The Central Board of Direct Taxes has made various amendments to
the Income Tax Rules dealing with transfer pricing, which are to be
enforced with effect from April 1 2013. The amendment prescribes a
new format for Form 3CEB to include disclosures on specified
domestic transactions and additional clauses dealing with
Amendment to rules
Specified domestic transactions will now be included in the
transfer pricing provisions prescribed under Rules 10A, 10B, 10C
and 10E of the Income Tax Rules. In this regard, Rule 10B will be
amended to include Rule 10AB, which will pertain to specified
Furthermore, the term 'associated enterprise' has now
been defined specifically to include specified domestic
transactions. The transfer pricing provisions will be applicable to
such transactions in relation to:
expenditure for which payment has been made or is to be made to
domestic related parties;
holiday or other tax deductions claimed by the assessee;
the transfer of goods or services between various businesses of
the same assessee; and
greater than ordinary profits derived from transactions with
closely connected persons.
Amendment to accountant's report form
The accountant's report detailed in Form 3CEB, which is a
mandatory report that the taxpayer must obtain from a chartered
accountant, has been made more precise and elaborate. The entire
form has been bifurcated into three parts - the first part pertains
to Form 3CEB (Part A) and the second and third parts to the
appendices to Form 3CEB, which will now be divided in two as
disclosures pertaining to international transactions (Part B);
disclosures pertaining to specified domestic transactions (Part
Wherever the term 'international transaction' was used in
Form 3CEB, it will now be substituted with the term
'international transaction(s) and specified domestic
Form 3CEB will also require the disclosure of the aggregate
value of specified domestic transactions in line with the books of
accounts, in addition to the disclosure of international
transactions made to date.
The amended Form 3CEB requires additional disclosures on
international transactions. The notification1 has led to
the separate demarcation of different international transactions
that were previously grouped under the heading "Particulars in
respect of any other international transaction".
As a result, the following international transactions must be
disclosed separately under different clauses:
business restructurings or reorganisations;
the purchase or sale of marketable securities;
the issue or buy-back of equity shares and debentures or
preference shares; and
deemed international transactions and any transaction having an
impact on profits, incomes, losses or assets of the taxpayer.
The main change in Form 3CEB is the introduction of a separate new
section on the disclosure of details of specified domestic
transactions of the taxpayer, which must now be revealed under
1. Notification 41/2013/ F 142/42/2012-TPL.
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guide to the subject matter. Specialist advice should be sought
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Cummins Inc. is a foreign company, rendering services in respect of desktop/laptop software license and internet mail facilities to its Indian associated enterprises, i.e. CIL and CSSL which were paying IT charges provided by the taxpayer.
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