The Supreme Court on Thursday stayed the Income Tax department from passing any order in the case related to payment of brand licensing fee and royalty by auto major Maruti Suzuki India to parent Suzuki Motor Corporation. A three judge bench headed by Chief Justice S H Kapadia directed the department to maintain status quo till October 1, , next date of hearing of the matter on transfer pricing — the technique where parent companies sell goods and services to subsidiary.
“Till October 1, status quo would be maintained,” said the bench, which also consisted of Justice K S Radhakrishnan and Swatanter Kumar. The order follows a petition by Maruti Suzuki India (MSI) against an order of the Delhi High Court, which directed the transfer pricing officer (TPO) of I-T Department to fix the company’s tax liability again.
The apex court, however, directed the TPO to go ahead with its proceedings to ascertain tax liability uninfluenced by the Delhi High Court’s order. “TPO would go ahead uninfluenced by the orders passed by the Delhi High Court,” the bench said.
Earlier, passing an order in July, the High Court had directed TPO to fix again the tax liability against MSIL after observing that the approach adopted by IT department was erroneous and unsustainable.The issue relates to benefit, which MSIL’s Japanese parent firm Suzuki Motor Corporation got from use of marketing intangibles such as trademarks through licensing arrangements with the Indian arm.
TPO had conducted transfer pricing audit for assessment year 2004-05 and determined the value of Maruti brand at Rs 4,420 crores and asked to pay Rs 206 crore as tax.