am :

Section 115JSection 142(1)Section 143(3)Section 144CSection 92BSection 92C

Total 17,55,64,144 8. TPO noticed that during the course of proceedings for earlier years, Revenue had taken a stand that Bright Line Test should be applied and any AMP expenditure incurred by the taxpayer in excess of the expenditure incurred by the comparable should be considered ... High Court in the case of Sony Mobile Communication (India) Pvt. Ltd. had rejected the contention of Revenue on the applicability of Bright Line Test and corresponding calculations but however, Department had filed an appeal against the order of the Hon’ble High Court and contested the judgment before

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

In the result, the additional ground raised by the assessee is allowed

ITA 463/DEL/2021[2016-17]Status: DisposedITAT Delhi22 Sept 2021AY 2016-17

Bench: The Income Tax Appellate Tribunal, Delhi Bench “I-2”, New Delhi

For Appellant: Mr. Deepak Chopra, AdvFor Respondent: Ms. Meera Shrivastava, CIT (DR)

Section 142(1)Section 143(2)Section 143(3)Section 271(1)(c)Section 80Section 80ISection 92C

Delhi) and CTT v. Salora International Ltd. [2009] 308 ITR 199 (Delhi). 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 tax implications and complications ... 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

ACIT, Circle- 14(1), New Delhi vs. Karl Storz Endoscopy India Pvt. Ltd., New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 3750/DEL/2018[2010-11]Status: DisposedITAT Delhi17 Sept 2021AY 2010-11

Bench: Shri Amit Shukla & Shri O.P. Kant[Through Video Conferencing] Assessment Year: 2010-11

made an addition of account marketing intangibles developed by the appellant as a result of marketing expenditure on the basis of Bright Line Test (BLT).” 7.1 The Learned CIT(A) has deleted the transfer pricing addition observing as under: “5.7 The main contention of the appellant and an admitted fact ... year under reference is the first year in which a transfer pricing adjustment has been made by the TPO on the basis of ‘Bright Line Test’ using SBI PLR as mark up. It is also seen that a transfer pricing adjustment were made by the TPO in the subsequentyear-LeAY20ll

Amadeus India Pvt. Ltd., New Delhi vs. ACIT, Circle 2(2), New Delhi

In the result, the appeal of assessee are allowed

ITA 8700/DEL/2019[2015-16]Status: DisposedITAT Delhi31 May 2021AY 2015-16

Bench: Sh. Anil Chaturvedi & Sh. Amit Shukla(Through Video Conferencing) Amadeus India Pvt. Ltd., Vs. Acit E-9, Connaught Hose, Circle – 2(2), Connaught Place, New Delhi New Delhi - 110001 Pan No. Aaaca 0364 L (Appellant) (Respondent) Assessee By Shri Taran Deep Singh, Adv. Revenue By Shri Surender Pal, Cit-D.R. Date Of Hearing: 18/05/2021 Date Of Pronouncement: 31/05/2021 Order Per Anil Chaturvedi, Am: This Appeal Filed By The Assessee Is Directed Against The Order Dated 19.09.2019 Of The Asst. Commissioner Of Income Tax, Circle-2(2), Delhi Under Section 143(3) R.W.S 144C(13) Of The Act Pursuant To The Direction Of Dispute Resolution Panel (Drp) – 1, Delhi For Assessment Year 2015-16. 2. The Relevant Facts As Culled From The Material On Records Are As Under :

Section 143(2)Section 143(3)Section 144CSection 144C(2)Section 144C(5)Section 92BSection 92CSection 92C(3)Section 92F

substantive basis. The Assessee inter alia submitted that the AMP expenses were not an international transaction. With respect to the application of Bright-line Test (BLT) for benchmarking AMP expenditure, it was submitted that the application of the Bright- line Test for benchmarking the AMP expenditure has been rejected ... held that the assessee should have been reimbursed with appropriate mark-up on such excessive AMP expenditure identified by him by applying the Bright Line Test (BLT). In his order, the TPO has identified the said abnormal AMP expenses by applying the bright line method i.e., by comparing

Pepsico India Holdongs Pvt Ltd, Gurgaon vs. ACIT Central Circle-07, New Delhi

The appeal of the assessee is allowed and the Stay Application of the assessee is dismissed

ITA 113/DEL/2021[2016-17]Status: DisposedITAT Delhi04 May 2021AY 2016-17

Bench: Sh. Amit Shukladr. B. R. R. Kumarita No. 113/Del/2021 : Asstt. Year: 2016-17 Pepsico India Holdings Pvt. Ltd., Vs Acit, Level 3-6, Pioneer Square, Central Circle-07, Sector-62, Golf Course, Extension New Delhi Road, Gurgaon, Haryana-122101 (Appellantt (Respondent) Pan No. Aaacp1272G

For Appellant: Sh. Deepak Chopra, AdvFor Respondent: Ms. Meera Srivastava, CIT DR

Section 143(3)Section 92BSection 92CSection 92F

Luxottica India Eyewear Pvt. Ltd., Gurgaon vs. ACIT, Circle- 15(2), New Delhi

The appeal of the assessee is allowed

ITA 126/DEL/2018[2013-14]Status: DisposedITAT Delhi26 Apr 2021AY 2013-14

Bench: Sh. Amit Shukladr. B. R. R. Kumarita No. 126/Del/2018: Asstt. Year: 2013-14 M/S Luxottica India Eyewear Pvt. Ltd. Vs Acit, 7Th Floor, Dlf Building No. 9, Tower- Circle-15(2), B, Phase-Iii, Dlf Cyber City, New Delhi Gurgaon (Appellantt (Respondent) Pan No. Aabcl3871C

For Appellant: Sh. Nageshwar Rao, AdvFor Respondent: Sh. Surendrapal, CIT DR

Section 143(3)Section 92BSection 92F

profit margin of comparable companies without appreciating that intensity adjustment in principle uses the same parameters which were being used for application of Bright Line Test ("BLT") which is in complete disregard to the decision of Jurisdictional Delhi High Court in the case of Sony Ericsson Mobile Communications (supra ... 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

Amadeus India Pvt. Ltd., New Delhi vs. ACIT, Circle- 2(2), New Delhi

In the result, appeal of the assessee in ITA No

ITA 7376/DEL/2018[2014-15]Status: DisposedITAT Delhi08 Mar 2021AY 2014-15

Bench: Shri N.K. Billaiya & Ms. Suchitra Kamble[A.Y 2014-15]

For Appellant: Shri Tarandeep Singh, AdvFor Respondent: Shri Surender Pal, CIT-DR

Section 143(3)Section 14ASection 92F

held that the assessee should have been reimbursed with appropriate mark- up on such excessive AMP expenditure identified by him by applying the Bright Line Test (BLT). In his order, the TPO has identified the said abnormal AMP expenses by applying the bright line method i.e., by comparing ... should adequately compensate the domestic AE incurring costs towards marketing activities by Revenue reimbursement of expenses or by sufficient and appropriate return. Bright Line Test, applied by the Para 194, sno X, page 139 Ld. TPO/LD. AO, is not permitted by the Bright Line Test has no statutory transfer pricing

M/S. Dabur India Ltd., New Delhi vs. Addl.CIT, New Delhi

In the result, the appeals filed by the Revenue are partly allowed and the appeals filed by the assessee are partly allowed for statistical purposes

ITA 6525/DEL/2014[2008-09]Status: DisposedITAT Delhi18 Feb 2021AY 2008-09

Bench: Shri R.K. Panda & Ms Suchitra Kamble

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri Anupam Kant Garg, CIT-DR

Section 115JSection 143(1)Section 143(2)Section 143(3)Section 80GSection 80ISection 92CSection 92E

length price. Secondly, the appellant has not established that AE in Nepal, UAE and Bangladesh are incurring abnormal AMP expenses which exceed ‘Bright Line Test’. The appellant has not established its view by giving figures of AMP in case of comparables operating in respective geographical locations. The appellant ... after termination of agreement post 2005. 12.9.5 In view even if Dabur Bangladesh was incurring AMP in excess of 8% of sales, a bright line test need to be demonstrated to show the benefit availed by the appellant. Hence the contention that no royalty should be charged in not tenable

DCIT, New Delhi vs. M/S. Dabur India Ltd., New Delhi

In the result, the appeals filed by the Revenue are partly allowed and the appeals filed by the assessee are partly allowed for statistical purposes

ITA 6256/DEL/2014[2008-09]Status: DisposedITAT Delhi18 Feb 2021AY 2008-09

Bench: Shri R.K. Panda & Ms Suchitra Kamble

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri Anupam Kant Garg, CIT-DR

Section 115JSection 143(1)Section 143(2)Section 143(3)Section 80GSection 80ISection 92CSection 92E

M/S. Dabur India Ltd., New Delhi vs. Addl.CIT, New Delhi

In the result, the appeals filed by the Revenue are partly allowed and the appeals filed by the assessee are partly allowed for statistical purposes

ITA 3241/DEL/2014[2007-08]Status: DisposedITAT Delhi18 Feb 2021AY 2007-08

Bench: Shri R.K. Panda & Ms Suchitra Kamble

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri Anupam Kant Garg, CIT-DR

Section 115JSection 143(1)Section 143(2)Section 143(3)Section 80GSection 80ISection 92CSection 92E

DCIT, New Delhi vs. M/S. Dabur India Ltd., New Delhi

In the result, the appeals filed by the Revenue are partly allowed and the appeals filed by the assessee are partly allowed for statistical purposes

ITA 3114/DEL/2014[2007-08]Status: DisposedITAT Delhi18 Feb 2021AY 2007-08

Bench: Shri R.K. Panda & Ms Suchitra Kamble

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri Anupam Kant Garg, CIT-DR

Section 115JSection 143(1)Section 143(2)Section 143(3)Section 80GSection 80ISection 92CSection 92E

Rayban Optics India Ltd., Bhiwani vs. DCIT, New Delhi

ITA 1727/DEL/2016[2007-08]Status: DisposedITAT Delhi22 Jan 2021AY 2007-08

Bench: Shri R.K. Panda & Shri Kuldip Singh(Through Video Conference)

For Appellant: Shri Nageshwar Rao, AdvocateFor Respondent: Shri Anupam Kant Garg, CIT DR

Section 143Section 143(3)Section 144CSection 92BSection 92F

international transaction of AMP. In 4 ITA No.1727/Del./2016 ITA No.1619/Del./2016 doing so, the Hon'ble DRP has applied a bright line test and failed to consider the findings of Sony He order according to which bright line test has no statutory mandate. Re: Disallowance of Selling Expenses ... facts and circumstances of the case. 15. Undisputedly, ld. TPO has made upward adjustment qua AMP expenses incurred by the taxpayer by using Bright Line Test (BLT) by comparing alleged excessive AMP expenses with that of the comparables. However, ld. DRP has overruled this issue taken

DCIT, New Delhi vs. M/S Rayban Sun Optics India Ltd., Bhiwani

ITA 1619/DEL/2016[2007-08]Status: DisposedITAT Delhi22 Jan 2021AY 2007-08

Bench: Shri R.K. Panda & Shri Kuldip Singh(Through Video Conference)

For Appellant: Shri Nageshwar Rao, AdvocateFor Respondent: Shri Anupam Kant Garg, CIT DR

Section 143Section 143(3)Section 144CSection 92BSection 92F