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2015 (10) TMI 2624 - AT - Income TaxNotional interest addition on the business advances given by an appellant to its Associated Enterprises (AE) - Held that:- There is no dispute on the nature of loans as "international transactions‟ in view of retrospective amendment by the Finance Act 2012 to section 92B of the Act relating to the “definition of international transactions”. Regarding the charging of interest on such interest free loans given to the subsidiaries, it is now decided issue, by virtue of the case of CIT vs. Tata Autocomp Systems Ltd [2015 (4) TMI 681 - BOMBAY HIGH COURT ] that the said loan amounts are required to be bechmarked considering the LIBOR of the Singapore and Hong Kong, as the case may be. Now the question is what is the rate of interest which constitutes ALP in this case. It is the decision of the coordinate Bench in the case of Melstar Information Technologies Ltd (2015 (5) TMI 70 - ITAT MUMBAI) that LIBOR + 2% is followed by the Tribunal of Bombay Benches. No contrary decision of Bombay Benches of the Tribunal is brought to our notice by the Ld AR. Therefore, we are of the opinion that AO / TPO is directed to benchmark the impugned transaction by applying the arm‟s length rate of interest at LIBOR + 2% and the LIBOR of the respective countries should be considered. Accordingly, this part of the ground is partly allowed. Considering rate of notional interest as 12 months average Libor + 300 basis - Held that:- On perusal of the loans given by the assessee and the date of return of the loans, we find no loan given by the assessee has exceeded one year. Minimum period of loan returned by the AEs is one month. Further, when the period of loans consumed by the AEs is not uniform for applying the uniform average of 12 months LIBOR on all these loans of that countries is prima facie not valid and appropriate. In these circumstances, we are of the opinion, considering the average of 6 months LIBOR of those countries, where loans are consumed, would meet the ends of justice. In any case, this issue was not addressed by the lower authorities during the relevant proceedings. As such, no judicial precedent is brought to our notice on this issue. Therefore, in our opinion, AO / TPO should verify the facts and give an opportunity to the assessee and decide the issue afresh.
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