Section 92CB of the Income Tax Act 1961 provides that the determination of arm’s length price under Section 92C OR 92CA. However, same shall be subject to Safe Harbour Rules.

Sections 10 TA to 10 TG deals with the Safe Harbour Rules, which pertain to International Transactions.

Rule 10TE provides a detailed procedure for exercise of option for Safe Harbour Rules.  

To exercise the option, the assessee shall furnish a Form 3CEFA, complete in all aspects, to the Assessing Officer (AO) on or due date as specified in Explanation 2 of  sub- Section 1 of Section 139 i.e.

  • the relevant Assessment Year in case the option is exercised only for the assessment year; or
  • the first of the Assessment Years, in case of option is exercised more than one assessment year

Further, it is necessary to furnish his return of income on or before the date of furnishing of Form 3CEFA.

The option of safe harbour validly exercised shall continue to remain in force for the period specified in Form 3CEFA OR a period of five years whichever is less.

In addition to above, the Assessee require to submit a statement to the Assessing Officer (AO) before filing return of income, details like Eligible Transactions /   Quantum/ Profit Margins / Rate of Interest / Commission… etc

Latest Amendments – In Brief 

The Income-tax (21st Amendment) Rules, 2017

W.e.f – 1st day of April 2017

Additional Details – Required to be disclosed 

  • Employee cost in relation to operating expense declared;
  • Currency of denomination of the amount of loan for each loan transaction
  • Whether credit rating of AE has been done? If yes, the credit rating rank and the name of the credit rating agency
  • Particulars in respect of eligible international transaction –

Has the eligible assessee entered into any international transaction in respect of receipt of low value-adding intra-group services as referred to in item (x) of rule 10TC? If Yes? Then following details also required: 

  • Name and address of the associated enterprises (AE) with whom the eligible international transaction has been entered into.
  • Name of the country or territory in which AE (s) is located.
  • Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA.
  • Description of the eligible international transaction.
  • Amount paid or payable in relation to such transaction.
  • Mark-up charged in per cent.
  • Whether transfer price is in accordance with the circumstances specified under rule 10TD.

Source: CBDT Notification No. 62 /2017/ F. No. 370142/ 20/2017-TPL Dated 18.07.2017

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December 2020