3F Industries Limited Vs ACIT (ITAT Visakhapatnam)
The ALP is to be determined on an international transaction ie., on the international loan and not 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 back loan from EXIM Bank during the impugned assessment year. Further, the Ld. DRP has also observed that the long term borrowings and short term borrowings of the assessee have increased and therefore the Ld. DRP has adopted the PLR rates of SBI which stood at 13.85% for the FY 2011-12. In the instant case, we find from the written submissions of the Ld. AR that the average cost of borrowings works out to 10.58% as follows:
