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Following are the main observations of Author from Draft Rules in respect of Master file issued by CBDT:-

1. CBDT has prescribed that a constituent entity of an International Group shall maintain Master file if:-

  • if the consolidated revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year preceding such previous year, exceeds Rs 500 cr; and
  • the aggregate value of international transactions:
    • during the reporting year, as per the books of accounts, exceeds Rs 50cr, or
    • in respect of purchase, sale, transfer, lease or use of intangible property during the reporting year, as per the books of accounts, exceeds Rs 10cr

2. Due date of submission of Master File has been prescribed:- Master file is to be reported in Form 3CEBA to Director General of Income-tax (Risk Assessment) on or before the due date for furnishing the return of income as specified in section 139(1) of Income Tax Act, 1961 (Act). However a proviso has been added for FY 2016-17 stating that due date for FY 2016-17 is 31st March, 2018.

3. Where there are more than one constituent entities of an international group, resident in India, then the Master File may be furnished by that constituent entity if it has been designated by the international group to furnish the said report and the same has been notified by the international group or the designated constituent entity to the Director General of Income-tax (Risk Assessment) in Form 3CEBE. Form 3CEBE is to be submitted at least 30 days before the due date of filing of Form 3CEBA.

4. All constituent entities of an International group are supposed to file Part A of Form 3CEBA which contains certain basic details only. One of the Indian constituent entity as prescribed in point no. 3 will file both Part A & Part B of Form 3CEBA.

5. Master file is to be kept for a period of 8 years from the end of A.Y.

Following are the main observations of Author from Draft Rules in respect of Master file issued by CBDT:-

1. Provisions of Section 286 of the Act shall be applicable i.e. an International group is supposed to file CBCR if total consolidated group revenue is Rs. 5500 crs rupees or more.

2. In case Parent entity is not resident in India, every constituent entity is supposed to file 3CEBB in which details of Parent Entity or Alternate reporting entity is to be given. In case the constituent entity filing Form 3CEBB is itself an alternate reporting entity then same shall also be communicated to Director General of Income Tax (Risk Assessment).

3. Form 3CEBB is required to be filed atleast 60 days prior to due date for furnishing of CBCR which is mentioned in sub-section (4) of Section 286 of the Act.

4. In respect of CBCR, Form 3CEBC has been prescribed by CBDT. The same is to be filed by every parent entity or the alternate reporting entity, as the case may be, resident in India on or before due date as mentioned in sub-section (4) of Section 286 of the Act.

5. There is no extension of Due date for FY 2016-17 in respect of CBCR.

Major requirements in Master file as per Draft Rules:-

1. List of all the operating entities of the international group along with their addresses;

2. A chart depicting the legal status of the constituent entity and ownership structure of the entire international group;

3. the important drivers of profits of business or businesses;

4. a description of the supply chain for the 5 largest products or services of the international group in terms of revenue plus any other products and/or services amounting to more than 5% of group turnover or revenue;

5. details about the transfer pricing policies for allocating service costs and determining prices to be paid for intra-group services;

6. a description of the functions performed, assets employed and risks assumed by the constituent entities of the international group that contribute at least 10% of the revenues, assets and profits of the group;

7. a description of the important business restructuring transactions, acquisitions and divestments during the accounting year;

8. Various details in respect of Intangibles such as overall strategy, details of entities engaged in development and management, list of important Intangibles;

9. a detailed description of the transfer pricing policies of the international group related to research and development and intangibles;

10. a detailed description of the financing arrangements of the international group, including the names and addresses of the top 10 unrelated lenders;

11. a list of group entities that provide central financing functions, including their place of operation and of effective management;

12. a detailed description of the transfer pricing policies of the international group related to financing arrangements among group entities;

If we compare requirements as per Draft rules prescribed by CBDT and OECD Guidelines then there are no major changes in the requirements.

{Author is a CA Final Rank holder (AIR 34 – Nov’15) currently working in a Fortune 500 company and can be reached at his facebook page – Jatin’s Tax Arena ( https://www.facebook.com/TheTaxArena/?ref=aymt_homepage_panel )or his Linkedin account – ( https://www.linkedin.com/in/ca-jatin-grover-a0aa3923 )}

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