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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