India vs LG Electronics India Pvt Ltd, December 2014, ITA

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LG India is a wholly owned subsidiary of LG Korea, a multinational manufacturer of electronic products and electrical appliances.

LG Korea and LG India entered into a technical assistance and royalty agreement in 2001 where LG India, as a licensed manufacturer, would pay a 1% royalty to LG Korea for the use of various rights for the manufacture and sale of products in India. The agreement also gave LG India a royalty-free use of the LG brand name and trademarks.

The tax tribunal in 2013 held that the advertising, marketing and promotion (AMP) expenditure in excess of the arm’s length range helps to promote the brand of the foreign associated enterprise and that the Indian associated enterprise should necessarily be compensated by the foreign one. In reaching the above conclusion, the special bench applied the “bright line” test used by a US Court in DHL Corp v Commissioner.


The 2014 Appeal Case



The Prior 2013 Judgement from the ITA