Bright line test not usable for AMP adjustments — Delhi HC

The Delhi High Court held that the Assessing Officer cannot import the “bright-line test” as a substitute for statutory transfer-pricing methodology to make AMP (advertising, marketing & promotion) expense adjustments. The Court sustained the Tribunal’s finding in favour of the assessee, stressing that statutory comparability and prescribed methods under section 92C/Rule framework govern ALP determination — arbitrary bright-line rules applied by AO violate the statutory scheme. The judgment clarifies the limits of administrative heuristics (bright-line tests) in transfer-pricing disputes and re-emphasises structured cross-border arm’s-length analysis: functional profile, risk, contractual terms, economic substance and reliable comparables remain determinative. Practically, the decision restricts revenue’s ability to adopt shortcut engineering for AMP adjustments and strengthens taxpayers’ defence where established TP documentation and economic rationale exist. Transfer-pricing policymakers and multinationals should continue to emphasise contemporaneous TP studies, benchmarking and robust documentation to withstand AO challenges.