Section 92B of the Income Tax Act

When the cost of acquisition of a capital asset cannot be determined, the computation mechanism for capital gains fails, and thus no capital gains can be charged. This establishes a broader principle that a charging section cannot operate in the absence of specific machinery provisions for computation.

The Delhi High Court holds that the Bright Line Test (BLT) is not a valid or proper method for determining the arm's length price for Advertising, Marketing, and Promotion (AMP) expenses in transfer pricing.

0.5% is determined as the Arm's Length Price (ALP) for corporate guarantee commission provided to Associated Enterprises for A.Y. 2011-12, using the Comparable Uncontrolled Price (CUP) method under Section 92C of the Income Tax Act. Subsequent cases note this rate is specific to its facts and assessment year, requiring contemporaneous data for other periods.

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.

The interest rate for benchmarking foreign currency loans advanced to Associated Enterprises should be the market-determined rate applicable to the currency of the loan, such as LIBOR for US Dollar loans, rather than a domestic lending rate like the Indian PLR.

A corporate guarantee issued to Associated Enterprises (AEs) is an international transaction under Section 92B, requiring adjustments for guarantee commission due to inherent risk. The reasonable arm's length rate for benchmarking such corporate guarantees can be determined using internal or external comparable uncontrolled prices.

Advertising, Marketing, and Promotion (AMP) expenses do not automatically qualify as an international transaction subject to Transfer Pricing adjustments under the Income-tax Act.

International transactions are generally benchmarked on a transaction-by-transaction basis for Arm's Length Price (ALP) determination. Aggregation of transactions is permissible only if they are intertwined, inextricably linked, part of a package deal, or cannot be evaluated adequately on a separate basis.

The currency in which an amount is to be repaid determines the applicable rate of interest for international transactions. For notional interest on loans granted to Associated Enterprises, the arm's length rate is restricted to LIBOR, and no mark-up on the LIBOR rate is warranted.

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.