India: Brand development | KPMG | GLOBAL
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India: Brand development not separate international transaction

India: Brand development

The Chennai Bench of the Income-tax Appellate Tribunal rejected a transfer pricing adjustment based on the tax administration’s treatment of brand development as a separate international transaction.


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The tribunal highlighted that the value to the foreign parent company was its increased brand valuation, as a consequence of cars being sold in India by the taxpayer, and not as a result of conscious brand promotion by the taxpayer. The tribunal concluded that the accretion of brand value, as result of the use of the foreign related party's brand name (an arrangement at arm's length price) did not result in a separate international transaction that needed to be benchmarked.

The case is: Hyundai Motor India Limited v. DCIT


The taxpayer (a wholly owned subsidiary of a Korean company) was involved in the manufacturing and sale of cars in India using the Korean company’s brand. The taxpayer was required to use the company’s “badge” with the trademark of the Korean related party for each and every vehicle manufactured, pursuant to an intercompany agreement between the taxpayer and the Korean company. 

Relying on case law that building brand in the local market was an international transaction, the Transfer Pricing Officer proposed an adjustment based on the increased value to the brand, and the Assessing Officer made the adjustment. The taxpayer administratively appealed, and the Dispute Resolution Panel in principle agreed to the adjustment. The taxpayer filed for judicial review.

The tribunal held that the accretion of brand value, as a result of use of the brand name of the foreign related party under the technology-use agreement, which had been accepted to be an arrangement at an arm’s length price, did not result in a separate international transaction to be benchmarked and, therefore, removed the transfer pricing adjustments.


Read a May 2017 report [PDF 358 KB] prepared by the KPMG member firm in India

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