TMI Blog2023 (2) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) TMI 1031 - DELHI HIGH COURT ] held that for outbound loans the LIBOR rate should adopted but not PLR of Indian Banks. It was also established by the assessee that the loans were given for the purpose of carrying on the business and not with an intention of earning interest. Therefore, we are of the considered view that in the instant case, the prevailing LIBOR rate should be adopted for the interest received on outbound loans. We therefore direct the Ld. TPO to calculate the interest as per the prevailing LIBOR rates. Thus, this ground raised by the assessee is allowed. - I.T.A. No.70/Viz/2017 - - - Dated:- 3-2-2023 - Shri Duvvuru Rl Reddy, Hon ble Judicial Member And Shri S Balakrishnan, Hon ble Accountant Member For the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order of the Ld. AO, the assessee filed an appeal before the Ld. DRP-1, Bangalore. The assessee made various submissions before the Ld. DRP regarding the interest received from AEs and on the foreign currency loans given to overseas subsidiaries. The Ld. AR contended before the Ld. DRP, the Ld. AO has benchmarked the interest received on outbound foreign currency loans by benchmarking the same to the PLR rates adopted by banking companies in India. The Ld. AR pleaded that in the assessee s own case for the earlier AYs it has been held by the Hon ble Tribunal and the Ld. DRP that the prevailing rates of LIBOR should be adopted for the purpose of benchmarking the interest received from subsidiaries. Considering the objections raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arm s length price. Other Grounds: 2. Incorrect computation of interest U/s. 234D of the Act of Rs,. 1,06,799/-. 3. Incorrect computation of interest U/s. 244A of the Act of Rs. 65,081/-. 4. Initiating penalty proceedings U/s. 271(1)(c) of the Act. 4. Ground No.1 is with respect to adjustment of interest on foreign currency loan provided to its subsidiaries. The Ld. AR argued that the basic raw material for the manufacturing of the products by the assessee company is Shea Nuts, which is to be imported from Africa. The Ld. AR further submitted that the basic raw material viz., Shea Nuts is a spontaneous crop available in the forest of Africa. The Ld. AR further submitted that the local laws in Ghana does not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CCL Products (India) Limited vs. ACIT 5. The Ld. AR further submitted that in the assessee s own case for the AY 2007-08, 2008-09, 2009-10, 2010-11, 2013-14, 2014-15, 2016-17 and 2017-18, the Hon ble Tribunal, Ld. DRP and the Ld. TPO has adopted the prevailing LIBOR rate. The Ld. AR submitted that the principle of consistency as laid down in the case of Radhasoami Satsang vs Commissioner Of Income Tax reported in 1992 AIR 377 (SC) should be adopted. The Ld. AR therefore pleaded that prevailing LIBOR rate shall be benchmarked as ALP for interest received from AEs. Per contra, the Ld. DR submitted that the loans originated from India to its subsidiaries outside India and hence LIBOR cannot be adopted for rupee loans. The Ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the domestic loan. Therefore, the comparable in respect of foreign currency loan in international market is LIBOR based and which is internationally recognized and adopted. In the assessee s own case for the AYs 2008-09 and 2009-10 by the Hon ble Visakhapatnam Bench, the dispute is with respect to 2% mark-up on the interest on loans granted to the AE which is on back to back basis from EXIM Bank. The Hon ble Tribunal held that LIBOR should be the basis for benchmarking the interest payments for the purpose of determining the ALP. Therefore, the interest paid to EXIM Bank @ 12.5% on back to back basis was not considered by the Hon ble Tribunal. In the instant case, the Ld. DRP and Ld. TPO have relied on the non-availability of back to ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not with an intention to earn interest. We find that these loans were given solely for the business expediency and business convenience but not with the aim of earning interest from the subsidiary companies. Various Hon ble Courts have held that the foreign currency loans to foreign subsidiary companies, the ALP should be computed based on the market determined interest applicable to the currency in which the loan has to be repaid ie., on LIBOR and not on PLR. The Hon ble Delhi High Court in the case of CIT vs. Cotton Naturals India (P) Ltd reported in 55 Taxmann.com 523 held that for outbound loans the LIBOR rate should adopted but not PLR of Indian Banks. It was also established by the assessee that the loans were given for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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