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32. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of the proceedings, it was noticed that the assessee had advanced a loan of US $ 345,04,000 to its AE, vide agreement dated 25th May 2007, for purchase of an aircraft. It was explained by the assessee that the loan was in the nature of quasi equity and that it was the first year of operations of the AE which made the transaction more in the nature of the shareholder activity rather than a commercial transaction. While, by way of this interest free loan, the assessee had given 25% of the cost of the aircraft, the balance 75% was met out of the SBI loan. It was also explained that this interest free loan resulted in lower aircraft lease rental and thus benefit to the assessee. None of these submissions, however, impressed the TPO. He proceeded to adopt LIBOR plus 445 bps as the arm's length price of the interest, and, as he did so, he rejected the plea of the assessee that as AE was able to raise loans at LIBOR plus 1.45% from the State Bank of India, Hong Kong branch, the same should be taken as arm's length price of the interest free loan taken by the AE from the assessee. The TPO observed that "this is so in view of the difference in credit risk on account of collateral and the guarantee". Consequently, the ALP of interest free loan was taken at 7.14% and an ALP adjustment of Rs 27,64,950 was made. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us.

33. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

34. We find that a coordinate bench of this Tribunal, in the case of UFO Movies India Ltd Vs ACIT [(2016) 175 TTJ 633 (Del)] and speaking through one of us i.e. the Vice President, had observed as follows:

5. We have noted that there is no dispute that the LIBOR rate, so far as the relevant previous year was concerned, is to be taken at 4.53%, as the TPO himself has, pursuant to the directions of the DRP to adopt ALP at LIBOR+4%, taken the ALP at 8.53%. The order dated 19th March 2013, a copy of which was placed before us at pages 426 and 427 of the paper-book, clearly evidences this factual position. There is also no dispute that the assessee has advanced the loan to the subsidiary at 7% per annum. Clearly, therefore, as long as the comparable uncontrolled price of the US $ denominated lending is less than 247 points (i.e.700-453) above the LIBOR rate, the transaction entered into by the assessee with its subsidiary cannot be said to be at less than arms length price. The Transfer Pricing Study filed by the assessee, however, does not throw much light on this aspect of the matter beyond stating, in rather vague terms, that "a study revealed that around 100 basis points increase in the LIBOR rate is considered appropriate for lending to corporates", and that "therefore, the adjusted interest percentage is to be taken the arm's length interest rate i.e. 5.53%". Such sweeping generalizations and vague justifications as inherent in the above comment CO Nos. 25 and 26/Ahd/ 2015 ITA No.: 3481 and 3482/Ahd/14 Assessment year: 2009-10 and 2010-11 in the TP study, in support of LIBOR+100 basis points as ALP, cannot meet any judicial approval.

'62. As far as the first adjustment is concerned, while the TPO has adopted the rate as 4% over LIBOR rate, he has not set out the specific basis of this rate. He has mentioned about some information gathered from websites of financial institutions which, according to him, states that, "for the foreign currency denominated term loans, the maximum rate of interest is 4% over 6 months LIBOR", and then proceeded to adopt this maximum interest rate as a fair basis for his computing the arm's length price. On the other hand, the assessee has taken two specific comparables of USD borrowings, i.e. L&T and Seri Infrastructure, on the interest rate of LIBOR + 150 bps and 1.4% to 1.7% band over LIBOR respectively. There is no material whatsoever, save and except for vague observations about weak financials of the subsidiaries - which are not supported by any specific facts and proceed on sweeping generalizations and assumptions, to reject the comparables taken by the assessee. When a Transfer Pricing Officer rejects comparables taken by the assessee, he has to set out specific, cogent and legally sustainable reasons for doing so. On this point, therefore, the stand of the Assessing Officer cannot be accepted.

10. Similarly, the DRPs observation to the effect that "Generally, Indian banks are charging interest rate of 2.5% to 5% above the LIBOR/EURIBOR for foreign currency loans" is not only devoid of any basis but, as our day to day experience on the bench shows, ex facie incorrect.

11. There are any number of decisions by the coordinate benches which show that the interest rates charged on foreign currency, say US dollars, loans are much lower than the 250 to 500 basis points above the LIBOR having been to be generally applicable rates. For instance, in the cases of Bharti Airtel Ltd. (supra), which pertains to the assessment years 2007-08 and 2008-09, the comparable cases were taken as 150 basis points above LIBOR and in the range of 140-170 basis points above LIBOR. In contrast to this comparable case, the interest charged in the present case is 247 points above the LIBOR rate. In the case of Siva Industries & Holdings Ltd. v. Asstt. CIT [2012] 26 taxmann.com 96/54 SOT 49 (Chennai), dealing with the assessment year 2006-07 and while referring to LIBOR at 4.42, interest rate on advances to subsidiary at 6%, which was thus 158 points above the LIBOR rate, was held to be an arms length price. In view of these discussions, it cannot be said that the advance to subsidiary, at 247 basis points above the LIBOR, is not at an arms length price. In any event, once DRP itself states that the Indian banks are charging 250 basis above LIBOR on similar loans, even though this interest rate could reach upto 400 basis points in some cases, there cannot be any good reason for holding that loan advanced to a subsidiary at 247 basis points above the LIBOR rate is not at an arms length price. That apart, as noted earlier in this order, once Hon'ble Delhi High Court, observes that the "assessee advanced monies to the subsidiaries which were under its management and control, which in fact substantially reduced the risk and in these circumstances there was no rationale of adjusting any amount of higher basis", it cannot be open to the transfer pricing authorities to contend that this loan should be treated as a high risk loan on which high interest rate should be charged even within the range of interest rates charged by the Indian banks generally. In view of these discussions, as also bearing in mind entirety of the case, we uphold the grievance of the assessee and direct the Assessing Officer to delete this arms length price adjustment of Rs. 74,20,785 in respect of interest charged on advances to the subsidiaries.