Maruti Suzuki India vs. ACIT (Supreme Court)

High Court’s judgement on transfer pricing of trademarks & brands licensing nullified

In Maruti Suzuki vs. ACIT 328 ITR 210 (Del), the Delhi High Court whilst remanding the matter to the TPO for fresh consideration inter alia held that if a domestic Associate Enterprise is mandatorily required to use the foreign trademark on its products, the foreign entity should make payment to the domestic entity on account of the benefit the foreign entity derives in the form of marketing intangibles from such mandatory use of the trademark. Certain other far-reaching principles on transfer pricing of trademarks & brands were set out. On appeal by the assessee, HELD disposing off the Appeal:

“In this case, the High Court has remitted the matter to the Transfer Pricing Officer with liberty to issue fresh show-cause notice. The High Court has further directed the TPO to decide the matter in accordance with law. Further, on going through the impugned judgement of the High Court dated 1st July, 2010, we find that the High Court has not merely set aside the original show-cause notice but it has made certain observations on the merits of the case and has given directions to the TPO, which virtually concludes the matter. In the circumstances, on that limited issue, we hereby direct the TPO, who, in the meantime, has already issued a show-cause notice on 16th September, 2010, to proceed with the matter in accordance with law uninfluenced by the observations/directions given by the High Court in the impugned judgement dated 1st July, 2010.”