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 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 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.

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

About IPR Plaza IPR Plaza is a web-based platform that bridges the gap between IP law, accounting, tax, transfer pricing and valuation by providing general and profession-specific information on intangibles, as well as, quantifiable valuation models. IPR Plaza is empowered by different leading IP advisory firms. IPR Plaza is headquartered in the Netherlands with representation in other major countries.