Direction for Determination of US LIBOR

Last updated: 11 January 2021

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Quick Summary

This Income Tax Appellate Tribunal case concerns an appeal by Aithent Technologies Pvt. Ltd. against the determination of arm's length price for international transactions. The core issue revolves around the calculation of interest on a loan provided to a wholly-owned subsidiary, specifically the use of US LIBOR plus a significant enhancement for risk profile, which the assessee argued was unreasonable.

Court :
ITAT New Delhi

Brief :
The present appeal has been fi led by the assessee againstthe order dated 31.07.2017 passed by the AO u/s 254/143(3)r.w.s. 144C of the Income Tax Act, 1961.

Citation :
ITA No. 6293/Del/2017

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘I-1’, NEW DELHI

Before Sh. H. S. Sidhu, Judicial Member
Dr. B. R. R. Kumar, Accountant Member
(Through Video Conferencing)
ITA No. 6293/Del/2017 : Asstt. Year : 2005-06

Aithent Technologies Pvt. Ltd.,
A-16/9, Vasant Vihar,
New Delhi-110057
(APPELLANT)
PAN No. AAACS2319H

DCIT,
Circle-2(1),
New Delhi-110002
(RESPONDENT)

Assessee by : Sh. Atul Ninawat, AR
Revenue by : Sh. Surender Pal, CIT DR.

Date of Hearing: 14.12.2020
Date of Pronouncement: 05.01.2021

ORDER

Per Dr. B.R.R. Kumar, Accountant Member:

The present appeal has been fi led by the assessee againstthe order dated 31.07.2017 passed by the AO u/s 254/143(3)r.w.s. 144C of the Income Tax Act, 1961.

2. Fol lowing grounds have been raised by the assessee:

“1. The order of the learned Assessing Of ficer (‘Ld.AO’) is bad in law and on the facts and circumstances of the case.

2. The Ld. Transfer Pricing Of ficer (‘Ld. TPO’)/ Ld. Assessing Officer (‘Ld. AO’) have erred on facts andcircumstances of the case in determining the arm’slength price of the appel lant’s internationaltransaction with its associated enterprises in respectof interest on loan advanced to whol ly ownedsubsidiary thereby proposing an enhancement of returned income by Rs.1,47,99,068/-.

3. The Ld. TPO/AP/Ho’ble DRP has erred in laws andfacts of the case by computing interest at US LIBORfurther enhanced by more than 236% for risk profi leetc. which is completely unreasonable and against theaccepted industry norms.”

To know more in details find the attachent file

FAQ :

The main issue was the determination of the arm's length price for international transactions, specifically concerning interest charged on a loan to a subsidiary and the calculation of that interest using US LIBOR.

The appeal was between Aithent Technologies Pvt. Ltd. (the appellant) and the DCIT (Deputy Commissioner of Income Tax) (the respondent).

The Transfer Pricing Officer/Assessing Officer proposed an enhancement of the returned income by Rs. 1,47,99,068/-.

The assessee objected to the computation of interest at US LIBOR further enhanced by more than 236% for risk profile, deeming it unreasonable and against industry norms.