Relief to Louis Vuitton: ITAT Holds Bright Line Test not valid Method for making TPA on Advertisement, Marketing & Promotion [Read Order]
Louis Vuitton argued before the Tribunal that the Bright Line Test could not serve as a benchmarking tool owing to its lack of statutory backing.
![Relief to Louis Vuitton: ITAT Holds Bright Line Test not valid Method for making TPA on Advertisement, Marketing & Promotion [Read Order]](https://images.taxscan.in/h-upload/2025/06/12/2043237-louis-vuitton-site-img.webp "Relief to Louis Vuitton: ITAT Holds Bright Line Test not valid Method for making TPA on Advertisement, Marketing & Promotion [Read Order]")
In a significant relief for luxury retail giant Louis Vuitton India Retail Pvt. Ltd. (LV), the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the Bright Line Test (BLT) cannot be considered a valid method for making transfer pricing adjustments (TPA) relating to Advertisement, Marketing, and Promotion (AMP) expenses. The Indian wing of the French luxury...
In a significant relief for luxury retail giant Louis Vuitton India Retail Pvt. Ltd. (LV), the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the Bright Line Test (BLT) cannot be considered a valid method for making transfer pricing adjustments (TPA) relating to Advertisement, Marketing, and Promotion (AMP) expenses.
The Indian wing of the French luxury fashion had filed the present appeal against the order passed by the Deputy Commissioner of Income Tax, Circle-1(1), Gurgaon with regards to its financials for the Assessment Year (A.Y.) 2020-21.
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Louis Vuitton India, represented by Chartered Accountant Ajit Jain filed an appeal against the final assessment order issued by the DCIT which proposed a protective adjustment of ₹1,84,35,150 on allegations of excessive AMP expenditures.
It was contended by LV that the AMP adjustment was bad in law as the prerequisite for applying Chapter-X, i.e., existence of an international transaction between two Associated Enterprises (AE) under section 92B of the Act was not fulfilled as there was no agreement, understanding or arrangement for incurrence of expenditure by the Appellant on behalf of the AE.
The Bright Line Test (BLT) is a method generally used by tax authorities to determine whether the AMP expenses incurred by an entity exceeded what would be considered "routine" for a local distributor of a foreign AE. If expenses crossed this undefined "bright line," the excess was treated as a service to the foreign AE, triggering a transfer pricing adjustment.
Further, the counsel stated that the BLT could not be a tool to propose protective adjustment the and could not be a benchmark for the alleged international transaction since it is not a prescribed method under the purview of Section 92C of the Act and the same was previously laid down by the Delhi High Court in:
Sony Ericsson Mobile Communications India Private Limited & Others v. Commissioner of Income Tax - III (ITA No. 16/2014);
Bausch& Lomb Eye care (India) Pvt. Ltd. (ITA No. 643/2014) and
Whirlpool of India Ltd. [ITA No. 610/2014].
Meanwhile, Rohit Garg, appearing for the Revenue sought for dismissal of the matter relying on the orders of the lower authorities.
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The bench comprising Judicial Member Yogesh Kumar U.S. and Accountant Member Avdhesh Kumar Mishra, referenced the decision of the co-ordinate Bench in LV’s own matter from A.Y. 2012-13 which relied on the decisions of Delhi High Court that disapproved the usage of BLT as a benchmarking method.
The tribunal noted that if a situation of determining the ALP arises, then no transfer pricing adjustment should be made by applying the Bright Line Test, thereby granting partial relief to LV.
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