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2015 (11) TMI 1264 - AT - Income TaxTransfer pricing adjustment - whether for the benchmarking of the transaction of loan, the interest rate for 6 months LIBOR + 150 Basis Points for a period for more than 5 years is appropriate or not? - Held that:- So far as the basis adopted by the TPO, we agree with the observation and finding of the CIT(A) that manner in which credit rating has been assigned to the AE is not a correct approach, because there is ‘no specific information’ with regard to the AE and making assumption of various factors for giving the credit rating actually destroys the estimation of risk assumed. Since both lender and the borrower are overseas based, therefore, it would not be appropriate to use domestic interest rate to benchmarking interest charged on account of such loan transactions. In absence of any independent study carried on by the assessee or any independent CUP rate applied by the TPO based on comparables, the approach of the CIT(A) to follow the guidelines of the Reserve Bank of India appears to be correct approach for benchmarking the ALP. The aforesaid finding of CIT(A) is thus affirmed and we do not find any reason to deviate from such a conclusion. Accordingly, the order of the CIT(A) on this score is affirmed and the grounds raised by the revenue stands dismissed. - Decided in favour of assessee.
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