The 2025 Income Tax Appellate Tribunal (ITAT) ruling in the Sony India case marks a significant development in Indian transfer pricing law. The tribunal rejected the bright line test (BLT) and intensity-based adjustments for advertising expenses, affirmed the deductibility of royalties for licensed technology, and stressed the need for documented agreements and reliable comparables in intra-group pricing. By focusing on functional analysis, evidence-based benchmarking, and statutory compliance, the decision confirms that arm’s-length pricing should rely on substantive, methodologically sound analysis rather than formulaic methods. This underscores the need for multinational enterprises to maintain robust documentation and use OECD-consistent methodologies.
