maruti suzuki indian v india transfer pricing office
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Maruti Suzuki Indian V. India Transfer Pricing Office

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Maruti Suzuki Indian V. India Transfer Pricing Office. Suzuki Royalty TP case –Facts . Maruti Suzuki Motor Corporation (“Suzuki”), a Japanese company, owned over 50% of Maruti Suzuki India (“ Maruti ”), an Indian company.

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suzuki royalty tp case facts
Suzuki Royalty TP case –Facts
  • Maruti Suzuki Motor Corporation (“Suzuki”), a Japanese company, owned over 50% of Maruti Suzuki India (“Maruti”), an Indian company.
  • Suzuki licensed the brand and technical know-how to Maruti to use it in India, in return, Maruti paid Suziki a lump-sum royalty and royalties based on the FOB value of certain components that Maruti will use to manufacture using the technology provided by Suzuki.
  • Suzuki didn’t have to make any payment to Maruti
  • India’s tax authority (TPO) stated that Maruti should be compensated for use of the Suzuki brand on the Maruti automobiles
  • High Court of Delhi found in favor of the defendantMaruti and rejected the TPO’s arguments
the arguments
The Arguments
  • Tax Authority\'s Arguments:
  • The use of the Suzuki brand on Maruti automobiles effectively constituted the sale of the Maruti brand to Suzuki
  • Maruti was owed an arm’s-length royalty for the piggybacking, use of the Maruti brand on the co-branded trademark “Maruti Suzuki,” and impairment of the Maruti brand.

Taxpayer\'s Arguments:

  • Maruti asserted that there had been no transfer of the Maruti brand
  • Maruti argued that by using Suzuki’s trademark it had received a large benefit while Suzuki received no benefit.
  • Maruti demonstrated that its advertising expenses over the 13 years were commensurate with comparable companies’ advertising expenses and its royalty-to sales ratio was lower than other companies
high court of delhi decision
High Court of Delhi Decision
  • High Court of Delhi stated that the use of the Marutiname was within the discretion of Maruti and not granted to Suzuki or contained in any legal agreement
  • The court also found that Maruti was justified in entering into the License Agreement and paying an appropriate royalty to Suzuki for the use of its trademark
implications
Implications
  • This case illustrates the Indian tax authorities\' application of marketing intangibles and the application of international standards
  • Maruti Suzuki suggests the increasing attention from tax authorities over the value of marketing intangibles
  • This case demonstrates what data should be used for benchmarking when dealing with India tax authority
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