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Showing contexts for: LIBOR in Bombay Rayon Holdings Limited, Mumbai vs Ito-9(2)(2), Mumbai on 6 January, 2020Matching Fragments
Without prejudice if interest is to be charged the rate of interest is to be restricted to LIBOR / LIBOR + 200 bps.
14. On the facts and in the circumstances of the case and in law, the learned TPO/ learned AO / Hon'ble DRP erred in not restricting the rate of interest on the loan transaction to LIBOR rates without any spread.
15. Without prejudice, learned TPO/ learned AO / Hon'ble DRP erred in applying spread on LIBOR rates. The learned TPO/ learned AO / Hon'ble DRP further erred in not restricting the spread to 200 bps.
Without prejudice, on the fact and circumstances of the case and in law, the learned TPO / learned AO erred by not bringing on record a comparable transaction of interest being charged on share application money pending allotment among unrelated parties. The Hon'ble DRP erred in upholding the action of the learned TPO / learned AO.
Without prejudice, on the fact and circumstances of the case and in law, the learned TPO / learned AO erred in applying LIBOR rate on share application M/s. Bombay Rayon Holdings Ltd., transaction. The learned AO / learned TPO further erred in applying spread in addition to LIBOR rate on share application transaction."
- 17 the loans to the subsidiary have been written off and therefore, Transfer Pricing provision and determination of arm‟s-length price need not be carried out. In this regard the TPO noted that lending of money is not the business of the assessee. That each assessment year is separate and independent for the purposes of assessment. He further held that the assessee company is not into the business of financing and therefore, the write off of the loan to subsidiary in Italy is not allowable as deduction under the provisions of income tax act. Thereafter, the TPO dealt with the without prejudice argument of the assessee that benchmarking of LIBOR +200 bps is not justified and only LIBOR rate should be used. The TPO observed that at the outset it is noted that assessee has not benchmarked the transaction of loan on its own. That assessee has also not submitted any Transfer Pricing study report. That form 3 CEB for all the years have been submitted after the reassessment proceedings were initiated by the assessing officer subsequent to the survey. He noted that in the course of survey proceedings the Managing Director had agreed to offer interest on loans to subsidiary at the rate of LIBOR +200 bps. In this regard the TPO further noted that courts/tribunals have held that the transaction of loan is to be benchmarked M/s. Bombay Rayon Holdings Ltd., based on the prevailing interest rates and the currency in which loan is to be repaid.
11. In addition to the primary TP adjustment based on the SBI PLR, the TPO had, by way abundant caution, also computed an alternate adjustment after benchmarking the action on the basis of the foreign currency i.e. Euro. For this, the TPO utilised the Bloomberg Database taking the credit rating of the AE to be of 'Non-Investment Grade' the tenure of the loan being long-term; Euro LJBOR of 12 months; and, the TPO calculated a spread over and above the 12-month Euro LIBOR on the basis of certain factors like currency, country, issue date of the loan etc. For determining the spread, the TPO utilised the swap calculator (Currency-Fixed Flat Swap) considering the maturity periods and also the fluctuation in the INR and Euro. The TPO has given the details of the yearly UBOR + Spread for AY 2009-10 to M/s. Bombay Rayon Holdings Ltd., 2014-15 in his order. The TPO has also held that since the AE has never made any payment of interest by the AE, the amount of interest worked out for the first year i.e. AY 2009-10 is to be added to the opening balance of the next year i.e. AY 2010-11 and so on and the TP adjustment was calculated accordingly. The TPO has also copied the screenshots of the Bloomberg Database search in his order and for the FY 2008-09 relevant to AY 2009-10 the Euro LIBOR and the spread was calculated at 160 bps + 652 bps = 812 bps. The TPO has worked out the alternate interest adjustment based on the Euro LIBOR + Spread in respect of each transaction during the previous year relevant to the AY 2009-10 in his order. For AY 2009-10 the alternate adjustment has been finally worked out by the TPO atRs.6,81,86,220/-.