2010 (7) TMI 84 - HC - Income Tax

Transfer pricing (TP) - Use of brand name / trademark – payment of royalty - arm’s length price - Prior to 1993, the petitioner was using the logo ‘M’ on the front of the cars manufactured and sold by it. From 1993 onwards, the petitioner started using the logo ‘S’, which is the logo of Suzuki, in the front of new models of the cars manufactured and sold by it, though it continued to use the Mark ‘Marut’ along with the word ‘Suzuki’ on the rear side of the vehicles manufactured and sold by it - TPO came to the conclusion that the trademark ‘Suzuki’, which was owned by Suzuki Motor Corporation, had piggybacked on the Maruti trademark, without payment of any compensation by Suzuki to ‘Marut’. He also came to the conclusion that the trademark ‘Marut’ had acquired the value of super brand, whereas the trademark ‘Suzuki’ was a relatively weak brand in Indian market - TPO noted that Maruti had paid royalty of Rs.198.6 crores to Suzuki in the year 2004-05, whereas no compensation had been paid to it by Suzuki, on account of its trademark having piggybacked on the trademark of Maruti – He, thus, made a total adjustment of Rs.2,06,52,26,920/- and also directed that the Assessing Officer of Maruti shall enhance its total income by that amount, for the assessment year 2005-06 - Held that: - Procedure for determining arm’s length price u/s 92C explained in detail - order dated 30.10.2008 set aside and TPO directed to determine appropriate arm’s length price in respect of the international transactions entered into by the petitioner Maruti Suzuki India Limited with Suzuki Motor Corporation, Japan, in terms of the provisions contained in Section 92C of the Income Tax Act and in the light of the observations made in this order