Delhi High Court Deletes BLT Based AMP Adjustment For Yakult Danone For Non-Existence Of International Transaction

The Delhi High Court has deleted the Bright Line Test (BLT)-based Advertising, Marketing, and Promotion (AMP) Adjustment for Yakult Danone for the non-existence of international transactions.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has dismissed the department’s appeal, which challenged the ITAT’s order, and held that the "bright line test" has no statutory mandate and a broad-brush approach is not mandated or prescribed.

The issue raised was whether Advertising, marketing, and Promotion (AMP) Expenses can be construed as an international transaction.

The Transfer Pricing Officer (TPO) applied the BLT. The Tribunal has disagreed with the view of the TPO and, in coming to the conclusion, has relied upon its decision rendered qua the respondent/assessee for AY 2011–12.

BLT is a test to distinguish between routine and non-routine expenditures incurred by a subsidiary of a foreign Parent Enterprise.

The respondent/assessee submitted that in the subject trademark licencing agreement and royalty agreement, there is nothing that suggests that there was any arrangement or agreement obtained between the assessee and its Associated Enterprise (AE) to spend money on AMP. The TPO has failed to establish that there was an international transaction obtained with respect to AMP expenses with a view to building the brand of the AE with the object that the AE could achieve sales in other territories.

The court, while dismissing the appeal of the department, referred to the jurisdictional High Court’s ruling in Sony Ericsson Mobile Communications India (P) Ltd. and Maruti Suzuki India Ltd., in which it was categorically held that BLT has no "statutory mandate".

Case Title: PCIT Versus Yakult Danone India Pvt. Ltd.

Citation: 2023 LiveLaw (Del) 693

Date: 28.07.2023

Counsel For Petitioner: Ruchir Bhatia

Counsel For Respondent: Himanshu Sinha

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