The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has granted relief to Toyota Kirloskar Motor on transfer pricing adjustment relating to royalty payments made to Toyota Motor Corporation, Japan, and Toyota Motor Asia Pacific, Singapore.
However, in a verdict last month, the appellate body dismissed Toyota Kirloskar’s appeal against the payment of dividend distribution tax (DDT) using the India-Japan Double Taxation Avoidance Agreement (DTAA). The appellate body approved the company’s royalty payment of ₹646 crore at 6% of local value addition and rejected the transfer pricing officer’s estimate of ₹437 crore at 2.62% of net sales. Moreover, it also upheld Toyota Kirloskar’s method of combining all its international transactions to determine the arm’s length price for the royalty payment.
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