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.
 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 defendant Maruti and
rejected the TPO’s 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 stated that the use of the Maruti name 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
• 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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