Delhi High Court Stays Draft Assessment Order Against American Express, Admits Transfer Pricing Appeal

The Delhi High Court has stayed the operation of a draft assessment order passed against American Express Banking Corporation (India Branch) while admitting the company's income tax appeal raising multiple questions of law relating to transfer pricing adjustments, including the validity of the Bright Line Test (BLT) and the Transfer Pricing Officer's (TPO) methodology.

A division bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta noted that by an interim order dated May 29, 2026, it had permitted the Assessing Officer to pass a draft assessment order while directing that it should not be given effect to.

Since the draft assessment order was passed on June 29, 2026, the Court directed that its "effect and operation" shall remain stayed.

The Court thereafter admitted the appeal on eight substantial questions of law arising from the Income Tax Appellate Tribunal's order.

Among the issues to be examined is whether the Tribunal erred in sustaining the TPO's substitution of the transfer pricing methodology without expressly rejecting the methodology adopted by American Express, contrary to settled precedents of the Delhi High Court.

The Court will also consider whether the Tribunal wrongly treated the issues involved in the relevant assessment year as being similar to Assessment Year 2009-10 despite differences in the transfer pricing analysis adopted by the TPO, and whether the remand was warranted when the comparable company relied upon by the TPO, Kotak Mahindra Banking Limited, had incurred losses during the relevant period whereas American Express' credit card business remained profitable.

The Court also agreed to examine whether the Tribunal ought to have rejected the transfer pricing adjustment on the ground that it was based on the Bright Line Test, which has previously been held to be invalid by the Delhi High Court.

It also framed questions regarding the rejection of foreign associated enterprises as the tested parties, the validity of benchmarking based on the BLT despite being labelled as the Comparable Uncontrolled Price (CUP) method, and the inclusion of domestic transactions in the transfer pricing adjustment pool.

The Court issued notice to the Revenue and listed the appeal for hearing on October 29.

For Appellant: Advocates Nageswar Rao and Ravi Lochan

For Respondent: Vipul Agrawal SSC with Sakshi Shairwal, Mr. Akshat Singh, JSCs.