TaxTMI 
TaxTMI 
2021 (6) TMI 330
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....l is regarding benchmarking of interest receivable on loan given by the assessee to the subsidiary company in Germany. 2. The assessee has raised the following grounds of appeal in ITA No. 4107/Del/2016 for the Assessment Year 2010-11:- "1.a That the Ld. CIT(A) has failed to appreciate that appellant had charged interest rate of 6% p.a. on loan given to Ahlberg +Hennrich Gmbh Germany (A+H) ,its German subsidiary, which was higher than the interest rate prevalent in the country of borrower and the adjustment by applying 700bps above the LIBOR is unjustified. 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 ....
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.... The ld CIT(A) deleted the adjustment of Rs. 38,05,170/- being interest on outstanding receivable and granted certain relief with respect to adjustment in arms length price of interest on unsecured loan to a subsidiary company in Germany but he retained that interest is at ALP at LIBOR +700 BPS.. Therefore, assessee aggrieved with the order of the ld CIT (A) and challenging the part confirmation of addition on account of ALP of interest on unsecured loan to its subsidiaries. 7. The facts shows that the assessee has advanced in foreign currency loan to its German subsidiary of Rs. 53,96,360/- and has received interest of Rs. 3,87,954/- where the effective rate of interest is 6%. The assessee benchmarked the above transaction using CUP met....
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....ate prevailing in April 2009 was 1.42% and long term interest rate were 3.13% and therefore, the assessee has already charged interest higher than prevailing interest rate in Germany. Therefore, he submitted that, there could not be any adjustment on account of arm's-length price of the interest charged on loan to subsidiary. He further submitted that as the assessee is a holding company and loan is advanced ease to a subsidiary company there is no credit risk involved. In view of this, he submitted that no adjustment should be made. 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 ....
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....ing capital risk. However, honourable Delhi High Court in Commissioner of income tax versus Cotton naturals India private limited (2015) 276 CTR 445 (Del) has categorically held that the financial position and credit rating of the subsidiaries will be broadly the same as of the holding company. Therefore, there should not be any adjustment on account of capital risk. The honourable court also categorically held that where the transaction was of lending money in foreign currency to its foreign subsidiaries the comparable 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 ....