ITAT Directs Adoption of LIBOR Rate for AE Loans, Rejects SBI PLR

ITAT Directs Adoption of LIBOR Rate for AE Loans, Rejects SBI PLR

The Income Tax Appellate Tribunal (ITAT) mandated the adoption of the London Interbank Offered Rate (LIBOR) for loans between associated enterprises repayable in USD, decisively rejecting the State Bank of India (SBI) Prime Lending Rate (PLR) as a benchmark.

This ruling emphasizes the necessity for market-derived interest rates in transfer pricing assessments, aligning with global best practices for fairness and transparency in international financial arrangements. The Tribunal's decision advocates for the selection of rates based on the currency of repayment, enhancing assessment accuracy.

The precedent set by this ruling will serve tax practitioners in ensuring compliance with transfer pricing regulations by applying appropriate market rates in associated enterprise transactions.