India: Indian Revenue Guidelines On ‘Appropriate Use' Of CbCR Information

Last Updated: 26 July 2018
Article by SKP  

The Action 13 report of the Organisation for Economic Co-operation and Development's (OECD's) Base Erosion and Profit Shifting (BEPS) project introduced to transfer pricing documentation, consisting of:

  1. Master File, containing information relevant for all members of the Multinational Enterprise (MNE) group;
  2. Local file, referring specifically to material transactions of the local taxpayer; and
  3. Country-by-Country Reporting (CbCR), containing certain information relating to the global allocation of the group's income and taxes, together with indicators of the location of economic activity within the group (CbCR information).

Applicability of CbCR:

In India, CbCR filings have been made applicable from Financial Year 2016-17 (April 2016 to March 2017) subject to meeting the consolidated revenue threshold criteria of INR 5 billion. For further details on applicability refer our alert click here.

In this regard, recently, the outcomes of the peer review process were also shared by the OECD which had following key recommendation for India on the CbCR front:

  1. The threshold of INR 5 billion under the Indian law may be reviewed to prevent hardship on overseas headquartered entities which are otherwise not required to prepare CbCR (since threshold of EUR 750 million is not met), however, they cross the threshold of INR 5 billion prescribed in Indian law when converted using the exchange rate prescribed under the Indian law.
  2. Presently, the Indian CbCR template (Form 3CEAD) mentions that the term 'related party' referred to in the said template shall mean 'Associated Enterprises' (AE) as defined in the Indian Income Tax Act, 1961 (the Act). The term AE has a very wide meaning and covers parties whose financial statements are not consolidated into the Ultimate Parent Entity (UPE) of the group. Therefore, to avoid such mismatch, the peer review report recommends 'related party' shall have the same meaning as 'constituent entity.'

To date, around 60 jurisdictions have introduced or taken steps to introduce an obligation for MNEs to file CbCR, according to the OECD, while more than 1,400 exchange relationships between pairs of jurisdictions have been created.

OECD on the appropriate use of CbCR information

The Action 13 report (at para 56) describes following as underlying conditions for obtaining and use of CbCR:

  • Confidentiality;
  • Consistency; and
  • Appropriate use.

Later, in September 2017, the OECD also released supplementary guidance on the 'appropriate use' of CbCR information by the tax authorities. These guidelines provided indicators of appropriate use and also discussed the instances which will as 'inappropriate use' of CbCR information. The said guidelines clarified that tax authorities can use CbCR information planning a tax as a for making further .

The guidelines also discussed at length the consequences of non-compliance with the appropriate use condition and designed the checklist which may be used by the jurisdictions to effectively implement the appropriate use restrictions their domestic rules and processes.

Guidelines from Indian revenue on 'appropriate use' of CbCR information

Recently, the Central Board of Direct Taxes (CBDT) (apex tax body in India) has released guidelines (Instructions No. 2/2018) for all tax officers in India on 'appropriate use' of CbCR information. The said guidelines are mostly a shadow reflection of OECD guidelines referred to above. The key highlights of the said guidelines are summarized below:

  • Access to CbCR
    As regards, the CbCR filings in India, Rule 10DB (3) of Indian Income Tax Rules, 1962 (the Rules) states that the relevant Indian taxpayer shall furnish the CbCR in a prescribed form to Director General of Income Tax - Risk Assessment (DGRA). Furthermore, the CBDT guideline has clarified that all CbCR's exchanged by other jurisdictions shall be primarily accessed by Competent Authority of India. Furthermore, the CBDT has instructed that the Centralized Risk Assessment Unit (CRAU) of the DGRA will formulate a standard operating procedure for use by the filed level Transfer Pricing Officers (TPO) in this regard.
  • Appropriate use of CbCR
    In line with the OECD guidance on appropriate use, the CBDT has instructed that CbCR information shall be used for the following purposes:

    • High-level transfer pricing risk assessment – the risk assessment unit, i.e. CRAU, may provide perspectives of potential risks from transfer pricing arrangements between the Indian taxpayer and its foreign AE, which may necessitate a further examination by the TPO. However, it has been clarified that inquiries by the TPO may not be restricted only to the potential risks identified by the CRAU.
    • Assessment of other BEPS related risk – The Action 13 report and the CBDT guidelines does not contain specific guidance with respect to the ability of the tax authorities to use information in CbCR for assessing other BEPS related risks.
      However, the September 2017 guidance of the OECD on 'appropriate use' suggests that 'assessment of other BEPS related risks' should be understood to refer to the assessment of tax risks that may result in the erosion of a country's tax base. The CBDT guidelines that CbCR may be used to identify indicators of possible tax risks unrelated to transfer pricing. The tax officers may send during the tax assessment for further examination of such risks identified through CbCR information. However, it has that the information gathered from CbC reports cannot constitute conclusive evidence that the taxpayer is engaged in any form of BEPS.
    • Economic and statistical analysis – The CBDT guidelines suggests that the economic and statistical analysis of CbCR information will assist in better understanding of the use of CbCR and also to identify features, benefits, and risks of the CbCR and tax systems.
  • Inappropriate use
    The CBDT guidelines have instructed that the use of information contained in CbC report by tax authorities shall be considered inappropriate, if:

    • The information is used as a substitute for detailed transfer pricing analysis; and
    • The information is used as the only material to propose transfer pricing adjustment.
  • Confidentiality of the CbCR
    The CBDT instructions emphasize that maintaining confidentiality of the information received in the form of CbCR through permissible routes is a legal obligation and therefore the guidelines on maintaining confidentiality shall be strictly followed by all the officers.
  • Monitoring, Control and Review
    The CBDT has instructed that the use of information in transfer pricing audits shall and breach of 'appropriate use', if any, shall be reported to a Competent Authority of India, who in turn is committed to such breaches to the ordinating body secretariat of the OECD as per the OECD guidelines. The concerns of the taxpayers on inappropriate use will have to be addressed by the jurisdictional tax officers, failing which the Competent Authority will assume the responsibility. The CBDT has also suggested internal quarterly reporting by the tax authorities to monitor the appropriate use of CbCR information.

SKP's comments

One topic that has been dominating almost all discussions on the subject of transfer pricing is the 'appropriate use' of CbCR)/Master File, especially after the first round of filings in India, which were recently concluded.

The condition of 'appropriate use' of CbCR information was described very clearly in the Action 13 report of the BEPS project itself, to which India is a participating nation. Thereafter, the supplementary guidance in September 2017 specifically reminded the participating jurisdictions of the consequences of non-compliance with appropriate use condition.

Therefore, one may say that the CBDT instructions on 'appropriate use of CbCR information' in response to OECD guidelines is inevitable. The implementation of these guidelines by the filed level tax officers will be a key factor in strengthening the confidence of MNE's.

While the CBDT guidelines are a welcome move, it is pertinent to note that the CbCR information will provide tax authorities for the first time with a full breakdown of MNE's revenue, profits, tax and other attributes by tax jurisdiction, significantly increasing the volume and scope of information available to them. Therefore, the taxpayers can anticipate that with access to the CbCR information the transfer pricing assessments in India are likely to be more intense, and it may potentially create a new litigation trend in India. Therefore, it is imperative that the taxpayers prepare themselves by doing a high-level risk assessment of CbCR information submitted/to be submitted to the tax office.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions