2015 (11) TMI 1264

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....rred in benchmarking the transaction of loan with RBI guidelines on external commercial borrowings by applying 6 months LIBOR + 150 Basis points for a period of 3 years and 6 months LIBOR + 250 Basis Points for a period of more than 5 years. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in rejecting the method adopted by the TPO in benchmarking the loan transactions with domestic corporate bonds. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in ignoring the fact that the cost of borrowing by the assessee is much more than the LIBOR rate and in application of CUP, it has to be seen whether the assessee company would give loan to 3rd party at the same rate a....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....iving and assigning the credit ratings is not correct; secondly, he held that in the international transactions LIBOR is the best basis for benchmarking the interest rate. Since there is no independent CUP rate available to benchmark the said international transaction, accordingly, he looked into RBI guidelines, which are in respect of ECB rates for the borrowing by the Indian corporates for the purposes of capital account transactions. Based on these RBI guidelines, he directed the Assessing Officer to adopt 6 moths Libor + 150 basis points and LIBOR + 250 basis points. The relevant observation and finding of the CIT(A) in this regard is as under: "xxi. However it is the fact that normal lending does not take place at LIBOR as the same ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... 6 months LIBOR plus 250 basis points. xxiii. Accordingly it is directed to work out the amount of adjustment. by applying above rates of interest depending upon the average period by which the money so advanced by the appellant remained with the without allotment of shares. The appellant gets consequential relief". 5. After hearing both the parties, we find 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 b....