SWATCH GROUP (INDIA) PRIVATE LIMITED,NEW DELHI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 22(2), C.R. BUILDING

ITA 5929/DEL/2024

AI Insights

The case involves Swatch Group (India) Pvt. Ltd., which appealed against the final assessment order by the Deputy Commissioner of Income Tax, which included a significant adjustment to the assessee's income based on the Bright Line Test applied to advertising and marketing expenses. The Tribunal examined whether the Bright Line Test was an appropriate method for adjusting the assessee's income for AMP expenses incurred on behalf of its associated enterprises (AEs). The Tribunal found that the application of BLT was not supported by statutory mandate and was contrary to several judicial precedents, including decisions by the Delhi High Court which had rejected the use of BLT for such adjustments. Consequently, the Tribunal deleted the adjustment made by the AO.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 829017 (ITAT-NEW DELHI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Delhi
• Assessment Year: misc
• Appeal Filed On: 20-12-2024
• Other Referred Cases: Sony Ericsson Mobile Communications India Private Limited & Others vs. CIT, Bausch & Lomb Eyecare (India) Pvt. Ltd. vs. CIT, Whirlpool of India Ltd. vs. CIT, LG Electronics India Private Limited vs. CIT, Maruti Suzuki India Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: DHARM VEER SINGH
• Assessee Lawyers: ROHIT TIWARI
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Tangible material
• Section: 143(3); 92C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, I: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.5929/Del/2024 [Assessment Year: 2021-22] Swatch Group (India) Private Limited, 4th Floor, Rectangle-I, Plot No. D- 4, Saket District Centre, New Delhi-110017. Vs Deputy Commissioner of Income Tax, Circle 22(2), C.R. Building, I.P. Estate, Delhi, 110002. PAN- AAFCS7516R Assessee Revenue Assessee by Shri Rohit Tiwari, Adv. Ms. Tanya, Adv. Revenue by Shri Dharm Veer Singh, CIT(DR) Date of Hearing 09.01.2026 Date of Pronouncement 14.01.2026 ORDER PER BRAJESH KUMAR SINGH, AM: This appeal has been preferred by the assessee against the Final Assessment Order dated 29.10.2024 passed by the Learned Assessing Officer (AO) under Section 143(3) read with Sections 144C(13), r.w.s. 144B of the Income-tax Act, 1961 (“the Act”), pursuant to the directions of the Hon'ble Dispute Resolution Panel (DRP) order dated 09.09.2024 for the Assessment Year 2021-22. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 2 2. Brief facts of the case: The Swatch Group Limited is based in Switzerland and the ultimate holding company of the Swatch Group, world's largest manufacturer and distributor of luxury watches. The Swatch Group Ltd. is the number one manufacturer of finished watches in the world. The Group is active in the manufacture of finished watches, jewellery and watch moments and components. Swatch Group India Pvt. Ltd. is a part of the Swatch Group and it commenced operations during the financial year 2002-03. Swatch India as distributor is primarily engaged in the import and resale of watches and spare parts of watches. Some of the major brands under which luxury watches are imported and resold by Swatch group India are Omega, Rado, Tissot, Breguet Balmain, Jaquet Droz, Blancpain, Calvin Klein, Longines and Swatch. 3. The TPO based on the FAR profile of the assessee as discussed in his order observed that there was sufficient evidence that it was discharging marketing function, function of market development including adding value to the intangibles of its AE and was not merely engaged in purchase and sale of goods with insignificant promotional activities. Accordingly, the TPO was of the view that the marketing function carried out by the assessee was required to be considered while carrying out the benchmarking of the international transactions. The TPO further observed that the contribution that the assessee had made must be treated as part of the brand building exercise in respect of the brands which were owned by its AE. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 3 The TPO further was of the view that AE should have reimbursed the cost that was incurred by the assessee towards advertising which led to brand building. Placing all these facts in a logical sequence, The TPO was of the view that the assessee was entitled to a reimbursement from the AE and the final beneficiary was the AE as the brand owned by it was gaining in value due to the marketing efforts of the assessee. The TPO observed that assessee was in effect creating a marketing intangible in favour of the AE by the AMP efforts that it carries out in the Indian sub-continent. 4. In view of the discussions made by the TPO in his order u/s 92CA(3) of the Act dated 10.11.2022, the TPO issued a show cause notice dated 05.10.2023 and 11.10.2023 (as referred in para 12 of page no. 11 of its order placed at pg. no. 119- 120 of the Appeal set) as to why adjustment in the AMP expenses should not be made by applying Bright Line Test. The relevant extract of the said show cause notice is reproduced as under: “Advertising, marketing expenditure incurred on behalf of AE On perusal of information submitted by Assessee it is seen that it is actively promoting brands of AEs such as Omega, Rado, Tissotetc and also ensures spare parts are available with service centers and by doing so it is increasing customer satisfaction and brand value of such brands in India and thereby creating valuable intangible. It is not clear from information submitted by Assessee whether it is entitled to any consideration if such brands are sold by AEs to any other entity. Accordingly, this office deems it fit that an appropriate consideration should have been received by Assessee for creating such valuable marketing intangible for AEs in India. Primary Approach -Bright Line In relation to advertising, marketing and promotion expenses, this office has taken a stand that bright line test should be applied and any non-routine expenditure Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 4 incurred by the assessee in excess of the expenditure incurred by the comparables should be considered as the expenditure incurred by the assessee for the benefit of the parent AE and corresponding adjustment should be made. The Hon'ble High Court in case of Sony Ericsson has rejected the contention of revenue on the applicability of bright line test and corresponding calculations. The Department has filed an appeal against the order of the Hon'ble High Court and contested the judgment before the Hon'ble Supreme Court. The Hon'ble Supreme Court has rejected the petitioner's application for stay of the order of the Hon'ble High Court. Accordingly, the primary contention of this office remains the same as mentioned above. The comparables identified for this approach are same as the comparables considered in the case of alternative approach discussed below. In view of the Hon'ble Supreme Court order refusing the stay, the alternative approach in line with the directions/judgment of the Hon'ble High Court on AMP in case of Sony Ericsson is discussed below. ……………………….xxx…………………. 4.1 The assessee submitted its reply to the above show-cause notice which was summarized by the TPO in para no. 13 (placed at page no. 122 of the appeal set) which is reproduced as under: “REPLY GIVEN BY THE ASSESSEE: The assessee company has given its replies in the matter vide submission dated 19.10.2023, and has raised following issues/points: i. AMP Expenses is not an international Transaction. ii. The AMP expenditure incurred, is only for promoting sales of its products in India / Swatch Group India is not engaged in Brand Building activities. iii. The assessee submitted that the primary reliance on brightline approach is erroneous. iv. Arguments for certain adjustments in comparability v. Arguments against the substantive adjustment basis intensity. vi. The assessee objected to the selection of comparables.” (emphasis supplied by us) Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 5 5. However, the AO did not accept the above contentions of the assessee and applied Bright Line Test for making adjustment in the AMP expenses and proposed an adjustment of Rs. 3419.25 lacs. The relevant discussion by the TPO in para no. 15 to 20 (placed at page no. 123-125 of the Appeal set) are reproduced as under: “BRIGHT LINE APPROACH 15. As far as the primary reliance of this office on segmentation estimating the segregation of routine promotional expenditure for purchase resale of products from the expenditure on marketing and market development service to the AE termed as brightline approach is concerned, it has already been discussed above that the Revenue Department has proposed a SLP before the Hon’ble Supreme Court of India. The assessee has pointed out that the rejection of stay by the Hon'ble Supreme Court was limited to the objection of the assesse on the existence of the international transaction and the same was not on the rejection of brightline. The assessee has not produced any order of the Hon'ble Court which has led it to believe so. Since the judgment of the Hon'ble High Court has not been stayed and in view of the objections of the Revenue to the judgement in the case of Sony Ericsson coupled with the fact of proposing an SLP on this issue, the contention to not consider Brightline analysis as primary method is not found acceptable. Moreover, this method is in accordance with the provisions of rule 10AB as already discussed in details above. Keeping alive such stand of the revenue, benchmarking of International transaction for marketing and development of market services for the AE is carried out as under: 16. The ratio of AMP expenditure to sales in the case of the assessee is determined as given below: Sl. No. Nature of Transactions FY 2020-21 (Amount in Rs. lacs) 1 Advertisement expenseS 2111.63 2. Selling and distribution expenses 81.09 3. Point of sale material 494.04 4. Trade Discount 902.17 Total AMP Expenditure by the assessee 3588.73 Gross sales of the assessee 38548.73 AMP to gross sales (AMP /Sales) 9.31% Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 6 17. The list of comparable selected, as per the SCN, along with the calculation of AMP / Sales ratio as per annual reports is as follows: 18. The amount which represents the bright line and the amount that should have been compensated to the assessee company are computed hereunder: Particulars Value (Rs. in Lacs) Value of gross sales of assessee A 38,548.73 Arithmetic mean of AMP / Sales of comparables B 1.94% Amount that represents price for routine AMP activities C=B*A 747.85 Total expenditure incurred by assessee on AMP D 3,588.93 Arm’s Length Price of the service / expenditure for creation of marketing intangible in India in favour of the AE E=D-C 2,841.08 Mark -up @ 20.35% F=20.35% of E 578.16 The amount by which the assessee company should have been reimbursed by A.E, and for which the adjustment is proposed to be made G=E+ F 3,419.25 Sl. No. Company Name AMP / Sales 1 Ethos Ltd. 4.06% 2 Kapoor Watch Co. Pvt. Ltd. 0.99% 3 Johnson Watch company Pvt. Ltd. 0.76% Arithmetic Mean 1.94% Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 7 Price received from the AE for creation of marketing H 0 Adjustment required to be made for creation of marketing intangibles I=G-H 3,419.25 19. The mark-up is considered at 20.35%, being the same as considered in the alternative analysis discussed below. 20. Thus, based on the above computation, an adjustment of INR 3,419.25 lacs (INR 34,19,25,000/-) to the total income of the assessee on account of marketing and market development function carried out for the AE for which the assessee company was not adequately compensated is required to be carried out.” 6. Thereafter, the TPO also carried out ‘Alternative Benchmarking’ of the said ‘international transaction’ under TNMM providing for ‘Intensity as comparability adjustment and discussed the matter in para no. 21 to 31 (placed at page no. 125 to 137 of the Appeal set), but made no adjustments on the ground that the intensity adjusted (OP/OR) was 6.54% and the margin earned by the assessee i.e. 16.54% (OP/OR) was more than the average of comparable, and therefore, the said adjustment was not required to be done by adopting intensity-based approach. 6.1 Accordingly, the TPO in para no. 31 and 31.1 of its order (placed at pg. no. 137 of the Appeal set) determined the adjustment by adopting Bright Line Test approach at Rs. 34,19,25,000/- as under: “31. Since the margin earned by the assessee i.e. 16.45% (OP/OR is more than the average of comparable, the adjustment is not required by adopting intensity based approach. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 8 31.1 Accordingly, as discussed in para 18 above (AMP adjustment by adopting BLT approach) the following adjustments may be made to the income of the assessee, being the difference between the arm's length price and the price charged by the assessee on incurring AMP expense for branding AE's intangibles S.No. Segment Adjustment in INR 1. Advertising and marketing expenditure 34,19,25,000/- 7. The AO passed a draft assessment order u/s 144C(1) of the Act, dated 11.12.2023 by incorporating the above finding of the TPO and determined the total income of the assessee at Rs. 41,07,12,920/- (placed at pg. no. 107 of the appeal set) as under: Sl. No. Description Amount (in INR) 1 Income as per Return of Income Filed 6,87,87,920/- 2 Income as computed u/s 143(1)(a) 6,87,87,920/- 3 Variation as discussed in Para 3.7 34,19,25,000/- 4 Total income / Loss determined as per the above proposal 41,07,12,920/- 8. Aggrieved with the said order, the assessee filed its objections before the Ld. DRP. The Ld. DRP vide its order dated 09.09.2024, upheld the finding of the AO, and the relevant directions of the Ld. DRP in para no. 7.3 and 7.3.1 at page nos. 31 to 34 of its order (placed at pg. no. 92 to 95 of the Appeal set) are reproduced as under: “7.3 Ground No. 7- That on the facts and circumstances of the case and in law, Ld. AO/Ld. TPO have erred in proposing adjustment to the income of the Assessee on Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 9 protective basis without appreciating that there are no underlying provisions in the Act that support protective adjustment making the order bad in law. Ground No. 8- That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO have erred in proposing protective adjustment applying bright line test (\"BLT\") as a 'tool' to benchmark the alleged international transaction, even though BLT has been jettisoned by jurisdictional Hon'ble High Court. Ground No. 9- That on the facts and circumstances of the case and in law, Ld. AO/ TPO have erred by not appreciating that BLT is not a prescribed method under the purview of section 92C of the Act. Ground No. 10- That on facts and circumstances of the case and in law, Ld. AO/Ld. TPO have erred in proposing an adjustment of INR 34,19,25,000/- on protective basis applying the BLT. 7.3.1 Directions of DRP: 1. The above grounds are interrelated and hence are being taken up together. 2. Panel has considered rival contentions. In the submissions, assessee has mentioned that bright line limit is not a method to benchmark transactions. Since assessee has not considered AMP as an international transaction, it has neither mentioned it in form 3CEB nor carried out a study on it, it was contingent upon TPO to carry out this exercise. In the preceding paras it has been discussed that AMP activities of the assessee is an international transaction in consonance with Income tax and Rules. However, the transaction under reference has its under aspects which do not fit in the traditional way MAMs are interpreted. In order to make comparison studies more accurate, certain adjustments have to be made to the typical MAMs. TPO has used modified cost-plus method, which is also called bright line test or BLT in common parlance, to make comparison more accurate and relevant to the case of the assessee. Despite all the confusion around BLT as a method of calculating arm's length price, BLT is nothing but cost-plus method. it is a statistical tool used for transfer pricing calculations. 3. The basic objective of making this comparability analysis is to determine limit of AMP Expenditure, beyond which since the assessee who is not the owner of brand name/intangible, therefore it is not expected to use/spend resources on enhancement of intangible property for the brand owner, just like a third party would not. In order to benchmark the transactions, TPO compared AMP expenditure of the assessee, with AMP expenditure of other comparables engaged in same/similar business. He used AMP (including trade discount and volume rebate) to the sales ratio for comparability analysis. 4. TPO chose comparables and worked out mean of the \"expenditure incurred on AMP/sales\" of such companies, which is the excess expenditure assessee made vis-à- vis its comparables also called the \"bright line\". Expenditure more than this amount Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 10 was considered to have been used for the promotion of brand/trade name for the AE for which assessee needed to be suitably compensated by the AE. The amount which represents the bright line and the amount that should have been compensated to the assessee company was computed as under and added in hands of the assessee as transfer pricing adjustment: 5. As per section 92C (1) of the Act- “ The arm's length price in relation to an international transaction shall be determined by any of the following methods being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribed namely: - (a)comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e)Transaction net margin method; (f) Any other method provided in Rule 10AB; (g) Further, other methods as per Rule 10AB’ 6. As per Rule 10AB Other method of determination of arm’s length price. “For the purpose of clause (f) of sub- section (1) of section 92C , the other method for determination of the arm’s length price in relation to an international transaction or a specified domestic transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non- associated enterprises under similar circumstances considering all the relevant facts.” 7. A plain reading of the above provisions reveals that for an international transaction any method which takes into account price paid or would have been paid for the same/similar transaction between/with AE under similar circumstances can be used for TP study and benchmarking. Assessee has given in its submissions that in the case of LG Electronics India Private Limited (ITA No. 5140/DEL/2011), the Special bench of the Hon'ble ITAT has also observed as under: 15.4 we have heard the rival submission in this regard and gone through the necessary material. There is absolutely no doubt that a provision from the legislation of a foreign country cannot be imported into the Indian legislation. Similar is the position regarding the judgments of the foreign Couts. These have only a persuasive value and cannot have a binding affect over the Indian authorities. As such we are Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 11 abstaining from examining the case in the light of the US regulations or the decision of the United States of Tax Court or United Sates Court of Appeals in DHL Corporation & Subsidiaries vs. Commissioner of Internal Revenue.” 9. In this regard, it is clarified that no provision of foreign country is being imported for application in the Indian statute and there is no question of it being binding on the revenue. The point here is that it is a very sensible method of determining extra AMP expenses of the assessee made not for itself but for its AE. Revenue has adopted this method after considering all the available method u/s 92C(1). It is when none of the methods in section 92C(1) can be used to benchmark the impugned transaction that the available provision next in line are considered. In the present context it means, referring to Rule 10AB which has been introduced with the understanding that there may be transaction which cannot be benchmarked using the traditional 5 methods and a new method is required for transfer pricing study. Not many alternative methods are available. In any case, assessee and revenue quote and emphasize upon OECD guidelines which are also not a part of Indian study/statute. 10. BLT is a popular statistical tool used abroad and has been considered by revenue to be a good alternative. In order to separate the advertising, marketing and promoting (AMP) expenditure incurred by the tax payer for its own business and for brand promotion of its parent enterprise, this test was propounded by the US Tax Court in DHL Incorporated and Subsidiaries case, T.C. Memo. 1998-461. The US Tax Court in that case laid down that AMP expenses, to the extent incurred by uncontrolled comparable distributors is to be regarded within the 'Bright Line limit' of the routine expenses and AMP expenses incurred by the distributors beyond such 'Bright Line limit' constituted non routine expenditure, resulting in creation of economic ownership in the form of market intangibles which belong to the owner of the brand. Every licensee or distributor is expected to spend a certain amount of cost to exploit the items of intangible property to which it is provided, it is when the investment crosses the 'bright line of routine expenditure into the realm of non-routine that, economic ownership likely in form of a marketing intangible is created. 11. An analysis based on Bright Line test is nothing but application of Cost-Plus method, by first identifying the cost/value of services provided. Non-mentioning of the method in so many words, does not ipso facto mean that Cost Plus method was not applied. Essence of the method adopted by TPO was nothing but Cost-Plus method. BLT is applied only when the assessee has intermingled its routine and non- routine expenditures in such a way that it is not possible to separate them by using any of the five prescribed methods. This is the exact case of the assessee, therefore, using BLT as a protective method by TPO is upheld. 12. In order to determine what part of the AMP expenditure of the assessee was on account of regular sales made by the assessee and what part related to the expense incurred on boosting the value of brand owned by the AE, the best way is to look at the amount of expenditure on AMP by other companies in the industry which do not own any brand. The amount of expense incurred by the assessee on AMP as a Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 12 percentage of sales is compared with the amount of AMP expenditure of similar comparables which do not own any brand. Since this expenditure by the assessee company on building the brand is actually a service provided by the assessee to its AE, the assessee is also entitled for a reasonable mark-up on this expenditure. This mark-RG determined on the basis of average profits of the companies engaged in marking support service (MSS). Thus, the arm's length price of the services provided by the assessee company to the AE is determined by adding the amount of average mark-up to the amount of expenditure incurred in brand building for brands not owned by the assessee company in this approach. However, since the Hon'ble Delhi High Court rejected the approach of the department with regard to BLT in the case of Sony Ericsson, which has been challenged by the Department in the Hon'ble Supreme Court (the Department has also challenged other similar decisions in the Hon'ble Supreme Court and the Hon'ble High Court against the decisions of the Hon'ble High Court/ITAT), the adjustment on the basis of BLT is proposed on protective basis till the issue in this regard is settled by the Hon'ble Supreme Court. The method applied for this purpose is 'such other method as prescribed by the Board' provided in section 92C(1) (f) read with Rule 10B(1) (f) and Rule 10AB. 13. This ground of objection is accordingly disposed off.” 9. After the receipt of the directions of the Ld. DRP, the AO passed the final assessment order on 02.09.2024, reducing amount the adjustments from Rs. 34,19,25,000/- to Rs. 22,35,89,000/- as per the directions of the Ld. DRP. 10. Aggrieved with the said order, the assessee is in appeal before us on the following grounds of appeal: “ 1. That on the facts and circumstances of the case and in law, the order passed by the Ld. Assessing Officer (\"Ld. AO\") under Section 143(3) read with section 144C(13) read with section 144B of the Act is bad in law and liable to be quashed to the extent it confirms the additions/ disallowances made in the assessment order. 2. That the Ld. AO/Learned Transfer Pricing Officer (\"Ld. TPO\")/ Hon'ble Dispute Resolution Panel (\"DRP\") have erred in enhancing the income of the Appellant by INR. 22,35,89,000/-in respect of the advertising and marketing (\"AMP\") expenditure incurred by the Appellant. 3. That on the facts and circumstances of the case and in law, the AMP adjustment made by the Ld. AO/Ld. TPO/ Hon'ble DRP is bad in law as the pre-requisite for Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 13 applying Chapter-X of the Income Tax Act, 1961 (\"The Act\"), i.e., existence of an international transaction between two Associated Enterprises (\"AE\") as envisaged under section 928 of the Act, is not satisfied, as there is no agreement, understanding or arrangement for incurrence of expenditure by the Appellant on behalf of the AE. 4. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/ Hon'ble DRP have failed to appreciate that assumption of existence of an international transaction without having any valid agreement as basis has been overruled by the Hon'ble High Court numerous instances. 5. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon'ble DRP have erred in holding that the unilateral advertisement and sales promotion arrangement between the Appellant and Indian third parties for selling goods in India would even be a \"transaction\" with its AEs, much less an \"international transaction\" within the hameaning of Chapter X of the Act, without demonstrating the existence of any understanding or an agreement between the Appellant and its AEs which requires the Appellant to spend excessively towards brand promotion. 6. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon'ble DRP have erred in not appreciating that marketing is one of the primary functions undertaken by the Appellant and the beneficiary on account of incurring of AMP expenses was the Appellant itself and the same does not require to be compensated/remunerated separately by the AE for any incidental benefits endured by the AE. 7. That the Ld. TPO/Ld. AO/ Hon'ble DRP has erred in not proposing the said adjustment as protective' in nature as has been done in the past by the Ld. TPO/Ld. AO/Hon'ble DRP. 8. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon'ble DRP have erred in making adjustment applying bright line test (\"BLT\") as a 'tool' to benchmark the alleged international transaction, even though BLT has been jettisoned by jurisdictional Hon'ble High Court. 9. That on the facts and circumstances of the case and in law, Ld. AO/Ld. TPO/ Hon'ble DRP have erred by not appreciating that BLT is not a prescribed method under the purview of section 92C of the Act. 10. That on facts and circumstances of the case and in law, Ld. AO/Ld. TPO/ Hon'ble DRP have erred in making an adjustment of INR 22,35,89,000/- on non-protective basis applying the BLT. 11. That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/ Hon'ble DRP have erred by wrongfully selecting inappropriate comparables for determining the BLT. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 14 12. That the Ld. TPO/Ld. AO/Hon'ble DRP erred in including 'Point of Sales Material' expenses in computing the AMP expenses of the Appellant. 13. That on facts and circumstances of the case and in law, Ld. TPO/Ld. AO/Hon'ble DRP have erred, by inappropriately loading a return of 20.35 percent in respect of allegedly incurred excessive AMP expenditure.” 11. Grounds nos. 1 and 2 of the appeal are general in nature and do not require any separate adjudication. 12. Ground no. 3 to 5 of the appeal challenges the finding of the AO that advertising and marketing (AMP) expenditure amounts to ‘international transaction’. These ground of the appeal in view of the discussion as later made in this order become academic and kept open in this appeal. 13. Ground no. 7 to 13 are against the adjustments of Rs. 22,35,89,000/- made in AMP expenses by following the Bright Line Test in respect of AMP expenses. 13.1 In this regard, the assessee has filed a ‘case synopsis’, the relevant extract of which is reproduced as under; ‘V. BLT is not an appropriate benchmarking approach In the order, the Ld. AO / Ld. TPO had proposed adjustment on account of AMP expenditure by undertaking comparability analysis, the basic premise of which was BLT. BLT does not have a statutory mandate and cannot be applied in order to determine the international transaction of incurring of AMP expenses on behalf of AE. BLT approach has been jettisoned by the Hon'ble High Court in the below pronouncements: Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 15 1. Sony Ericsson Mobile Communications India Private Limited & Others (ITA No. 16/2014 & connected matters) (refer page 457 of paperbook) ii. Bausch & Lomb Eyecare (India) Pvt. Ltd. (ITA No. 643/2014). (refer page 460 of paperbook) iii. Whirlpool of India Ltd. [ITA 610/2014] (refer page 460 of paperbook) Further, in the recent case of Louis Vuitton India Retail (P.) Ltd v. Deputy Commissioner of Income Tax (IT Appeal No. 4348 (Delhi) of 2024) for Assessment Year 2020-21, it was held that no transfer pricing adjustment should be made by applying BLT because the Jurisdictional High Court has not approved the application of Bright Line test in several decisions. It was held that if a situation of determining the ALP arises, then no transfer pricing adjustment should be made by applying the Bright Line Test. Hon'ble High Court decision should be held valid The Ld. AO / Ld. TPO had mentioned that since the department is before the Hon'ble Supreme Court against the Sony Ruling, the Ld. AO/Ld. TPO would continue to adopt the same approach of applying BLT. In this regard, the Appellant wishes to submit that principle of judicial discipline requires that the decision of the Jurisdictional High Court be binding on the authorities subordinate to it. Reliance may be placed on the following decision of Supreme Court in various judgments, where it was held that \"When an order is passed by a higher authority, the lower authority is bound thereby keeping in view the principles of judicial discipline' i. Hon'ble Supreme Court in 'Union of India v. Kamlakshi Financial Corpn. Ltd'. AIR 1992 SC 710 (SC) ii. East India Commercial Co. Ltd. vs Collector of Customs AIR 1962 SC 1893 iii. Commissioner of Income Tax, Bhopal v. Ralson Industries Ltd. (2007) 2 SCC 326 (SC)” 13.2 Further, in this regard, the assessee has also filed a written submission at page no. 457 to 462 of the paper book, in respect of its grounds nos. 8,9, & 10 challenging the application of Bright Line Test for marking the adjustment in respect of AMP expenses which are reproduced as under: Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 16 “ Ground No. 8, Ground No. 9 and Ground No. 10 \"That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO have erred in proposing protective adjustment applying bright line test (\"BLT\") as a 'tool' to benchmark the alleged international transaction, even though BLT has been jettisoned by jurisdictional Hon'ble High Court; That on the facts and circumstances of the case and in law, Ld. AO/ TPO have erred by not appreciating that BLT is not a prescribed method under the purview of section 92C of the Act; and That on facts and circumstances of the case and in law, Ld. AO/Ld. TPO have erred in proposing an adjustment of INR 34,19,25,000/- on protective basis applying the BLT.\" In this regard, the Assessee wishes to submit as under: In the Order, the Ld. AO/Ld. TPO had proposed adjustment on account of AMP expenditure by undertaking comparability analysis, the basic premise of which was BLT. BLT does not have a statutory mandate and cannot be applied in order to determine the international transaction of incurring of AMP expenses on behalf of AE. In the case of Widex India Private Limited, Chandigarh Tribunal has held that AMP intensity approach is just another manner of applying BLT and since BLT has been discarded by High Court, AMP intensity approach can also not be applied. Relevant extract from the ruling is provided below: \" 18.2 We will come to the decisions and the provisions subsequently as first we must also set out the other applicable, well settled legal position namely that the Hon'ble Delhi High Court in the case of Sony Ericsson also unambiguously held that Bright Line Test was an act of judicial legislation and the Court held that by validating the bright line test, the Special Bench in LG Electronics case went beyond Chapter-X of the Act. The Court while arriving at the conclusion was conscious of the international tax jurisprudence and was constrained to hold that even international tax jurisprudence and commentaries do not recognize the bright line test for bifurcation of routine and non routine expenses. The purpose why we feel the need to address which we thought was a well settled legal position is on account of the resort to the bright line test not only by the TPO despite the available judicial opinion to the contrary but this lapse, we note unfortunately was not addressed by the DRP also who instead have tried to do some skillful tip toeing around the issue and did not clearly refer to the settled legal position thereon and left the conclusion arrived at by the Hon'ble High Court in ambiguity, When we consider how \"Intensity approach\" as a method which has been carved out by the DRP which we have referred to in the earlier part of this order while adverting to the objections posed by the taxpayer, we find ourselves in agreement to the objections posed and we have no hesitation in holding that what applies to bright line test fully applies to the Intensity approach as worked out in the facts of the present case as it is a reverse of bright line test as its mirror image. The said mental acrobatics and athletics do not have any judicial sanction and cannot be approved.\" Hence, the use of BLT is without any statutory mandate with a single-minded objective of imputing Transfer Pricing adjustment. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 17 The Ld. AO/Ld. TPO has proposed the BLT when computing the AMP adjustment in the case of the Assessee although this approach has been rejected by Delhi High Court in case of Sony Ericsson Mobile Communications India Private Limited & Others (ITA No. 16/2014 & connected matter wherein it was held that the BLT is not a correct method under Indian TP regulations. The relevant extracts from the said ruling are given below for ready reference: 120. Notwithstanding the above position, the argument of the Revenue goes beyond adequate and fair compensation and the ratio of the majority decision mandates that in each case where an Indian subsidiary of a foreign AE incurs AMP expenditure should be subjected to the bright line test' on the basis of comparables mentioned in paragraph 17.4. Any excess expenditure beyond the bright line should be regarded as a separate international transaction of brand building. Such a broad-brush universal approach is unwarranted and would amount to judicial legislation. During the course of arguments, it was accepted by the Revenue that the TPOs/Assessing Officers have universally applied bright line test' to decipher and compute value of international transaction and thereafter applied Cost Plus Method' or Cost Method' to compute the arm's length price. The said approach is not mandated and stipulated in the Act or the Rules.... 121..... The TPO can then apply an appropriate method and compute the arm's length price of the two independently and even by applying separate methods. This will be in terms of the provisions of the Act and the Rules and also as per the general principles of international taxation accepted and applied universally. On the other hand, as recorded by us above, applying 'bright line test' on the basis of parameters prescribed in paragraphs 17.4 and 17.6 would be adding and writing words in the statute and the Rules and introducing a new concept which has not been recognised and accepted in any of the international commentaries or as per the general principles of international taxation accepted and applied universally. There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to 'bright line test' and the non-routine AMP expenses as a separate transaction to be computed in the manner as stipulated. In view of the above, the Assessee submits that the concept of the BLT has been squarely rejected by the High Court and that the principle has been clearly laid down that in the case that a taxpayer is adequately compensated by its AE by adhering to the arm's length principle then no separate benchmarking of AMP expenses is required. Furthermore, Assessee would like to submit that in the case of the Maruti Suzuki India (supra), the taxpayer initially filed a writ petition before the high court questioning the jurisdiction of the TPO on the issue. The high court set aside the matter for the fresh assessment for the TPO with reference to the guidance provided in the ruling. Thereafter the taxpayer challenged the matter in the Supreme Court. The Hon'ble Supreme Court remitted back the matter to the TPO, with liberty to proceed with the matter uninfluenced by the observations of the high court. The Hon'ble SC set aside the order passed by the Hon'ble high court to the extent of providing guidance on the issue of AMP. Post Supreme Court order, the order of the Hon'ble high court has been nullified and therefore cannot be relied upon. Thus, relying upon the order is in contradiction of the order of the Hon'ble Supreme Court. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 18 Later on, the Hon'ble high court in the same case of Maruti Suzuki passed an order on appeal filed by the Assessee against the order of the tribunal. The Hon'ble High Court in the Maruti Suzuki Ruling (subsequent ruling passed pursuant to order of Tribunal) also held that the sine qua non for commencing the transfer pricing exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the arm's length price by applying one or the five methods specified in section 92C of the Act. The fourth step would be to compare the price of the international transaction with the comparables and make transfer pricing adjustment by substituting the arm's length price for the contract price, wherever required. In respect of AMP expenses, the Hon'ble High Court held that the Revenue first arrived at the BLT by comparing the AMP expenses incurred by taxpayer with the average percentage of the AMP expenses incurred by the comparable entities. Since on applying BLT, the AMP spend of taxpayer was found to be 'excessive', the Revenue deduced the existence of an international transaction. It then added back the excess expenditure as the transfer pricing 'adjustment'. The Hon'ble High Court highlighted that this runs counter to legal position explained in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Del), which required a TPO \"to examine the 'international transaction' as he actually finds the same.\" Further, it was also held in the Maruti Suzuki Ruling that since BLT has been rejected by the Hon'ble High Court in the case of Sony Ericsson both for forming the base and determining if there is an international transaction and also for purpose of determining the ALP, then there is no basis on which it can be said that there is an international transaction as a result of AMP expenses incurred by taxpayer. The relevant extract is provided below for ready reference. \" 47. As regards the submission regarding the BLT having been rejected in the decision in Sony Ericsson is concerned, the Court notes that the decision in Sony Ericsson expressly negatived the use of the BLT both as forming the base and determining if there is an international transaction and secondly for the purpose of determining the ALP. Once BLT is negatived, there is no basis on which it can be said in the present case that there is an international transaction as a result of the AMP expenses incurred by MSIL. Although the Revenue seems to contend that the BLT was used only to arrive at the quantum of the TP adjustment, the order of the TPO in the present case proceeds on the basis that an international transaction can be inferred only because the AMP expenses incurred were significantly higher that what was being spent by comparable entities and it was also used for quantifying the amount of the TP adjustment. Consequently, the Court does not agree with the submission of the learned Special counsel for the Revenue that de hors the BLT, which has been rejected in the Sony Ericsson judgment, the existence of an international transaction on account of the incurring of the AMP expenses can be established.\" (Emphasis Supplied) In this regard, the Assessee would also like to place reliance on the Sony Ruling which had upheld that BLT is not a tool to benchmark international transaction of AMP expenses. The relevant para of the HC Ruling is produced below for kind reference: \"121. During the course of hearing before us, counsel for the Revenue had submitted that paragraph 17.4 should be treated as illustrations and not as binding comparables. We Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 19 would prefer to observe, that an Assessing Officer/ TPO can go and must examine the question whether the Assessee is performing functions of a pure distributor or performing distribution and marketing functions, in the latter case, he must examine and ascertain whether the transfer price takes into consideration the marketing function, which would include AMP functions. This would ensure adequate transaction price and hence assure no loss of revenue. When the distribution and marketing functions are inter-connected and reliable comparables are available, arm's length price could be computed as a package, if required and necessary by making adequate adjustments. When the Assessing Officer/TPO comes to the conclusion that it is not possible to compute arm's length price without segregating and dividing distribution and marketing or AMP functions, he can so proceed after giving justification and adequate reasons. At that stage, he would have apportioned the price received or the compensation paid by the foreign AE towards distribution and marketing or AMP functions. The TPO can then apply an appropriate method and compute the arm's length price of the two independently and even by applying separate methods. This will be in terms of the provisions of the Act and the Rules and also as per the general principles of international taxation accepted and applied universally. On the other hand, as recorded by us above, applying 'bright line test' on the basis of parameters prescribed in paragraphs 17.4 and 17.6 would be adding and writing words in the statute and the Rules and introducing a new concept which has not been recognised and accepted in any of the international commentaries or as per the general principles of international taxation accepted and applied universally. There is nothing in the Act or the Rules to hold that it is obligatory that the AMP expenses must and necessarily should be subjected to 'bright line test' and the non-routine AMP expenses as a separate transaction to be computed in the manner as stipulated. ……………… 148. There is no material or data on record to show that an independent enterprise acting in a commercially rational manner would not enter into an agreement for distribution and marketing has been entered into by the Indian Assessee, a subsidiary of the foreign AE. It would be incongruous and presumptuous to hold, without any data or good reason, that the transactions for distribution and marketing as a package are not executed between a foreign enterprise and an independent enterprise. The bright-line test, we hasten to reiterate is not and cannot be the criteria, reason or data. Commercial men would seek appropriate margins to incur AMP expenses and yet earn net profit as per market conditions.\" The Assessee has also relied on the following rulings wherein the Hon'ble Delhi High Court has upheld the rejection of bright-line test by relying on the Sony Ruling: Bausch & Lomb Ruling \"60. The transfer pricing adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Assessee and the AMP expenditure of a comparable entity that an international transaction exists and then proceeding to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred for the AE. In any event, after the decision in Sony Ericsson (supra), the question of applying the BLT to determine the existence of an international transaction involving AMP expenditure does not arise.\" Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 20 (Emphasis Supplied) Whirlpool Ruling \"47. For the aforementioned reasons, the Court is of the view that as far as the present appeals are concerned, the Revenue has been unable to demonstrate by some tangible material that there is an international transaction involving AMP expenses between WOIL and Whirlpool USA. In the absence of that first step, the question of determining the ALP of such a transaction does not arise. In any event, in the absence of a machinery provision it would be hazardous for any TPO to proceed to determine the ALP of such a transaction since BLT has been negatived by this Court as a valid method of determining the existence of an international transaction and thereafter its ALP.\" (Emphasis Supplied) The mere fact that the order of the appellate authority (Delhi HC, in this case) is not \"acceptable\" to the department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. There is currently no stay order from the Hon'ble Supreme Court of India on the order of Hon'ble High Court on the AMP matter. Thus, these orders being jurisdictional High Court orders should be followed. Based on the above, it is submitted that the BLT is not a method and the price determined the Ld. AO/Ld. TPO to the arm's length price is not determined adopting the most appropriate method in the case. …………………xxxx……………………. In light of the above, the Assessee implores your honour to take cognizance of the aforementioned rulings, and not make TP adjustment on account of alleged \"excessive\" AMP spend incurred by the Assessee using BLT approach.” 14. On the other hand, the Ld. CIT(DR) supported the orders of the authorities below. 15. We have heard the rival contentions and perused the material available on record. In this case, as discussed above, the AO has made the adjustment in respect of AMP expenses by applying the Bright Line Test and added a sum of Rs. 22, 35,89,000/- to the total income of the assessee. In this regard, we have carefully considered the decisions relied by the assessee in its written submission as Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 21 reproduced above, wherein the Hon’ble Court / Tribunal have upheld the rejection of Bright Line Test for making adjustment in respect of AMP expenses. This fact has also been accepted by the TPO / DRP in their respective orders, as the relevant extract of the same are reproduced once again for ready reference: TPO (In its show cause notice dated 11.10.2023 as reproduced earlier in para no. 4 of this order). “Primary Approach – Bright Line In relation to advertising, marketing and promotion expenses, this office has taken a stand that bright line test should be applied and any non-routine expenditure incurred by the assessee in excess of the expenditure incurred by the comparables should be considered as the expenditure incurred by the assessee for the benefit of the parent AE and corresponding adjustment should be made. The Hon'ble High Court in case of Sony Ericsson has rejected the contention of revenue on the applicability of bright line test and corresponding calculations. The Department has filed an appeal against the order of the Hon'ble High Court and contested the judgment before the Hon'ble Supreme Court. The Hon'ble Supreme Court has rejected the petitioner's application for stay of the order of the Hon'ble High Court. Accordingly, the primary contention of this office remains the same as mentioned above. The comparables identified for this approach are same as the comparables considered in the case of alternative approach discussed below. In view of the Hon'ble Supreme Court order refusing the stay, the alternative approach in line with the directions/judgment of the Hon'ble High Court on AMP in case of Sony Ericsson is discussed below.” DRP (In para 15 of the TPO order as reproduced earlier in para no. 5 of this order) “BRIGHT LINE APPROACH 15. As far as the primary reliance of this office on segmentation estimating the segregation of routine promotional expenditure for purchase resale of products from Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 22 the expenditure on marketing and market development service to the AE termed as brightline approach is concerned, it has already been discussed above that the Revenue Department has proposed a SLP before the Hon’ble Supreme Court of India. The assessee has pointed out that the rejection of stay by the Hon'ble Supreme Court was limited to the objection of the assesse on the existence of the international transaction and the same was not on the rejection of brightline. The assessee has not produced any order of the Hon'ble Court which has led it to believe so. Since the judgment of the Hon'ble High Court has not been stayed and in view of the objections of the Revenue to the judgement in the case of Sony Ericsson coupled with the fact of proposing an SLP on this issue, the contention to not consider Brightline analysis as primary method is not found acceptable. Moreover, this method is in accordance with the provisions of rule 10AB as already discussed in details above.” (In para no. 12 of its order as reproduced earlier in para no. 8 of this order.) “….However, since the Hon'ble Delhi High Court rejected the approach of the department with regard to BLT in the case of Sony Ericsson, which has been challenged by the Department in the Hon'ble Supreme Court (the Department has also challenged other similar decisions in the Hon'ble Supreme Court and the Hon'ble High Court against the decisions of the Hon'ble High Court/ITAT), the adjustment on the basis of BLT is proposed on protective basis till the issue in this regard is settled by the Hon'ble Supreme Court. The method applied for this purpose is 'such other method as prescribed by the Board' provided in section 92C(1) (f) read with Rule 10B(1) (f) and Rule 10AB.” 15.1 Further, on similar facts, the co-ordinate bench of Tribunal, in the case of Louis Vuitton India Retail Pvt. vs. DCIT (supra) allowed the appeal of the assessee wherein the assessee had challenged the adjustment made in respect of AMP expenses by the TPO by applying the Bright Line Test. The relevant extract of the said order in para no. 21 to 26 are reproduced as under: “21. Ground No. 4 is regarding adjustment of Rs. 1,84,35,150/-on protective basis on the ground of excess advertisement, marketing and promotion expenditure. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 23 22. The Ld. Counsel for the Assessee submitted that Bright Line Test does not have a statutory mandate and cannot be applied in order to determine the international transaction relate to incurring of AMP Expenses on behalf of AE. The Ld. Assessee's Representative placed reliance on Assessee’s own case for Assessment Year 2012-13 in ITA No. 980/Del/2017, order dated 10/07/2017 and other Judgments of Hon'ble High Court of Delhi mentioned as under and sought for allowing the Ground No. 4.:- i. Sony Ericsson Mobile Communications India Private Limited & Others (ITA No. 16/2014 and connected matters) ii. Bausch& Lomb Eye care (India) Pvt. Ltd. (ITA No. 643/2014) iii. Whirlpool of India Ltd. [ITA No. 610/2014] 23. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities, sought for dismissal of Ground No. 4. 24. We have heard and perused the material available on record and also decisions relied by the Ld. Assessee's Representative. In Assessee’s case for Assessment Year 2012-13 (supra), the Co-ordinate Bench of the Tribunal relying on the ratio laid down by Hon’ble Jurisdictional High Court, held that ‘no transfer pricing adjustment should be made by applying Bright Line Test because the Hon’ble Jurisdictional High Court has not approved the application of Bright Line test in several decisions’. The relevant portion of the order of the Co-ordinate bench of the Tribunal in Assessee’s own case for Assessment Year 2012-13 are as under:- “5.2 The other point urged by the Ld. AR was to decide this issue at our end as the TPO had passed order on 29.01.2016 in which he had considered certain High Court judgments on the point. Once such judgments were taken into consideration, the Ld. AR argued, that there was no point in again directing the TPO to consider the effect of the judgments delivered by the Hon'ble High Court on the point. The argument put forth on behalf of the assessee in this regard is partly correct. It is seen that though the TPO has referred to certain rulings of the Hon’ble jurisdictional High Court on the point in coming to the conclusion that there was a separate international transaction, yet, there are certain other important judgments of the Hon'ble High Court, delivered after the passing of the order by the TPO, which could not be considered, as those were not in existence at that point of time. In this regard, it is noted that there are at least three later judgments of the Hon’ble Delhi High Court, referred to above, viz., Rayban Sun Optics India Ltd. Vs. CIT (order dated 14.9.2016), Pr. CIT VS. Toshiba India Pvt. Ltd. (order dated 16.8.2016) and Pr. CIT VS. Bose Corporation (India) Pvt. Ltd. (order dated 23.8.2016) in all of which similar issue has been restored for fresh determination in the light of the earlier judgment in Sony Ericsson Mobile Communications India Pvt. Ltd. (supra). Accordingly, the contention of the Ld. AR, claiming departure from the earlier year, on this score, is not tenable. Therefore, in light of the non-sustainability of the objections taken by the Ld. AR and following the earlier view taken by the ITAT in assessment year 2010- 11 in the case of the assessee, we set aside the impugned order and remit the matter to the file of TPO/AO for a fresh Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 24 determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter will end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judicial position, after allowing a reasonable opportunity of being heard to the assessee. 5.3 It is further clarified that if a situation for determining the ALP of AMP expenses arises, then no transfer pricing adjustment should be made by applying the Bright Line Test because the Hon’ble Jurisdictional High Court has not approved the application of the bright line test in several decisions.” 25. By respectfully following the Assessee’s own case for Assessment Year 2012-13 (supra) and Judgments of Hon'ble High Court of Delhi (supra), we hold that if a situation of determining the ALP arises, then no transfer pricing adjustment should be made by applying the Bright Line Test. Accordingly Ground No. 4 is allowed.” (emphasis supplied by us) 15.2 Therefore, respectfully relying upon the above decisions we agree with the submission of the assessee that the adjustment made by the AO by applying Bright Line Test, in respect of AMP expenses is not sustainable in the eyes of law. We, therefore, delete the adjustment / addition of Rs. 22,35,89,000/- made by the AO and allow the grounds no. 7 to 13 of the appeal. 16. Further, in view of the fact, that the adjustment of Rs. 22,35,89,000/- has been deleted by us, the contention of the assessee as to whether that AMP expenses incurred is not an ‘international transaction’ as contested in ground nos. 3 to 5 of the appeal become academic and are left open in this case. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 25 17. Ground no. 14 of the appeal is reproduced as under: “ That on facts and circumstances of the case and in law, the Ld. AO has erred in making considering additions of INR 832,809,482 while computing total income in the computation sheet forming part of the assessment order passed under section 143(3) read with section 144C(13) read with section 144B of the Act, despite no such additions being made in the assessment order. 17.1 The above claim of the assessee is restored to the file of the AO and the AO is directed to verify and pass necessary orders as per law. Ground no. 14 of the appeal is allowed for statistical purposes. 18. Ground no. 15 is reproduced as under: “ That on facts and circumstances of the case and in law, Ld. AO has erred in considering 'Income from Other Sources' amounting to INR 65,386,787 twice (as part of the erroneous addition of INR 832,809,482) while computing total income in the computation sheet forming part of the assessment order passed under section 143(3) read with section 144C(13) read with section 144B of the Act. 18.1 The AO is directed to verify the above claim of the assessee and pass necessary orders as per law. Ground no. 15 of the appeal is allowed for statistical purposes. 19. Ground no. 16 is consequential in nature, relating to charging of interest u/s 234A 234B, 234C of the Act respectively. The AO will charge interest as per law. Ground no. 16 is partly allowed. Printed from counselvise.com ITA No.- 5929/Del/2024 Swatch Group (India) Pvt. Ltd. 26 20. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 14th January, 2026 Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 14.01.2026. Pooja. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, Printed from counselvise.com "