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3. Briefly stated the facts are that the assessee is in the business of manufacturing and marketing of fast moving consumer goods, such as edible oils, skin care products, personal care products processed foods, etc. During the year under consideration, the assessee has set up a wholly owned subsidiary, namely Marico South Africa Consumer Care Pvt Ltd. (MSACC) in South Africa on 06.09.2007 to act as an investment holding company. In terms of this, the assessee vide agreement dated 05.11.2007 with Standard Chartered Bank (SCB) has taken an external commercial borrowing loan of US$ 15 million at an interest of 3 months LIBOR + 150 bps and the assessee has invested loan of US$ 15 million taken from SCB fully in subsidiary MSACC. SCB has charged interest @ 3 months LIBOR + 150 bps (effective rate is around 6.45%) on the loan provided to the assessee whereas the assessee has charged interest @ 6 months LIBOR + 230 bps (effective rate around 7.20%) on the loan provided to MSACC. The assessee has considered the comparable uncontrolled price method (CUP) for this transfer pricing study as the most appropriate method to benchmark the ALP of the interest received from ITA No,1869/ Mum/2015 Assessment Year 2008-09 MSACC. For applying the CUP method, the assessee contended that the amount received from SCB was provided to MSACC as loan in back to back transaction and the arrangement entered into by the assessee and SCB has considered internal CUP method for the purpose of ALP of the interest received from MSACC as most appropriate method. It was explained before the lower authorities that interest charged by the assessee on loans to MSACC was higher than the interest paid on loan taken from SCB; the transaction was concluded as ALP. The Transfer Pricing Officer (TPO) has not accepted the CUP method adopted by the assessee i.e. internal CUP on the ground that under CUP method, the interest rate would be prevalent only when the interest could have been earned by the assessee by advancing the loan to an unrelated party in India with the same weak financial health as that of the assessee's AE. On this basis, the TPO concluded that the information relied on by the assessee for the above conclusion on the information for credit rating of the debt instruments i.e. (corporate bonds) provided by CRISIL Ltd., a credit rated agency. The TPO observed that the loan given by the assessee to MSACC has been rated as 'BB' and, accordingly, yield at 17.26% p.a. Thus, the TPO/AO adopted interest rate @ 17.26% p.a. and made adjustment of ₹1,07,54,727/- for benchmarking the Arms Length Price. Aggrieved, the assessee preferred appeal before the CIT(A).

Aggrieved, the assessee came in appeal before the Tribunal.

5. Before us, Shri P.J.Paridwalla & Shri Nitesh Joshi argued on behalf of the assessee. Ld Counsels stated the facts that the assessee's AE MSACCL has taken ECB loan from SCB at three months LIBOR + 130 bps with effective rate being 6.45% and advanced the loan to its associates at six months LIBOR + 230 bps being 7.20%. The assessee had charged interest at 9.5% to MMEL, whereas the said MMEL had borrowed funds from ICICI Bank in Bahrain at months LIBOR + 60 to 100 bps being interest ranging from 5.76% to 6.16%. The assessee has charged interest to Sundari LLC (SL) at LIBOR+150 bps on loans given prior to 09.06.2005 and at 6% on loans given from 10.06.2005 whereas the SL had borrowed funds from HSBC Bank at LIBOR +100 bps, the effective interest @ 6%. Ld counsels stated that the interest at 6% is higher than the prevailing LIBOR and no interest has been charged from the said company from 23.10.2007 in view of its deteriorating financial position. Ld Counsel stated that the Tribunal in assessee's own case in the immediately preceding assessment year i.e. 2007-08 has accepted the interest to be charged on loans given by the assessee to its AEs and should be benchmarked on the basis of LIBOR in ITANo.8858/Mum/2011 for A.Y. 2007-08 order dated 18.5.2016. Ld Counsel for this referred to para 6 and 6.1 of the Tribunal's order, wherein, it is held that the TPO was not justified in making adjustment under the head interest to be charged ITA No,1869/ Mum/2015 Assessment Year 2008-09 as the rate of interest was higher than LIBOR. Following is the findings of Tribunal in para 6.6.1 of the order as under: -

6.1.It is found that during the year under appeal, the assessee had provided working capital loan to Sundari LLC,that it had charged LIBOR +150 bps on loans prior to AY.2006-07 and had charged interest @ 6% for the next year, that it had taken working capital loan from HSBC@ LIBOR+ 150bps,that later on HSBC reduced the rate ,that the assessee repaid the loan in the month of Feb. 2006,that the TPO adopted interest rate of 9.5% p.a. ,being the interest charged to MME as ALP, that he made an addition of Rs.70.87 lakhs, that referring to the ECB rates the FAA had given part relief to the assessee. We are of the opinion that the LIBOR rate has to be considered a valid base for determining ALP for foreign loans. If the loan taken and received are in foreign currency LIBOR would be the safest tool to justify or reject the claim of the AO/an assessee. In the ITA No,1869/ Mum/2015 Assessment Year 2008-09 cases of Siva Industries & Holdings Ltd. (46 SOT 112);Cotton Naturals (I) Private Ltd.(5855/ Del/2012)the issue under appeal has been dealt in details. In both the cases the Tribunal has held that in case of foreign currency Loan, LIBOR rates should to be applied. The Hon'ble Bombay High Court in the case of Tata Autocomp Systems Ltd.(ITA No.1320 of 2012 dtd.03.02.2015) has deliberated upon the issue. Fact of the case have been narrated by the Hon'ble court as under:

After considering the above orders of the Tribunal and judgment of the Hon'ble Court we are of the opinion that TPO was not justified in making adjustment under the head interest to be charged. The rate of interest was higher than LIBOR, so, we hold that the IT in question was at arm's length."

6. The Ld. counsel also stated that once LIBOR rate is charged for benchmarking of interest on loans granted by an Indian assessee to its overseas AEs, this issue is also covered by Hon'ble Bombay High Court in CIT vs. Aurionpro Solutions Ltd. in Income tax Appeal No.1869 of 2014 order dated 09.06.2017 held that no TP adjustment can be made in respect of interest on loans given to its AEs, once the LIBOR rate is applied by the assessee.