AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 211
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....3 The assessee had transferred funds to Indegene US and Indegene Singapore (borrowers) between period April 2005 to March 2006 for their capital investment and business development. For the funds transferred the assessee has made a loan agreement with the said subsidiaries on 30th March 2006. The terms and conditions of the loan agreement are as follows:- * The amount of loan to Indegene Inc. is USD 1,278,900 and to Indegene Singapore is SGD 185,000 * The rate of interest is 10% per annum. * The agreement would be in force from the date of the agreement and shall be renewed at the end of three years and the parties are free to extend it for a longer period upon mutual written agreement between them. * The Applicant(borrower) has the option to convert these funds to preference stock as per conditions to be specified in Shareholder's agreement as mutually decided at any time in future. * Initial tenor for the repayment will be three years and further expansion by mutual decision thereafter. * Indegene US and Indegene Singapore shall promptly pay all present or future tax, fees, charge or duties assessed or imposed by the Government of India or agency thereof with respect to th....
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....y CRISIL and considered the loans given by the Assessee similar to corporate bonds falling within the grade of BB to D. The TPO was of the view that the risks in the loans given are too high for the Company and have considered the same to be in the grade of BB and corresponding interest rate was computed at 17.26%. 7. In this regard the Assessee submitted that the loans were provided to the 100% subsidiaries of the Company situated outside India. Given that the AEs are a subsidiary of the lender entity the rationale for allocating the various risks as prevalent in the context of third party lending as stated by the TPO would not arise. Further, it was submitted that as outlined by the TPO, the health of the subsidiary companies to whom the loans were forwarded was not in good condition. The Assessee contended that the TPO failed to appreciate business and commercial expediency in relation to the loans forwarded to the subsidiaries. It was highlighted that the said loans were provided for business reason to infuse funding to the operations of the overseas subsidiaries and the subsidiaries were 100% subsidiaries of Indegene India and the loan agreement carried a clause that the same....
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....ted that the Foreign Exchange Monitoring Authority in India being the Reserve Bank of India has specified LIBOR/ EURO UBOR/EURIBOR to be considered for the computation of interest rate on export credit in foreign currency extended to exporters. The assessee further submitted the LIBOR rate for the FY 2007 and 2008 were as under:- LIBOR 2007 2008 USD 5.22% 2.48625% AUD 6.7075% 8.08% 10. In view of the same, it was submitted that considering the above rates as per the judicial precedent, the assessee has charged higher rate of interest from its subsidiaries. In view of the same the interest charged by the Company shall be considered to be at arm's length. 11. The TPO to whom the question of determination of ALP was referred to by the AO was of the view that adoption of LIBOR rates for the purpose of determining the ALP in respect of loan given in foreign currency has advocated in the decisions rendered by the ITAT Chennai Bench and Hyderabad Bench in the case of Siva Industries & Holdings (supra) and Foursoft Ltd. (supra) cannot be accepted as those decisions have not attained finality. The TPO thereafter determined the ALP by applying 17.26% rate o....
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....ions as made before the AO, submitted that the DRP did not deal with the application of LIBOR rate of exchange and did not deal with the decisions referred to by the assessee in this regard. He pointed out that the DRP in this regard had merely expressed the view that the method of computation done by the TPO was correct and did not call for any interference. It was further contended that the Honorable Dispute Resolution Panel, erred in confirming the order of the Ld. Transfer Pricing Officer which did not consider the interest rate of corporate bonds prevailing in the countries in which the loans were given by the Assessee, i.e., in the United States of America, Singapore and Australia. It was contended that the Honorable Dispute Resolution Panel, erred in confirming the order of the Ld. Transfer Pricing Officer which did not consider the proposition of the Appellant to use the LIBOR / EURO LIBOR / EURIBOR for the computation of interest rate on export credit in foreign currency extended to exporters. It was argued that the authorities below have not followed the decisions of the Tribunal referred to by the ld. counsel for the assessee for the reason that those decisions had not a....
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....extended credit period allowed to an Associated Enterprise (AE) based in USA shall be determined on the basis of USD London Inter Bank Offer Rate (LIBOR) instead of applying the rate of interest pertaining to EURO denominated loan charged to AE based in Germany since the AE was based in USA. The facts of the case were that the Assessee in that case was a joint venture between Mahindra & Mahindra Limited (Indian company) and British Telecommunications (UK Company), was engaged in rendering of software services relating to telecommunication, internet technology and engineering etc. During the previous year , the taxpayer had extended credit beyond the stipulated credit period to its AE based in USA without charging any interest on such extended credit period. During the assessment proceedings, the Transfer Pricing Officer (TPO) rejected taxpayer's arguments and determined the arm's length interest for such extended credit period to US AE at the rate of 10 percent per annum. The TPO determined this rate based on the rate of interest charged by the taxpayer on Euro denominated loan granted to its German AE. The resultant transfer pricing adjustment amounted to INR 1.87 crores. The Asse....
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....he assessee and the Associated Enterprises is in foreign currency and the transaction is an international transaction, then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction. If this is so, then the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR would come into play. In the circumstances, we are of the view that it LIBOR rate which has to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the Associated Enterprises. As it is noticed that the average of the LIBOR rate for 1.4.2005 to 3 1.3.2006 is 4.42% and the assessee has charged interest at 6% which is higher than the LIBOR rate, we are of the view that no addition on this count is liable to be made in the hands of the assessee. In the circumstances, the addition as made by the Assessing Officer on this count is deleted." 19. In the present case the AE is a German company. Eurobior rates are based on the average interest rates at which a panel of more than 50 European banks borrow funds from one another. There are different maturities, ra....