The Mumbai Bench of the Income-tax Appellate Tribunal held in the case of India Debt Management Pvt. Ltd. v. DCIT [IT(TP)A No. 7518/Mum/2014, held that the selection of tested party shall be done with reference to the entity which has undertaken the transaction. Further, the Tribunal held that the interest rate on borrowings should be market determined and should be applicable to the currency in which loan is borrowed/repaid, to be considered at arm’s length.
The Income-tax Appellate Tribunal identified that the leading issue under consideration was the necessity to identify ‘tested part,’ while applying the CUP method bench-marking analysis done by the taxpayer is vitiated, simply because the taxpayer has not identified the ‘tested party’.
