The Bright Line Test (BLT) is not a statutorily recognized method and cannot be applied for making transfer pricing adjustments in relation to Advertisement, Marketing, and Promotion (AMP) expenditures incurred by an assessee.

ORDER

PER C.N. PRASAD, JM,

This appeal is filed by the assessee against final assessment order dated 27.06.2022 passed u/s.143(3) r.w.s. 144C(13) of the Act pursuant to the directions of the DRP dated 27.4.2022 passed u/s.144C(5) of the Act for the A.Y. 2018-19.

2. The assessee in its appeal has raised the following grounds of appeal :-

1. That on the facts and circumstances of the case and in law, the AO erred in assessing the total income of the Appellant under section 143(3) read with sections 144C(13) of the Act, for the subject AY at 20,44,08,010 as against the returned income of INR 18,45,35,400.

2. That on the facts and circumstances of the case and in law, the orders passed by the AO / TPO were bad in law as the pre-requisite for applying Chapter-X, Le, existence of an international transaction between two Associated Enterprises ('AE") under section 928 of the Act, was not satisfied or existed as there was no agreement, understanding or arrangement between the Appellant and the AE for incurrence of such expenditure by the Appellant and the DRP erred in upholding the same.

2.1. That on the facts and circumstances of the case and in law, the AO/DRP/TPO have erred in re-characterizing the Appellant as service provider rendering brand building services to its AE, without appreciating that it is a full risk bearing retailer incurring AMP expenditure in the course of its own business to promote its sales in India.

3. That on the facts and circumstances of the case and in law, the orders passed by the AO/DRP/TPO were bad in law as the unilateral AMP expenditure incurred by the Appellant was categorized as 'international transaction' under chapter X of the Act, by the AO/DRP/TPO, contrary to law in as much the AO neither granted any opportunity of being heard to the Appellant, nor passed a speaking order recording his satisfaction in relation to characterisation/categorization of the AMP expenditure as an 'international transaction'.

4. That on the facts and circumstances of the case and in law, the TPO erred in re-characterizing the unilateral AMP expenditure being payments made by Appellant to independent third parties as an 'international transaction' under chapter X of the Act, particularly when section 92CA of the Act enables the TPO only to compute the arm's length price ("ALP") of 'international transaction'. Further, the DRP erred in not adjudicating the objections challenging the jurisdiction of the TPO in this regard.

4.1. That on the facts and circumstances of the case and in law, the TPO erred in suo benchmarking the alleged international transaction related to AMP expenditure without there being any order or reference from the AD in relation thereto

Notwithstanding and without prejudice to the above grounds that the AMP expenditure incurred by the Appellant does not constitute an international transaction under Chapter X of the Act, the Appellant craves to raise following grounds on merits:

5. That on facts and circumstances of the case and in law, DRP has erred in not directing AQ/TPO to exclude the sales and distribution expenditure from the quantum of alleged excessive AMP expenditure while benchmarking the alleged international transaction using substantive and/or protective methods, disregarding the decision of the Hon'ble Tribunal in Appellant's own case and various decisions of the High Court(s)

6. 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 transfe