TMI Blog2021 (6) TMI 330X X X X Extracts X X X X X X X X Extracts X X X X ..... parable transactions therefore was of foreign currency lent by unrelated parties. When the learned CIT- A applied the decision of the honourable Delhi High Court for applying the rate of interest where the foreign currency is lent but did not apply this aspect of the decision. Therefore, when the assessee has charged higher interest on loan to subsidiary compared to the prevailing interest rate in the country in which the money is lent, CUP method undisputedly agreed by the parties as the most appropriate method, there is no reason to make any adjustment in the hands of the assessee on this count. Assessee has given comparable instances of the prevailing interest rate for short-term and long-term in Germany, which could not be disputed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified. 1.b That the Ld. CIT(A) has erred both in facts and in law by arbitrarily applying interest rate of 700 bps above the LIBOR on loan given in foreign currency by the Appellant Company to its German wholly owned subsidiary. 1.c That order passed by Ld. CIT(A) sustaining the adjustment under section 92CA is bad in law and against the facts of the case. 3. Brief facts of the case shows that the assessee is a solution provider for environmental control with specialization in humidity control, dehumidification, drying, storage, preservation, air and gas purification and plastic auxiliaries. The company manufactures dehumidification, air and gas purification systems, seeds dryers and complete environmental control system. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to its German subsidiary of ₹ 53,96,360/- and has received interest of ₹ 3,87,954/- where the effective rate of interest is 6%. The assessee benchmarked the above transaction using CUP method. In its TP study, report assessee took the rates of interest prevalent in Germany for long term and short-term loans, which are far less than interest @ 6 %, charged by the assessee and stated it to be at Arm s Length. The ld TPO after considering the reply of the assessee took State Bank of India prime lending rate for different period at average value of 11.88%. He also applied 300 basis point as per safe harbor rules for various sectors and determine the arm s length interest rate @14.88% and computed the arms length price of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. The ld DR submitted that risk factors, opportunity cost of market return should be considered and therefore, there has been an addition over and above LIBOR rates should be made. He therefore, submitted that the ld CIT (A) has correctly upheld the applicability of LIBOR +s 700 basis points for benchmarking of the interest. 11. We have carefully considered the rival contentions and perused the orders of the lower authorities. The loan was granted by the assessee to its German subsidiary in FY. 2007-08. during this year there is no change in the terms of the loan. The assessee advanced loan of Euro 96576/- in December 2007 to its subsidiary at the interest rate of 6% PA. The assessee has also submitted that short term interest rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore was of foreign currency lent by unrelated parties. When the learned CIT A applied the decision of the honourable Delhi High Court for applying the rate of interest where the foreign currency is lent but did not apply this aspect of the decision. Therefore, when the assessee has charged higher interest on loan to subsidiary compared to the prevailing interest rate in the country in which the money is lent, CUP method undisputedly agreed by the parties as the most appropriate method, there is no reason to make any adjustment in the hands of the assessee on this count. Assessee has given comparable instances of the prevailing interest rate for short-term and long-term in Germany, which could not be disputed as a better comparable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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