Microsoft's policy says:
The following requirements apply to applications that receive the location of a user's mobile device: 2.7.3 Your application must provide in-application settings that allow the user to enable and disable your application's access to and use of location from the Location Service API.
I included ID_CAP_LOCATION in my manifest for an AdMob (google mobile advertising) control only - Do I need to add that in-app settings disabling location and tell user that the application uses location services on the first launch for successfully passing the certification?
In Google's own documentation, they say:
Google asks that you only specify location data if that information is already used by your app
The suggested interpretation of Microsoft's certification guidelines would be that to be accepted on the store, if you're going to use the location of the user (even if only to pass to an advertising control) you should be up front about that and allow your customer to disable that option.
So, to summarize, I would suggest not using the location unless your app has another reason to do so (to keep Google happy), and if you choose to use locations, I would recommend being up front with (one-off) message on first launch, and the ability for your customer to disable it (to keep Microsoft happy).