ITAT says Transfer Pricing Cannot Recharacterise Commercial Payments Without Basis

Tech Mahindra made substantial payments to BT for securing a long-term IT contract and for transition of existing contracts. The Tribunal rejected the Revenue's attempt to treat these payments as interest-free loans, holding that commercial substance cannot be disregarded merely because the arrangement is unconventional and that ALP cannot be determined at Nil without applying the prescribed methods. It also held that the foreign-currency loan to the AE should be benchmarked at LIBOR plus 80 basis points.