EPIP PhaseII, Whitefield, Bangalore 66 PAN : AABCM4573E (Appellant) (Respondent) Assessee by Shri Padamchand Khincha Revenue by Shri Sandip Garg, CIT Date of hearing 02 082019 Date of pronouncement 05082019 आदेश / ORDER PER R.S.SYAL, VP : This appeal by the Revenue emanates from the order passed by the Commissioner of Incometax (Appeals) on 31122012 in relation to the assessment year 200708. 2. The first effective issue raised in this appeal is against the direction of the ld. CIT(A) to compute the arm's length price (ALP) of the rate of interest charged by the assessee on loan advanced to its Associated enterprise (AE) situated in Germany by adopting the 2 IT(TP)A No.286/Bang/2013 M/s. IGate Global Solutions Ltd. average EURIBOR rate of 4.42% as applicable to the assessment year 200708. 3. Briefly stated, the facts of the case are that the assessee, an Indian company, is a subsidiary of iGate Incorporated, USA. It acts as a single source broad range of information technology applications, solutions and services that include client/server position and development. The assessee filed its return declaring loss of Rs.1.48 crore and odd. Certain international transactions were reported in Form No.3CEB. The Assessing Officer (AO) referred the determination of the ALP of the international transactions to the Transfer Pricing Officer (TPO). The instant dispute is only concerned with the international transaction of `Interest income'. The assessee advanced loans to its two AEs, namely, Mascot Systems GmbH, Germany, on which interest of Rs.5,21,928/ was charged @ 1.50%; and M/s. Symphoni Interactive, LLC, USA, on which interest of Rs.24,54,741/ was charged @ 6%. The assessee declared such international transactions at ALP. The TPO observed that the arm's length interest rate would be the one which would be earned by the assessee by advancing loan to an unrelated party in India. Applying the Comparable Uncontrolled Price (CUP) method as the most 3 IT(TP)A No.286/Bang/2013 M/s. IGate Global Solutions Ltd. appropriate method, the TPO determined the arm's length rate interest at 14%, being, the interest that is earned on BBB bonds in India. As against the actual interest received from two AEs at Rs.29,76,669/, the TPO determined arm's length interest income at Rs.1,10,33,725/ and accordingly recommended transfer pricing adjustment of Rs.80,57,056/. The AO, in his order dated 2102 2011 passed u/s.143(3) r.w.s. 144C of the Incometax Act, 1961 (hereinafter called 'the Act'), made the transfer pricing addition of the equal amount. The assessee carried the matter before the ld. CIT(A), who held that the domestic Prime Lending Rate would have no application in this regard and further that an international rate like LIBOR or EURIBOR would come into play as the loan in question was denominated in Euros to a subsidiary located in Germany. He, therefore, held that EURIBOR was the correct rate to be adopted for evaluation of arm's length rate of interest and noted in para 104 of his order that the average LIBOR rate as per the decision rendered by the Tribunal in another case was 4.42% for the A.Y. 200708. Consequently, he directed the AO to compute the ALP by adopting the average EUBIBOR rate of 4.42%, against which the Revenue has come up in appeal before the Tribunal. 4 IT(TP)A No.286/Bang/2013 M/s. IGate Global Solutions Ltd. 4. We have heard both the sides and gone through the relevant material on record. It is observed from the order passed by the TPO that the assessee advanced loans to its two AEs, one in the USA and the other in Germany. In so far as loan to Symp