2018 (10) TMI 1851

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..... y of Siegwerk Drukfarben, AG and is primarily engaged in the business of manufacturing and selling of printing inks. The assessee has received interest amounting to Rs. 29,50,652/- from its AE on a loan given to the AE. The assessee has given a loan in foreign currency to its AE and has charged interest @ EURIBOR Plus 0.25%. Such an interest rate was benchmarked by applying CUP method whereby the ALP interest rate was considered at EURIBOR Plus 0.12%. Before the TPO it was submitted that, since loan was given in foreign currency, therefore, the Indian rupee rate for benchmarking the said transaction would not be appropriate. However the Ld. TPO held that loans have been advanced out of accounts maintained in India which are in rupees and si .....

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..... because it has gone from the accounts from India is not correct observation of the TPO. DRP, therefore, has rightly held that AO did not have any rational basis for treating the foreign currency loan to be given in INR. Now is a well settled law that a loan given or taken in foreign currency loan, then same has to be benchmarked with reference to the market determined interest rate applicable to the currency loan has to be repaid. The observations of the Hon'ble Delhi High Court in the case of CIT vs. Cotton Natural (I) Pvt. Ltd. (supra) reads are as under :- "9. The question whether the interest rate prevailing in India should be applied, for the lender was an Indian company / assessee, or the lending rate prevalent in the United States .....

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..... ot be applicable and should not be applied for determining the interest rate in the extant case. PLR rates are not applicable to loans to be re-paid in foreign currency. The interest rates vary and are thus dependent on the foreign currency in which the repayment is to be made. The same principle should apply." 5. Thus, the observation and the finding of the DRP is in accordance with the principle laid down by the Hon'ble Jurisdictional High Court and, therefore, we do not find any infirmity in such a direction. Accordingly, we hold that no transfer pricing adjustment can be made by the TPO by applying SBI base rate. Thus, the appeal of the revenue is dismissed. 6. In the result appeal of the revenue is dismissed.  Order pronounced .....

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