Delhi ITAT Holds AMP Spend Can't Be TP Transaction Without AE Understanding, Follows Sony India Ruling

On 30 July, the New Delhi Income Tax Appellate Tribunal (ITAT) held that AMP expenditure incurred by an Indian entity cannot be treated as an international transaction for transfer pricing purposes without any agreement, arrangement or understanding with its associated enterprise (AE), following the Delhi High Court's ruling in Sony India Pvt. Ltd. v. ACIT.

A Bench comprising Judicial Member Satbeer Singh Godara and Accountant Member Manish Agarwal held that the issue of whether AMP expenditure constitutes an international transaction has been settled against the Revenue by decision in Sony India Pvt. Ltd. and deleted the transfer pricing adjustment made against Unicharm India Private Limited. It observed:

“We note that the question as to whether 'AMP' expenditure constitutes an international transaction or not, stands recently decided against the department in 2025 177 taxmann.com 325 (Del) Sony India Private Limited vs ACIT.”

Unicharm India Private Limited, a wholly-owned subsidiary of Unicharm Corporation, Japan, manufactures and sells personal hygiene products in India. For Assessment Years 2010-11, 2011-12 and 2012-13, the Transfer Pricing Officer (TPO) treated the AMP expenditure incurred by Unicharm India as being for promotion of its foreign AE's brand in India and proposed transfer pricing adjustments by applying the Bright Line Test (BLT).

The Commissioner (Appeals) rejected the Bright Line Test but directed the TPO to recompute the arm's length price using the “functional intensity” approach. Aggrieved by the order, both Unicharm India and the Revenue approached the Tribunal.

Unicharm India argued that it incurred the AMP expenditure to establish its own business presence in India during its initial years of operation. It contended that no international transaction existed as there was no agreement, arrangement or understanding requiring it to incur expenditure for the benefit of its AE. It also challenged the application of the Bright Line Test and the functional intensity approach. The Revenue, however, defended the AMP adjustment and sought restoration of the Bright Line Test methodology.

The Tribunal noted that the Revenue's case proceeded on the assumption that Unicharm India's AMP spending benefited its foreign AE by enhancing the AE's brand in India. However, relying on the Delhi High Court's decision in Sony India Pvt. Ltd., it held that AMP expenditure by itself cannot be regarded as an international transaction requiring arm's length compensation. Therefore, it rejected the Revenue's challenge against deletion of the Bright Line Test adjustment and accepted Unicharm India's contention on the AMP issue.

Further, the Bench also examined Unicharm India's remaining transfer pricing dispute concerning benchmarking of import transactions. It held that Unicharm India's request to adopt its foreign AE as the tested party could not be rejected without assigning reasons and remitted the issue to the TPO for fresh adjudication after considering the principles laid down by the Tribunal in Global Vantedge Pvt. Ltd. It observed:

“The least complex party is to be taken as the tested party but the use of a foreign enterprise as a tested party cannot be rejected summarily without assigning any reason.”

Accordingly, the ITAT granted relief to Unicharm India Private Limited on the AMP expenditure issue by following the Delhi High Court's decision in Sony India Pvt. Ltd., while remanding the benchmarking dispute relating to import transactions for fresh consideration. It rejected the Revenue's challenge to deletion of the Bright Line Test adjustment.

Counsel for Assessee: Mr. Gaurav Garg, CA and Ms. Preksha Gupta, AR.

Counsel for Revenue: Mr. Mahesh Kumar, CIT-DR.