INDIA Trends and Developments Contributed by: Mukesh Butani, Seema Kejriwal, Pranoy Goswami and Mansi Mathur, BMR Legal
• for euros, 6-month Euro Inter Bank Offered Rate (EURIBOR), currently administered by the European Money Markets Institute; • for UK pounds sterling, 6-month Term Sterling Overnight Index Average (SONIA), currently administered by ICE Benchmark Administra - tion/Refinitiv, increased by 30 basis points; • for Japanese yen, 6-month Tokyo Term Risk Free Rate (TORF), currently benchmarked by QUICK Benchmarks Inc, increased by 10 basis points; • for Australian dollars, 6-month Bank Bill Swap Rates (BBSW) currently administered by the Australian Securities Exchange; and • for Singapore dollars, 6-month Compounded Singapore Overnight Rate Average (SORA), currently administered by the Monetary Authority of Singapore, increased by 45 basis points. Further, an additional rate of 150–400 basis points (1.5% to 4%) is added, depending on the borrower’s credit rating. The guidance for prescribed credit rating agencies has also been updated. If the loan is given in Indian currency, the interest rate is linked to the SBI Base Rate and the additional interest cost can go up to 600 basis points if the taxpayer has no credit rating, or a credit rating of C+ or below. Power to review transfer pricing orders In what has only added to the already litigious landscape, the tax administration has been giv - en an additional avenue to create uncertainty for taxpayers. The order passed by the Transfer Pricing Officer can now be revised by the Com - missioner. Commissioners have started exercis - ing these powers. There is controversy around the stage at which Commissioners can exercise these powers.
Block period of three years The recent Finance Bill of 2025 has presented a three-year block period proposal, wherein tax - payers can opt to extend the arm’s length princi - ple determined in relation to international trans - actions or a specified domestic transaction in one year to two consecutive years immediately following such a year. More guidance is await - ed. Given the nuances of the audit procedure in India where a transfer pricing audit is subsumed into the overall audit, there is a general sense of excitement coupled with anxiety as to how the nuances will be dealt with. Choice of method Despite encompassing guidelines provided by the OECD and the UN, selection of method for specific transactions is an exceedingly litigated issue. Sabic India (P.) Ltd., W.P. (C) No 965 of 202, is a touchstone case which focuses on the TP authority’s rejection of the Transactional Net Margin Method (TNMM) and the adoption of the residual “other method” . The court made a pointed observation that any deviation from established methodologies must be well-sup - ported by reasoned analysis. The lack of clear justification led to uncertainty and inconsistency in tax assessments, undermining the credibility of the adjustment. Further, the bench also high - lighted that the “other method” should be con - sidered a method of last resort and emphasised the importance of consistency with prior years. PE as a separate entity A three-judge bench of the High Court of Delhi ruled on profit attribution for loss-making enter - prises within a group. This complex issue arises when an entity in the source state generates profit, but the multinational group’s overall per - formance results in losses. The key question is whether the profit earned by a PE in the source state can be attributed to the group experienc -
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