TaxTMI 
TaxTMI 
2018 (4) TMI 742
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....on'ble DRP grievously erred by determining and sustaining the transfer pricing adjustment of Rs. 6,94,98,484/- and not following the judgement of the Hon'ble Tribunal, Bangalore Bench in your appellant's own case for AY 2010-11 and AY 2011-12 and also not appreciating that the Hon'ble DRP in your appellant's own case for AY 2010- 11, AY 2011-12 and AY 2012-13 has adjudicated the matter in favour of your appellant. 2. The learned TPO / AO erred in holding and the Hon'ble DRP grievously erred by upholding that your appellant must mandatorily apply Reserve Bank of India's reference exchange rates while selling foreign currency, although it is itself an average rate of the previous days transactions made by ....
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....ssee filed its return of income declaring total income of Rs. 14,99,10,050 and claimed a refund of Rs. 46,34,430. The AO made a reference to the TPO and the TPO vide order dated 21.10.2016 directed that an addition of Rs. 6,94,98,484 be made on account of TP adjustment. The adjustment was proposed consequent to the TPO holding that the CUP method using internal comparables cannot be applied as assessee does not export foreign currency to its AE exactly at the reference rate announced by the RBI and that benefit of permissible range of +/- 3% prescribed under proviso to section 92C(2) is not available to the assessee. Consequently, the AO passed draft assessment order proposing to determine the total income at Rs. 21,94,08,530 by making the ....
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....o section 92C(2) has been substituted by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009 with two provisos. The first proviso states that : ' Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices'. As per the second proviso if the variation between the arm's length price so determined and price at which the international transaction has actually been undertaken does not exceed the specified percentage of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm's length price. Main sub-section (2) provides that the most appropriate method as per subsection (1) sh....
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....bstitution by the Finance (No.2) Act, 2009 which has been accepted by the assessee as laying down that if there is only one price determined by the most appropriate method, then this option of plus minus 5% is not available for determination of ALP. Now the moot point for our determination is as to whether the LIBOR rate should be considered as a single interest rate or the arithmetical mean of more than one interest rate. In order to find answer to this question, it is sine qua non to understand the connotation and import of LIBOR. In this regard, both the sides have placed on record some literature throwing light on LIBOR. Wikipedia, the free encyclopedia define the London Inter bank Offered Rate (LIBOR) as 'the average interest rate esti....
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....seen that each LIBOR contributor panel bank formulates its own rate for a day which is put into the application which links directly to a rate setting team at Thomson Reuters. Then trimming is done of such rates submitted by different contributor banks. After excluding four highest and lowest rates, an average is worked out, which becomes LIBOR rate. Thus it is evident that LIBOR is not a rate in itself which is charged or paid for the user of inter bank deposits. It is only an 'average' of the rates submitted by various panel banks, after exclusion of four each of highest and lowest responses, which is daily reported at 11:30 a.m. Albeit, technically speaking it is only one rate, but in reality, it is an average of rates at which various b....
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....ge rates. However, we find that RBI in its press release dt. 06.08.2008 has mentioned as under:- "August 6, 2008. Computation and Dissemination of RBI Reference Rate The Reserve Bank of India complies on a daily basis and publishes reference rates for Spot USD/INR and Spot EUR/INR. The rates are arrived at by averaging the mean of the bid/offer rates polled from a few select banks among 12 noon every week day (excluding Saturdays). The contributing banks are selected on the basis of their standing, market share in the domestic foreign exchange market and representative character. The Reserve Bank periodically reviews the procedure for selecting the banks and the methodology of polling so as to ensure that the reference ....