Indian Tribunal Holds Government Approved Rates may Not be Used as Transfer Pricing Benchmark for Royalty Payments

The Mumbai Income Tax Appellate Tribunal recently issued a decision concerning whether a royalty payment rate agreed to with the Indian government can be used as a comparable uncontrolled price benchmark for transfer pricing purposes. The case involved India-based Sara Lee TTK Ltd, (TTK), a company engaged in the business of manufacture and sale of household and personal care products.

In 1995, TTK entered into an agreement with Dutch company Buttress B.V. for the use of know-how, formulas, …