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8. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax(Appeals) has erred both on facts and in law in ignoring the contention of the appellant that the comparison made by the Transfer Pricing Officer for determining the rate of interest on international transaction of granting loan to three associate enterprises is unjustified.
9. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax(Appeals) has erred both of facts and in law in ignoring the contention of the appellant that the interest rate in respect of international transaction in foreign currency has to be in accordance with LIBOR/EURIBOR.
It was noticed by the TPO that the loans were given by the assessee in USD to its AEs viz. (i) ILFS Maritime Offshore PTE Limited (for short „IMOPL‟); and (ii) IL&FS International PTE Limited (for short „IIPL‟) at an interest rate of USD LIBOR plus 5.5%. Further, loan was given by the assessee in EUROS to its AE viz. Elsamex at an interest rate of EURIBOR plus 1.75%. On a perusal of the transfer pricing study report, it was gathered by the TPO that for the purpose of benchmarking the aforesaid transactions of providing financial assistance to the AEs the assessee had used external CUP derived from the Reuters Loan Connector, Bloomberg and had claimed the interest rate charged to be within the permissible range. The TPO did not accept the geography of the borrower as the determining factor in computing the ALP of the interest rate charged by the assessee. In the backdrop of his aforesaid deliberations the TPO used the „Credit Rating and Information Services of India Ltd.‟ (for short „CRISIL‟) credit rating scale for Financial Year 2008-09 and used the annualized average yield of bonds to determine the CUP of the interest rate to be applied for determination of the ALP. The TPO determined the ALP @15.41%, and worked out the resultant shortfall in charging of interest by the assessee on loans advanced to its AEs at Rs. 11,04,04,539/-, as under :

view as against the one which had been allowed on its part to attain finality. We find that it was on the basis of the aforesaid observations that the Hon'ble High Court had declined to entertain the appeal filed by the revenue. We however find that the issue as regards the determination of the ALP of the interest charged on loan advanced to AE was looked into by the Hon‟ble High Court of Bombay in the case of CIT-1 Vs. M/s VFS Global Services Pvt. Ltd. (ITA No. 336/Mum/2015, dated 19.01.2017). In the said case the Hon‟ble High Court dealing with the contention of the revenue that the Tribunal was not justified in directing the A.O/TPO to determine the ALP of the interest charged on amounts advanced by considering LIBOR plus 2% as against the rates of the Indian Market, had observed that the view of the Tribunal as regards determination of the ALP of interest charged on amounts advanced to the AE at LIBOR plus 2% appeared to be in conformity with the earlier judgment of the High Court in the case of CIT-2 Vs. Tata Autocomp Systems Ltd. (ITA No. 1320/Mum/2012, dated 03.02.2015). We find that the Hon'ble High Court of Bombay while disposing off the appeal filed by the revenue in the case of CIT-1 Vs. M/s VFS Global Services Pvt. Ltd. (ITA No. 336/Mum/2015, dated 19.07.2017) was not persuaded to be in agreement with the contention of the revenue that the Tribunal was in error in directing the A.O/TPO to determine the ALP of interest charged on loans advanced to AE by considering the LIBOR plus 2% and not the rates of the Indian Market. We further find that a coordinate bench of the Tribunal i.e. ITAT, Pune Bench "B", Pune in the case of Tool Tech Global Engineering Pvt. Ltd. Vs. DCIT had observed that in the case of a transaction in foreign currency between two cross border entities the ALP should be computed in context of the prevailing lending practices in the international market. The Tribunal had further observed that in ITA NO(s). 2393/Mum/2015 & 2568/Mum/2015, A.Y.2009-10 15 IL&FS Transportation Networks Ltd. Vs Addl.CIT-14(1) & ACIT-14(2)(1) Vs. IL&FS Transportation Networks Ltd.

respect of such international transactions, the domestic bank rate would not be a sound basis and rather internationally accepted LIBOR rate would be the proper basis for benchmarking the ALP of the interest rate in respect of the said transactions. We further find that the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax-1 Vs. M/s Cotton Naturals (I) Pvt. Ltd. (ITA No. 233/Mum/2014, dated 27.03.2015) had observed that the interest rate applicable should be that of the currency concerned in which the loan has to be repaid. The Hon'ble High Court had disagreed with the view that the interest rates were to be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. It was further observed by the High Court that the currency in which the loan is to be repaid normally determined the rate of interest. The aforesaid judgment of the Hon'ble High Court of Delhi in the case of M/s Cotton Naturals (I) Pvt. Ltd. (supra) had thereafter been followed by a coordinate bench of the Tribunal in the case of M/s Firestar International Pvt. Ltd. Vs. ACIT, Mumbai (ITA No. 488/Mum/2015, dated 31.07.2015). The Tribunal by taking support of the aforesaid judgment of the High Court of Delhi had concluded that the application of the State Bank of India PLR of 11.75% for determining the ALP of the interest on loan advanced in USD by the assessee to its AE could not be approved. We have deliberated on the issue under consideration and finding as being in agreement with the view taken in the aforesaid judicial pronouncements, are thus of the considered view that the ALP of the interest charged on the amounts advanced by the assessee to its AEs, viz. (i) ILFS Maritime Offshore PTE Limited; (ii) IL&FS International PTE Limited; and (iii) Elsamex had rightly been benchmarked by the assessee as per LIBOR and EURIBOR rates, and the same could not have been determined as per ITA NO(s). 2393/Mum/2015 & 2568/Mum/2015, A.Y.2009-10 16 IL&FS Transportation Networks Ltd. Vs Addl.CIT-14(1) & ACIT-14(2)(1) Vs. IL&FS Transportation Networks Ltd.