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appropriate method, the TPO determined the arm's length rate interest at 14%, being, the interest that is earned on BBB bonds in India. As against the actual interest received from two AEs at Rs.29,76,669/-, the TPO determined arm's length interest income at Rs.1,10,33,725/- and accordingly recommended transfer pricing adjustment of Rs.80,57,056/-. The AO, in his order dated 21-02- 2011 passed u/s.143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter called 'the Act'), made the transfer pricing addition of the equal amount. The assessee carried the matter before the ld. CIT(A), who held that the domestic Prime Lending Rate would have no application in this regard and further that an international rate like LIBOR or EURIBOR would come into play as the loan in question was denominated in Euros to a subsidiary located in Germany. He, therefore, held that EURIBOR was the correct rate to be adopted for evaluation of arm's length rate of interest and noted in para 104 of his order that the average LIBOR rate as per the decision rendered by the Tribunal in another case was 4.42% for the A.Y. 2007-08. Consequently, he directed the AO to compute the ALP by adopting the average EUBIBOR rate of 4.42%, against which the Revenue has come up in appeal before the Tribunal.

IT(TP)A No.286/Bang/2013 M/s. IGate Global Solutions Ltd.

7. Now we espouse the second facet of the dispute relating to the determination of the arm's length rate of interest. It is seen that the ld. CIT(A) has held that average EURIBOR for the A.Y. 2007-08 should be considered as a benchmark. In determining the average EURIBOR at 4.42%, he relied on an order passed by the Tribunal in which the average LIBOR was considered at 4.42%. In other words, the ld. CIT(A) considered EURIBOR as a comparable uncontrolled transaction for the purpose of benchmarking the rate of interest charged by the assessee.

uncontrolled rate of interest at which loans are advanced in Germany.

9. On lines of EURIBOR, there is LIBOR (London Inter-bank Offered rate), another rate which is applied on behalf of British Bankers Association. Similar to EURIBOR, LIBOR is also a rate at which major global banks lend to one another in the international inter-bank market on short-term basis. In calculation of LIBOR, 25% of lowest and 25% of the highest values are eliminated and the remaining 50% are considered for determining LIBOR. Therefore, LIBOR, as such, can also not be construed as a comparable uncontrolled transaction. The Hon'ble Bombay High Court in CIT Vs. Aurionpro Solutions Ltd. (2017) 99 CCH 0070 MUM-HC approved the action of the Tribunal in considering LIBOR +2% as the arm's length rate as against the TPO applying LIBOR plus 3%. Drawing an analogy from this position, we hold that EURIBOR+2% should be considered as arm's length rate of interest for determining the ALP of the international transaction of interest received by the assessee from Mascot Systems GmbH, Germany.

10. Before parting with this issue, we would like to clarify that the ld. CIT(A) has considered 4.42% as EURIBOR applicable for IT(TP)A No.286/Bang/2013 M/s. IGate Global Solutions Ltd.

the assessment year under consideration by relying on an order of the Tribunal, in which the average LIBOR was considered at this level. Equality of LIBOR and EURIBOR could not be substantiated from any material on record. In the given circumstances, we set-side the impugned order and remit the matter to the file of the AO for considering EURIBOR +2% as arm's length rate of interest to be applied on loan advanced by the assessee to Mascot Systems GmbH, Germany. In case EURIBOR +2% turns out to be lower than 4.42% as directed to be applied by the ld. CIT(A) on the understanding of the same being EURIBOR simplicitor, then the addition should be restricted with reference to 4.42% rate of interest, as the assessee is not in appeal on this issue. In the otherwise scenario, the relief allowed by the ld. CIT(A) will be restricted pro tanto.