Copying and distributing are prohibited without permission of the publisher

Indian ITAT ruling helps justify royalty payments by manufacturers to group companies

22 November 2012

Joe Dalton

A recent ruling by India’s Income Tax Appellate Tribunal (ITAT) Mumbai bench should help to justify the payment of royalty by entities undertaking contract manufacturing, toll manufacturing or fully-fledged manufacturing for their group companies.

In the case of SC Enviro Agro India v DCIT the tribunal held that it is not the role of a transfer pricing officer (TPO) to assess whether a technology royalty was payable as a legitimate business purpose. The tribunal said the TPO's role is to analyse only whether the payment was made at an arm's-length price, and it is for the assessing officer (AO) to determine whether or not the royalty should have been paid.

SC Enviro Agro case

SC Enviro Agro (Enviro Agro) entered into a technical licence agreement with Sumitomo Chemical Company (SCC) which allowed it to produce certain chemical products commercially as part of its insecticide and pesticide manufacturing business.

The agreement entailed that Enviro Agro only sold its products to companies approved by SCC.

It also purchased any intermediate ingredients only from SCC.

The company to which most of Enviro Agro's products were...



This article is locked content, available to current subscribers or trialists.

  • Current subscribers or trialists - Please log in to view this article in full.
  • New users - Please take a free 7 day trial.
  • Expired subscribers or trialists - Please subscribe to gain immediate full access.

If you think you've received this message in error, please contact your account manager, Nick Burroughs:
Email: nburroughs@euromoneyplc.com, Tel: +44 (0)207 779 8379

Subscribe now

Subscribe today to gain full access to International Tax Review.

Subscribe

Free trial

Take a free trial now and gain 7 days of full access to International Tax Review.

Free trial





International Tax Review Profile

#ff @AbelAdvisory @andrewmorreale @LAPFForum @maciejjesionow1

Oct 17 2014 09:29 ·  reply ·  retweet ·  favourite
International Tax Review Profile

Welcome to all our new followers @maciejjesionow1 @MadisonsMCR @AMRtaxCPA @gbskidmore @KateChaundy

Oct 17 2014 08:45 ·  reply ·  retweet ·  favourite
International Tax Review Profile

RT @AbelAdvisory: Abel is proud to be ranked again as one of the leading Dutch transfer pricing firms in @IntlTaxReview World TP 2015 http:…

Oct 16 2014 07:07 ·  reply ·  retweet ·  favourite
International Tax Review Profile

RT @CorplawLtd: Irish #Budget2015 – Key international #Tax aspects http://t.co/uwirtWvv6w by @intltaxreview #Ireland

Oct 16 2014 07:07 ·  reply ·  retweet ·  favourite
International Tax Review Profile

Welcome to our new followers @martinlambe @SchaferPetrecz @StudioSmussI

Oct 16 2014 09:24 ·  reply ·  retweet ·  favourite
International Correspondents

After the Irish budget, what would make you more likely to put more substance into Ireland?