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Page |5 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 5.6 Without prejudice to the above grounds, the learned CIT(A) erred in law by using Prime Lending Rate instead of LIBOR for determining the arm's length interest amount.

 CIT Vs. VFS Global Services Pvt. Ltd. (ITA No. 336 of 2015 dated 19 July 2017) (Bom HC)  CIT Vs. Cotton Naturals (I) Pvt. Ltd. (ITA No. 233/2014 dated 27 March 2015) (Del HC)  Firestar Intl Pvt. Ltd. Vs. Assist. CIT (ITA No. 488/Mum/2015 dated 31 May 2015 for AY 2010-11)  Tooltech Global Eng. Pvt. Ltd. Vs. DCIT ITA No. 273/PN/2014 vide order dated 28.08.2014.

P a g e | 26 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 It was submitted by the ld. A.R that the revenue in support of its contention that the rate of interest for determination of ALP should be the rate charged in the country where the loan is received or consumed had relied on the order of a coordinate bench of the Tribunal on the case of Geodesic (79 taxmann.com 215), which had followed the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Tata Autocomp Systems Ltd (2015) 374 ITR 516 (Bom). The ld. A.R submitted that in the case of Tata Autocomp Systems Ltd. (supra) the High Court had dismissed the appeal of the revenue because the order of the Tribunal in the case of V.V.F. Ltd. & Tech Mahindra Ltd, which were followed in the case of Tata Autocomp Ltd (supra), was accepted by the revenue and were not further carried in appeal. The ld. A.R in the backdrop of the aforesaid facts submitted that as the revenue had accepted the order of the Tribunal in the other cases which were followed by the Tribunal in the case of Tata Autocomp System Ltd. (supra), therefore, the High Court going by the said fact alone had not given any finding on the issue pertaining to the rate of interest that was to be applied. The ld. A.R submitted that as a matter of fact, a finding on the issue as regards the rate of interest to be applied was given by the Hon‟ble High Court of Bombay in the case of CIT Vs. V.F.S Global Services Pvt. Ltd. [(ITA No. 336 of 2015, dated 19.07.2017)(Bom)], wherein following its earlier judgment in Tata Autocomp System Ltd. (supra) the High Court had upheld the transfer pricing adjustment based on LIBOR. The ld. A.R submitted that a perusal of the ITAT‟s order in the case of Tata Autocomp System Ltd. (supra) and Tech Mahindra Ltd. (supra) clearly supported the contention of the assessee that the transfer pricing adjustment should be based on LIBOR/ EURIBOR and not PLR. The ld. A.R submitted P a g e | 27 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 that if a transfer pricing adjustment was to be made in respect of the interest on the aforesaid loan transaction, the same had to be in conformity with the rate of interest which the assessee could have charged if the ECB loan would have been advanced by it in India to a Non-AE. The ld. A.R to drive home his aforesaid contention relied on the RBI Circular dated 31.01.2004, as per which under the automatic route such interest should be based on LIBOR. It was thus the contention of the ld. A.R that if the assessee could not have charged interest from a non-AE on Indian PLR, therefore, it could not be expected to charge such interest from its AE, viz. ADSIL. The ld. A.R further averred that in case a transfer pricing adjustment in respect of the ECB loan was to be carried out, then the interest income on the said loan could safely be held as an income which would be entitled to be set off against the commission paid by the assessee to ADSIL. Per contra, the ld. D.R in support of his contention relied on the judgment of the Hon‟ble High Court of Bombay in the case of Autocomp System Ltd. (supra). It was submitted by the ld. D.R that the observations of the High Court that the ALP of the interest in the case of loans advanced to associate enterprises were to be determined on the basis of rate of interest being charged in the country where the loan is received/consumed, thus, negated both of the claims of the assessee, viz. (i) that the interest on loan is not an international transaction; and

(ii) that even if it is considered as an international transaction, then LIBOR was to be adopted for making the transfer pricing adjustment. The ld. D.R taking support of his aforesaid contentions averred that as in the case of the present assessee the loan had been consumed in India, therefore, the Indian PLR has to be considered as ALP. The ld. D.R submitted that the reliance placed by the assessee on the P a g e | 28 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 judgment of the Hon‟ble High Court of Bombay in the case of V.V.F. Global Services ltd. (supra) wherein the LIBOR rate was upheld as ALP rate was distinguishable on facts, as unlike the case of the assessee where the loan was received/consumed in India, in the said case the loan was received/consumed in Canada or Dubai where LIBOR is a rate of interest that was being charged in the said respective countries.

6) (Mum) had followed the view taken by the coordinate benches of the Tribunal in the case of V.V.F Ltd. Vs. Dy. CIT (ITA No. 673/Mum/2006) and Dy. CIT Vs. Tech Mahindra Ltd. (2011) 12 taxmann.ocm 132 (Mum), however, neither of the said orders were further assailed by the revenue. Thus, the High Court taking cognizance of the fact that the revenue had accepted the decision of the Tribunal in the case of V.V.F. Ltd. (supra) and Tech Mahindra Ltd. (supra), therefore, it would not be permitted on the part of the revenue to take a different view, as against the one which had been allowed to attain finality. We find that it was on the basis of the aforesaid P a g e | 39 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 observations that the Hon‟ble High Court had declined to entertain the appeal filed by the revenue. We thus are of the considered view that the contention of the ld. D.R that the Hon‟ble High Court had observed that the ALP in respect of interest on the loans advanced to AE‟s is to be determined on the basis of rate of interest being charged in the country where the loans is received/consumed is absolutely misconceived. We are rather persuaded to be in agreement with the contention of the ld. A.R that the issue as regards the determination of the ALP in respect of interest 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), wherein the 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 interest by considering the 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 interest 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 are of the considered view that the Hon‟ble High Court of Bombay while disposing of the appeal filed by the revenue in the case of CIT-1 Vs. M/s V.F.S 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 had erred in directing the A.O/TPO to determine the ALP interest by considering the LIBOR plus 2% and not the rates of the Indian Market. We further find that a coordinate bench of the Tribunal, ITAT, Pune Bench "B", Pune, had in the case of Tool Tech Global Engineering Pvt. Ltd. Vs. DCIT (ITA No. 273/PN/2014, dated P a g e | 40 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 22.08.2014) 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 practises in the international market. The Tribunal had further observed that in 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 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 ourselves to be in agreement with the view taken in the aforesaid judicial pronouncements, are thus of the P a g e | 41 Sabre Asia Pacific Lte Ltd. Vs. DCIT-A.Y. 205-06 to 2011-12 No.7400/Mum/2012,ITA No. 2120/Mum/2014, ITA No. 1704/Mum/2015 and ITA No.486/Mum/2016 Addl. CIT Vs. Sabre Asia Pacific Lte - A.Y. 2005-06, ITA No. 4780/Mum/2015 considered view that the ALP of the interest on the loans advanced by the assessee to its subsidiary company, viz. ADSIL was to be determined on LIBOR and not as per the Indian PLR rate so adopted by the A.O/TPO. We thus in the backdrop of our aforesaid observations direct the A.O/TPO to take ALP of the interest on the loan advanced by the assessee to ADSIL as per the LIBOR rate plus 2%. We thus in terms of our aforesaid observations partly allow the Ground of appeal No. 5 raised by the assessee before us.