Judgment Affirms Precedents in Sony Ericsson and Maruti Suzuki Cases; Supreme Court's Stance on Whirlpool Adds Weight
In a significant ruling, the Delhi High Court has dismissed appeals filed by the Principal Commissioner of Income Tax, Delhi-7, against Suzuki Motorcycle India Pvt. Ltd., upholding the Income Tax Appellate Tribunal's decision to reject adjustments of Advertising, Marketing, and Promotion (AMP) expenses using the Bright Line Test (BLT).
The Division Bench, comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta, delivered the judgment on August 10, 2026. The court reinforced its stance by relying on prior judgments in the cases of Sony Ericsson Mobile Communications India Pvt. Ltd. and Maruti Suzuki Ltd., which have consistently held that the Bright Line Test is not a legally sanctioned method for determining AMP expense adjustments under the Income Tax Act, 1961.
The Principal Commissioner of Income Tax had challenged the Tribunal's decision, questioning its reliance on the aforementioned cases, especially since related matters are still pending before the Supreme Court. However, the High Court was not persuaded by these arguments, largely due to the Supreme Court's earlier rejection of a Special Leave Petition (SLP) in a related matter involving Whirlpool of India Ltd., which further solidified the stance against using the BLT for AMP expenses.
The High Court clarified that while it is dismissing the current appeals, the outcome is subject to the Supreme Court's eventual decision on the pending appeals related to the Sony Ericsson and Maruti Suzuki cases. Should the Supreme Court overturn these precedents, the implications will extend to the present case as well.
Senior Counsel Ajay Vohra, representing Suzuki Motorcycle India Pvt. Ltd., argued that the High Court, in numerous cases, has ruled against the BLT, reinforcing that it is not a method sanctioned by law. Meanwhile, Senior Standing Counsel Puneet Rai, representing the tax department, emphasized that the matter is still under consideration by the Supreme Court, suggesting a potential shift in legal interpretation.
With this judgment, the Delhi High Court remains aligned with its previous rulings, awaiting further clarification from the Supreme Court, which will ultimately guide the definitive legal position on the applicability of the Bright Line Test in such tax matters.
Bottom line:-
Income Tax - Bright Line Test (BLT) for AMP expenses - Tribunal's rejection of AMP adjustment by applying BLT upheld, following precedents set by Delhi High Court in Sony Ericsson and Maruti Suzuki cases. Supreme Court's rejection of SLP against Whirlpool case further strengthens the position that BLT is not a method sanctioned by law.
Statutory provision(s):
Section 260A of the Income Tax Act, 1961
