Tuesday 27 August 2013

Stamp Duty and other expense Paid on Property: a Double Treat to Taxpayers

Ek ghar ho sapno ka, Ghar ek mandir, we have seen these sort of connotations used by various builders while promoting their ventures. As an ordinary man buying a property requires huge initial outlay and that will be bifurcated as actual amount paid, stamp duty, registration fee etc.

Assessee always want to get maximum tax benefit, so in this article we will discuss the expenses paid on property, where are the areas they can be claimed and in what manner.

Chapter VIA- Deductions in respect of certain payments states u/s 80c (1) “In computing the total income of assess being an individual or a HUF, there shall be deducted, in accordance with deposited in the previous year, being the aggregate of the sums referred to in subsection (2) as does not exceed one lakh rupees
(2)The sum referred to in sub section (1) shall be any sum paid or deposited in the previous year by assessee-“
(i)-(xvii)…………….
(xviii) for the purposes of purchase or construction of residential house property from the income which is chargeable to tax under the head “ Income from house property, where such payment are made towards or by way of-
(a)-(c)……..
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee

In simple words, it states that under section 80c you can claim expense relating to purchase of residential house property, which has used as rented property. However, the maximum cap of 1 lakh remain intact. This clause does not apply on self-occupied property.

For example, Mr A has two flats, one is used as his own residence and he bought another flat. Now his income under house property will be assessed for both flats as one under self-occupied and other as rented. Mr. A can claim can claim the stamp duty, registration fee and other expenses paid on rented property u/s 80c (maximum 1 lakh).

Another taxation aspect of property is capital gain. It is a well known by everyone that on sale of assets capital gain arises. Income tax act give indexation of cost of asset sold, if it is sold after 36 months of purchase.
Section 48 deals with the mode of computation of capital gains. It states that “ The income chargeable under the head capital gain shall be computed be deducting the full value of consideration received or accruing as a result of transfer of capital assets of the following amount namely-
i)              Expenditure incurred wholly and exclusively in connection with such transfer
ii)             The cost of acquisition of asset and the cost of improvement thereto”

This definition clearly states that cost of acquisition encompass all cost related to purchase. It includes stamp duty, registration fee etc. so it is part and parcel of cost and hence eligible to be admitted as cost of acquisition.

Summarizing the above discussion, we can say that for expenditure incurred on property being used as other then self-residence can be claimed u/s 80c and while computing capital gains giving ladoo in both hands of taxpayer.    


  

   




  

Thursday 22 August 2013

N.No. 64/2013-Sec.10(48)

On 19th of August 2013 CBDT issued a circular stating that certain income of a specified assessee is exempt u/s 10(48) of Income Tax Act, 1961. So to understand this notification first we should have knowledge that “what is the Sec. 10(48)” and what it exactly speaks.
As we, all are aware that sec 10 of the income tax is specifically devoted for exemptions and furthermore clause 48 too is the part of the same pool.
Section 10(48) states that any income received by a foreign company from sale of crude oil in India is exempt provided that such company is not engaged in any other activity in India.
Under this notification, the receipt of Income of the National Iranian Oil Company is exempt u/s 10(48) from the sale of Crude Oil to India.  This Notification comes into effect from January 20th  2013 i.e. retrospectively.

Text of Sec 10(48) of Income Tax Act, 1961
 In computing the total income of a previous year of any person, any income falling under this clause shall not be included-
Any income received in India in Indian currency by a foreign company because of [sale of crude oil to any person] in India:
Provided that—
(i)  Receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government;
(ii)  Having regard to the national interest, the foreign company and the agreement or arrangement are notified by the Central Government in this behalf; and
(iii)  The foreign company is not engaged in any activity, other than receipt of such income, in India;]



GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
[CENTRAL BOARD OF DIRECT TAXES]
[Notification No. 64/2013/ F.No.142/22/2013-TPL]
New Delhi, the 19th day of August 2013
INCOME TAX
S.O. 2493(E).– In exercise of the powers conferred by clause (48) of Section 10 read with Section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the national interest, hereby notifies for the purposes of the said clause, the National Iranian Oil Company, as the foreign company and the Memorandum of Understanding entered between the Government of India in the Ministry of Petroleum and Natural Gas and the Central Bank of Iran on the 20th day of January, 2013, as the agreement subject to the condition that the said foreign company shall not engage in any activity in India , other than the receipt of income under the agreement aforesaid.

2. This notification shall be deemed to have come into effect from the 20th day of January 2013.

Tuesday 20 August 2013

Procedure and criteria for selection of scrutiny cases under compulsory manual during the financial year 2013-2014

The CBDT has issued Instruction No. 10 of 2013 dated 05.08.2013 announcing the procedure and criteria for selection of scrutiny cases under the compulsory manual for FY 2013-14
INSTRUCTION NO 10/2013,
F.No.225/107/2013/ITA.II
Dated: August 5, 2013

Procedure and criteria for selection of scrutiny cases under compulsory manual during the financial-year 2013-2014-regd.In supersession of earlier instructions on the above subject, the Board hereby lays down the following procedure and criteria for manual selection of returns/cases for scrutiny during the financial-year 2013-2014

2. The targets for completion of scrutiny assessments and strategy of framing quality assessments as contained in Central Action plan document for Financial Year 2013-2014 has to be complied with. It is being reiterated that all scrutiny assessments including the cases selected under manual criteria will be completed through AST system software only.
3. The following categories of cases / returns shall be compulsorily scrutinized:-
a)      Cases where value of international transaction as defined u/s 92B of IT Act exceeds Rs. 15 crores.
b)      Cases involving addition in an earlier assessment year on the issue of transfer pricing in excess of Rs. 10 Crores or more which is confirmed in appeal or is pending before an appellate authority.
c)      Cases involving addition in an earlier assessment year in excess of Rs. 10 lacs on a substantial and recurring question of law or fact which is confirmed in appeal or is pending before an appellate authority.
d)      all assessments pertaining to Survey under section 133A of the IT Act excluding the cases where there are no impounded books of accounts/documents and returned income excluding any disclosure made during the Survey is not less than returned income of preceding assessment year. However, where assessee retracts the disclosure made during the Survey will not be covered by this exclusion.
e)       Assessment in search and seizure cases to be made under sections 158B, 158BC, 158BD, 153A & 153C read with 143(3) of the IT Act.
f)       All returns filed in response to notice u/s 147/148 of the IT Act.
g)       Cases claiming exemption of income u/s 11 or u/s 10(23C) which are hit by proviso(s) to Section 2(15) of IT Act.
h)      Entities which received Donations from countries abroad in excess of Rs. One crore during the Financial Year 2011-2012 (relevant for the A.Yr. 2012-2013) under the provisions of Foreign Contribution Regulation Act (FCRA). Such Information is maintained by Ministry of Home Affairs and is available on its Website (http://mha.nic.in/fcra.htm). Respective Cadre-Controlling chief Commissioners / Directors – General of Income-tax may identify the cases pertaining to their respective jurisdiction after downloading from the website and disseminate the information to various field offices.
i)        Cases in respect of which information is received from other Government Department(s) or other authorities pointing out tax-evasion. The Assessing Officer shall record reasons in such cases and take approval from jurisdictional CCIT/DGIT before selecting such case for scrutiny.
4. In order to ensure the quality of assessment orders, CCsIT/DGsIT would evolve suitable monitoring mechanism. They shall analyse at least 50 quality assessments of their respective charges and send the report to respective Zonal Member with copy to Member (IT) with suggestions for improvement by 30th April, 2014. CCsIT/DGsIT would further ensure that cases selected for publication in ‘let us share’ are picked up from quality assessments as reported.
5. These Instructions may be brought to the notice of all concerned.




Download the official Notification from the Link given below.
Link:http://www.incometaxindia.gov.in/archive/BreakingNews_Scrutiny_Cases_06082013.pdf

Monday 19 August 2013

GST-Constitutional amendment process should be started



In the month of august 2013, the parliamentary standing committee on finance released its report on the 115th Constitutional Amendment Bill, which had been referred to it by the government in 2011. This Bill lays out the framework and the implementation plan for a national goods and services tax (GST), which many observers have said will be a fiscal game-changer. It will, on the one hand, streamline the entire indirect tax system by eliminating interstate differentials in tax rates, subsuming a large number of local taxes into an aggregate levy, which, once paid, can be claimed as credit against subsequent tax payments anywhere in the country. On the other, it will incentive countless producers to enroll themselves into the tax system, because not to do so would now reduce their competitive edge. This will significantly raise the tax-to-GDP ratio. With both production efficiency and tax revenue benefits, one might wonder why the system is taking so long to introduce the new mechanism. The answer, as always, lies in the political economy: while the country as a whole might gain, it is not certain that every state will also do so, leading to skepticism about, and resistance to, the proposal.



By and large, the committee endorsed the concept of the GST and recognized the benefits it will bring relative to the extremely fragmented system that now exists. The overall experience of states with the implementation of the value added tax (VAT) does validate the strong incentive effects for enrolment in this self-enforcing framework. However, it also accepts the argument that a fully harmonized and centrally administered system can be seen as an erosion of states' fiscal autonomy. Its recommendations are essentially an attempt to find a middle ground between the efficiency and political economy dimensions of the issue.
There are two broad categories of suggested improvements. On the financial side, the committee proposes moving away from a single, fixed rate of taxation to a range, within which each state could choose to tax goods and services produced within it. This is the practice within the European Union and appears to be an acceptable compromise. Of course, every state may choose to tax at the ceiling, so it has to be carefully set. Keeping in mind the fears of some states about lower revenues, it suggests a formal and funded compensation mechanism to offset any losses. On the administrative side, it proposes greater powers for the GST Council, essentially insulating it from the central government's discretion, but also keeping it within the boundaries of legislative powers. The states' right to opt out of the system is also sought to be protected. There is little question that the current indirect tax system, in its federal manifestation, is grossly inefficient and an alternative - even after taking these recommendations into account - will almost certainly generate enormous benefits to both commerce and government finances. The government should now quickly move to close the issue and get the amendment process under way.





Source: ET ,BS

TAN Series-2( all about TAN)

1.      TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax.

2.      All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. It is compulsory to quote TAN in TDS/TCS return (including any e-TDS/TCS return), any TDS/TCS payment challan and TDS/TCS certificates.


3.      The provisions of section 203A of the Income-tax Act require all persons who deduct or collect tax at source to apply for the allotment of a TAN. It is mandatory to quote TAN in all TDS/TCS return as well as TDS/TCS certificates and payments challan.

4.      TDS/TCS returns will not be received if TAN is not quoted and challans for TDS/TCS payments will not be accepted by banks.


5.      Failure to apply for TAN or not quoting the same in the specified documents attracts a penalty of Rs. 10,000/-

Sunday 18 August 2013

Type of Leases Exist in Financial Markets

Type of Lease  


How many types of lease are you aware?

Did you know that how many types of leases are exist in financial world, you will say that Operating and finance lease. Here I will discuss few of them. But first of all we have to understand what is Lease

What is Lease

Lease is a legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the property owner) regular payments from the lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid. Or in other words Leases are the contracts that lay out the details of rental agreements b/w the lessor and lessee for the use of specified asset for the specified time.

For example, if you want to rent an apartment, the lease will describe how much the monthly rent is, when it is due, what will happen if you don't pay, how much of a security deposit is required, the duration of the lease, whether you are allowed to have pets, how many occupants may live in the unit and any other essential information. The landlord will require you to sign the lease before you can occupy the property as a tenant.


Accounting standard recognizes two types of lease which are as under :-

Majorly Lease are defined in two Variants

1.      Operating
2.      Finance

Operating Lease

An operating lease is particularly attractive to companies that continually update or replace equipment and want to use equipment without ownership, but also want to return equipment at lease-end and avoid technological obsolescence.
a)      An operating lease usually results in the lowest payment of any financing alternative and is an excellent strategy for bypassing capital budgeting restraints.
b)      It typically qualifies for off-balance sheet treatment and can result in improved Return on Asset (ROA) due to a lower asset base.
c)      It can also result in higher reported earnings in the early years of the lease.

Finance Lease

A finance lease is a full-payout, non cancellable agreement, in which the lessee is responsible for maintenance, taxes and insurance.
a)      Finance leases are most attractive in cases where the lessee wants the tax benefits of ownership or expects the equipment's residual value to be high.
b)      These leases are structured as equipment financing agreements with residuals up to 10 percent.
c)      The lessee purchases the equipment upon lease termination at a pre-agreed amount.
d)      The term of a finance lease tends to be longer, nearly covering the useful life of the equipment.

 

Other Type of leases also exists in financial world which are as follows:


Walk-Away Lease or Closed-End Lease

A rental agreement that puts no obligation on the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "walk-away lease", "true lease"  or "net lease" “Closed-End Lease”.
Since the lessee has no obligation to purchase the leased asset upon lease expiration, that person does not have to worry about whether the asset will depreciate more than expected throughout the course of the lease. Thus, it is argued that the closed-end leases are better for the average person.
On a walk-away lease, the lender assumes the risk of predicting what the residual value of the asset will be at the end of the lease period. The predicted residual value is not only an important consideration in establishing an appropriate amount to charge for lease payments, it ultimately determines how much profit the lender earns on the lease of a asset. Ideally, the total value of all lease payments in conjunction with the asset's residual value should be greater than the cost paid for the asset.

For example, suppose your lease payments are based on the assumption that the new car that you are leasing cost Rs 12,00,000  will be worth only Rs.3,00,000 at the end of your lease agreement. If the car turns out to be worth only Rs.2,40,000, you must compensate the lessor (the company who leased the car to you) for the lost Rs.60,000 since your lease payment was calculated on the basis of the car having a salvage value of Rs.3,00,000. Basically, since you are buying the car, you must bear the loss of that extra depreciation. But, if you have a closed-end lease, you don't buy the car so you don't bear the risk of depreciation.

Open-end Lease

A conditional sale lease in which the lessee guarantees that the lessor will realize a minimum value from the sale of the asset at the end of the lease.

Capital Lease

Type of lease classified and accounted for by a lessee as a purchase and by the lessor as a sale or financing, if it meets any one of the following criteria:
a)       the lessor transfers ownership to the lessee at the end of the lease term;
b)      the lease contains an option to purchase the asset at a bargain price;
c)      the lease term is equal to 75 percent or more of the estimated economic life of the property (exceptions for used property leased toward the end of its useful life); or
d)      the present value of minimum lease rental payments is equal to 90 percent or more of the fair market value of the leased asset less related investment tax credits retained by the lessor.

 

Direct Financing Lease (Direct Lease)

A non-leveraged lease by a lessor (not a manufacturer or dealer) in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria.

Lease to Own

An arrangement where an individual enters into a lease agreement with an owner with the inclusion of a clause that typically gives the individual the right, but not the obligation, to purchase the item leased at a predefined price and time. More often than not, a portion of the total rental payment goes toward paying down the value of the item leased in the event that the renter wishes to exercise the option.
For housing properties, the cost involved in lease-to-own agreements tend to be more expensive compared to standard rental agreements. In addition to paying rent, lease-to-own contract users need to pay an option fee, similar to an amount paid to buy a traditional stock option, and usually, a rent premium as well, which is not returned to the renter in the event that he or she does not exercise the option to buy the leased item.

First Amendment Lease

The first amendment lease gives the lessee a purchase option at one or more defined points with a requirement that the lessee renew or continue the lease if the purchase option is not exercised. The option price is usually either a fixed price intended to approximate fair market value or is defined as fair market value determined by lessee appraisal and subject to a floor to insure that the lessor's residual position will be covered if the purchase option is exercised.
If the purchase option is not exercised, then the lease is automatically renewed for a fixed term (typically 12 or 24 months) at a fixed rental intended to approximate fair rental value, which will further reduce the lessor's end-of-term residual position. The lessee is not permitted to return the equipment on the option exercise date. If the lease is automatically renewed, then at the expiration of that initial renewal term, the lessee typically has the right either to return the equipment without penalty or to renew or purchase at fair market value.

Full Payout Lease

A lease in which the lessor recovers, through the lease payments, all costs incurred in the lease plus an acceptable rate of return, without any reliance upon the leased equipment's future residual value.

Guideline Lease

A lease written under criteria established by the IRS to determine the availability of tax benefits to the lessor.

Leveraged Lease

In this type of lease, the lessor provides an equity portion (usually 20 to 40 percent) of the equipment cost and lenders provide the balance on a nonrecourse debt basis. The lessor receives the tax benefits of ownership.

Net Lease

A lease wherein payments to the lessor do not include insurance and maintenance, which are paid separately by the lessee.

Sales-type Lease

A lease by a lessor who is the manufacturer or dealer, in which the lease meets the definitional criteria of a capital lease or direct financing lease.

Synthetic Lease

A synthetic lease is basically a financing structured to be treated as a lease for accounting purposes, but as a loan for tax purposes. The structure is used by corporations that are seeking off-balance sheet reporting of their asset based financing, and that can efficiently use the tax benefits of owning the financed asset.

 

Tax Lease

A lease wherein the lessor recognizes the tax incentives provided by the tax laws for investment and ownership of equipment. Generally, the lease rate factor on tax leases is reduced to reflect the lessor's recognition of this tax incentive.

Trac Lease

A tax-oriented lease of motor vehicles or trailers that contains a terminal rental adjustment clause and otherwise complies with the requirements of the tax laws.

True Lease

A type of transaction that qualifies as a lease under the Internal Revenue Code. It allows the lessor to claim ownership and the lessee to claim rental payments as tax deductions.

 



TAN Series-1(Difference b/w TAN & PAN)

TAN is a allotted to persons who are deducting or collecting tax at source on behalf of the Income Tax Department where as PAN is allotted to assessees like individuals, companies etc for filling their Income Tax Returns and to Pay own taxes.

TRANSFER PRICING SAFE HARBOUR RULES – CREATING BARBED WIRES SINCE 2009


It is human nature to jump at and exploit to the fullest extent, everything that is new to our world. It happened with petroleum; it happened with Sachin Tendulkar; it also started happening with the Transfer Pricing provisions. After the introduction of the Transfer Pricing Regulations vide the Finance Act, 2001, the number of audits started increasing, along with the number of the pending cases. To curb the same, section 92CB was introduced vide Finance Act, 2009, which provided that the determination of arm’s length price under section 92A/92C shall be subject to certain “Safe Harbour Rules”. The intent was clear – do NOT scrutinize every single assessee who enters into a transaction with its international associate. “Safe Harbour” was defined to mean those transactions for which the Revenue would accept the transfer price declared by the assessee.

Vide the aforesaid amendment in 2009, the Government also empowered the CBDT to make the said “Safe Harbour Rules”. However, after many discussions, consultations and debates, no conclusion could be reached as to the issuance of these Rules. So, on 30th July, 2012, The Rangachary Committee was formed to review taxation of Development Centres and IT Sector, which submitted its reports from time to time.

On 13th October, 2012, the said committee submitted its report on the following term of reference:

“Engage in sector-wise consultations and finalize the safe harbour provisions announced in Budget 2010, sector-by-sector. The Committee will also suggest any necessary circulars that may need to be issued.”

The sectors, in respect of which the Rules were finalized by the Committee, are as follows:

  1. IT Sector
  2. ITES Sector
  3. Contract R&D in the IT and Pharmaceutical Sector
  4. Financial transactions-Outbound loans
  5. Financial Transactions-Corporate Guarantees
  6. Auto Ancillaries-Original Equipment Manufacturers


Taking into consideration, the above report of the Committee, the CBDT issued a press release on 14th August, 2013 inviting suggestions from the stakeholders on the draft Safe Harbour Rules, proposed to be inserted vide Rules 10TA to 10TG in the Income Tax Rules, 1962.

The Rules are discussed hereunder, in brief:

Rule 10TA – Definitions:
This rule provides the definitions of the services, sectors and other terms, for the purpose of the Safe Harbour Rules.

Rule 10TB – Eligible Assessee:
Eligible assessee has been defined to mean a person who has opted for the application of Safe Harbour Rules, and enters into specific transactions listed in sub-rule (1) of the said Rule. Certain transactions mandate the eligible assessee to have ‘insignificant risk’, which has been defined in sub-rules (2) and (3).

Rule 10TC – Eligible International Transaction:
‘Eligible International Transaction’ has been defined to mean an international transaction between the ‘eligible assessee’ and its ‘associated enterprise’, at least one of whom is a non-resident. The broad composition of such international transactions, eligible for the Safe Harbour Rules, has also been enlisted.

Rule 10TD – Safe Harbour:
Various circumstances in respect of the ‘eligible international transactions’, for which the transfer price declared by the assessee shall be accepted, have been specified. It is also clarified that the said circumstances would be applicable for the assessment years 2013-14 and 2014-15 only.

Further, it has been clarified that section 92C(2) will not be applicable on such transactions, i.e. the arm’s length price will not be computed as per the methods laid down by the Act. However, sections 92D and 92E would continue to apply on the eligible assessee as well. Hence, the eligible assessee would be required to keep and maintain such information and documents, as prescribed; the eligible assessee would also be required to furnish the report from Chartered Accountant as per section 92E.

Rule 10TE – Procedure:
This rule lays down the procedure for exercising the option for Safe Harbour. According to the said Rule, the eligible assessee must furnish Form 3CEG to the Assessing Officer by the due date specified in section 139(1), i.e. 30th November of the assessment year. The format of the said Form has also been provided, proposed to be inserted in Appendix II, Rule 10T.

On receipt of the said Form, the Assessing Officer shall verify whether the assessee is an ‘eligible assessee’, and whether the transactions are ‘eligible international transactions’.

On confirmation of the above, the Assessing Officer shall verify whether the transfer price declared by the assessee is acceptable or not, as per the circumstances laid down in Rule 10TD. For the above purposes, the Assessing Officer may call upon the assessee to submit such documents and information, as required. The Assessing Officer may also refer the same to the Transfer Pricing Officer for verification, as per section 92CA.

If any of the above conditions are not satisfied, the Assessing Officer shall declare the transfer price declared by the assessee to be invalid, and the arm’s length price would be computed by him as per section 92C, after giving a reasonable opportunity of being heard to the assessee.

It has been clarified that if the eligible assessee does not exercise his option for Safe Harbour by submitting the Form 3CEG and following the procedure laid down, then the arm’s length price would be computed as per section 92C and 92C. Hence, the Safe Harbour Rules do not apply automatically on the eligible assessee.

Rule 10TF – Safe Harbour Rules not to apply in certain cases:
The Safe Harbour Rules will not apply if the associate enterprise is located in:
Country or territory notified under section 94A (i.e. Notified Jurisdictional Areas); or
No tax or low tax country or territory (as defined in Rule 10TA – minimum marginal rate of income tax is zero or less than 15%, in respect of the associated enterprise).

Rule 10TG – Not eligible for MAP:
If the transfer price declared is accepted by the Revenue, the assessee will not be allowed to invoke Mutual Agreement Procedure under DTAA, as referred in sections 90 or 90A.

Under MAP, the Revenue Authorities of two countries come together to settle a dispute in respect of double taxation. The eligible assessee, exercising the option of Safe Harbour, thus, cannot opt for the option of MAP.

The above is a broad overview of the Rules proposed to be inserted by the CBDT. They have been released for suggestions from the stakeholders.

Saturday 17 August 2013

Statement by CBDT on Safe Harbour Rules Under Section 92CB of the Act




In order to reduce the increasing number of transfer pricing audits and prolonged disputes, the Finance (No.2) Act, 2009 w.r.e.f 1.4.2009 inserted a new section 92CB to provide that determination of arm’s length price under section 92C or Section 92CA shall be subject to safe harbour rules. Vide this amendment, the Government of India had empowered the CBDT to make Safe Harbour rules. “Safe harbour” was defined to mean circumstances in which the income-tax authorities shall accept the transfer price declared by the assessee.

Thereafter, the issuance of the Safe Harbour Rules was examined and discussed at various points of time, but no finality could be reached. Since a number of representations were received from different stakeholders to prescribe the safe harbor rules, the Prime Minister on July, 30, 2012 approved the constitution of a Committee to Review Taxation of Development Centres and the IT sector consisting of Shri N.Rangachary, Chairman of the Committee and three others (hereinafter called the Rangachary Committee) with broad terms of reference as under:

1.       Engage in consultations with stakeholders and related government departments to finalize the approach to Taxation of Development Centres and suggest any circulars that need to be issued.
2.       Engage in sector-wise consultations and finalize the safe harbour provisions announced in Budget 2010, sector-by-sector. The Committee will also suggest any necessary circulars that may need to be issued.
3.      Examine issues relating to taxation of IT sector and suggest any clarifications that may be required
Subsequently, the Government of India vide OM dated 12th September, 2012 approved the considered suggestion of the Rangachary Committee that it may finalize the Safe Harbour Rules in the following sector/ activities:
 (i) IT Sector
(ii) ITES Sector
(iii) Contract R&D in the IT and Pharmaceutical Sector
(iv) Financial transactions-Outbound loans
(v) Financial Transactions-Corporate Guarantees
(vi) Auto Ancillaries-Original Equipment Manufacturers The Rangachary Committee consulted various stakeholders including sector related government departments, NASSCOM, CII, FICCI, ASSOCHAM, ICAI, etc. and submitted six reports on Taxation of Development Centres and IT Sector and other sectors as referred to in the OM dated 12th September, 2013.

On the basis of the recommendations of the Rangachary Committee in the first report on Taxation of Development Centres and IT Sector (which was posted on the website of the income tax department www.incometaxindia.gov.in on 30th June, 2013), CBDT has issued the following circulars:
• Circular No. 1/2013 dtd. 17th January, 2013 on issues relating to Export of Computer Software under sections 10A, 10AA and 10B of the Act.
• Circular No. 6/2013 dtd. 29th June, 2013 on Conditions Relevant to Identify Development Centres engaged in Contract R&D Services with Insignificant Risk.

The Government of India has considered the other five reports of the Rangachary Committee. The major recommendations of the Rangachary Committee have been accepted, with some modifications, and the following decisions have been taken by Government:
1.      Safe harbour for the sectors recommended by the Rangachary Committee shall be applicable for two assessment years beginning from 2013-14.
2.      Safe harbour for various sectors, subject to certain ceilings, shall be as under –
3.       

S No
(1)
International Transaction
(2)
Circumstances
(3)
1.
Provision of software development services other than contract R&D where the total value of international transaction does not exceed Rs 100 crore.
The operating profit margin declared in relation to operating expense incurred is 20 percent or more.
2.
Provision of information technology enabled services other than contract R&D where the total value of international transaction does not exceed Rs 100 crore
The operating profit margin declared in relation to operating expense is 20 per
cent. or more
3.
Provision of information technology enabled services being knowledge processes outsourcing services other than contract R&D where the total value of international transaction does not exceed Rs 100 crore
The operating profit margin declared in relation to operating expense is 30 per
cent. or more.

4.
Advancing of intra-group loan to wholly owned subsidiary where the amount of loan does not
exceed Rs 50 crore
The Interest rate declared in relation to the  international transaction, is equal to or greater than the base rate of State Bank of India (SBI) as on 30th June of the relevant previous year plus 150 basis points.
5.
Advancing of intra-group loans to wholly owned subsidiary where the amount of loan exceeds Rs.50 crore
The Interest rate declared in relation to the international transaction is equal to or greater than the base rate of SBI as on 30th June of the relevant previous year plus 300 basis points.
6.
 Providing explicit corporate guarantee to wholly owned subsidiary where the amount guaranteed does not exceed Rs.100 crore
The commission or fee declared in relation to the international transaction is at the rate of 2 per cent or more per annum on the amount guaranteed.
7.
 Provision of specified contract research and development services wholly or partly relating to software development
The operating profit margin declared in relation to operating expense incurred is 30 per cent. or more.

8.
Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs
The operating profit margin declared in relation to operating expense incurred is 29 per cent. or more
9.
9 Manufacture and export of core
auto components
The operating profit margin declared in relation to operating expense is 12 percent. or more
10.
Manufacture and export of noncore
auto components
The operating profit margin declared in relation to operating expense is 8.5 per
cent. or more

 (3) Safe harbour rules shall not be applicable in respect of an international transaction entered into with an associated enterprise located in any country or territory notified under section 94A of the Income-tax Act, 1961, or in a no tax or low tax country or territory.
(4) Safe harbour rules shall be applicable only where a taxpayer exercises his option to be governed by such rules in a specified form to be furnished before the due date of filing of return.
(5) Where the Transfer Pricing Officer is of the opinion that the option exercised by the assessee is valid, he shall intimate acceptance of transfer price declared by the assessee to the assessing officer and the assessee within a period of six months from the end of the month in which reference under section 92CA is received from the assessing officer. Where he is of the opinion that the option exercised is not valid, he shall proceed to determine the arm’s length price in respect of the international transactions entered into by the assessee in accordance with sections 92C and 92CA without having regard to the safe harbour margin or price as specified in the rules.
(6) A taxpayer opting for safe harbour rules shall not be allowed to invoke Mutual Agreement Procedure (MAP) provided under the relevant DTAAs.
(7) Where the safe harbour rules are not applicable in the case of an assessee, engaged in providing contract research and development services with insignificant risks, the Transactional Net Margin Method (TNMM) shall be considered as the most appropriate method for the determination of arm’s length price unless it is shown by the assessee that it is not feasible to apply this method in the facts and circumstances of the case.


All stakeholders are requested to provide their comments on the draft rules  , if any. 

Safe Harbour Rules’-Notification

CBDT has issued draft on SAFE HARBOUR RULES 10TA to 10TG which defines Software development services, Information Technology Enabled Services, Knowledge processes outsourcing services, intra-group loan, corporate guarantee, contract research and development services wholly or partly relating to software development, core auto components, non-core auto components, No tax or low tax country or territory, It also defines the Operating expenses, Revenue & operating profit margin in relation to operating expense. It also defined who can be eligible assessee and which transactions fall in eligible international transaction as well as procedure to obtain the safe harbourIt also states that the Safe harbour Rules not to apply in cases respect of eligible international transactions entered into with an associated enterprise located in any country or territory notified under section 94A or in a no tax or low tax country or territory. Where transfer price in relation to an eligible international transaction declared by an eligible assessee is accepted by the income-tax authorities under section 92CB, the assessee shall not be entitled to invoke mutual agreement procedure under an agreement for avoidance of double taxation entered into with a country or territory outside India as referred to in sections 90 or 90A.

CBDT had asked opinion from the industry on these draft rules so they can finalize the safe harbor rules by considering the suggestions advises received.
These Draft rules are as follows.

[TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (ii)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
[CENTRAL BOARD OF DIRECT TAXES]
Notification
New Delhi, the …….day of August, 2013
INCOME – TAX
In exercise of the power conferred under section 92CB read with section 295 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-.
1. (1) These Rules may be called the Income-tax (....Amendment), Rules, 2013
(2) These shall come into force from the date of their publication in the official Gazette.
2. In the Income-tax Rules, 1962 (hereinafter referred to as Rules), -
(A) In Part-II, in sub-part D, after rule 10T, the following shall be inserted, namely:-

‘Safe Harbour Rules’
Definitions
10TA. For the purposes of this rule and rule 10TB to rule 10TG, -
(i) “Software development services” mean the following, namely:-
(a) business application software and information system development using known methods and existing software tools;
(b) support for existing systems;
(c) converting and/or translating computer languages;
(d) adding user functionality to application programmes;
(e) debugging of systems;
(f) adaptation of existing software;
(g) preparation of user documentation,
but does not include the research and development services ;

(ii) “Information Technology Enabled Services” means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely:-
(a) back office operations;
(b) call centres or contact centre services;
(c) data processing and data mining;
(d) insurance claim processing;
(e) legal databases;
(f) creation and maintenance of medical transcription excluding medical advice;
(g) translation services;
(h) payroll;
(i) remote maintenance;
(j) revenue accounting;
(k) support centres;
(l) website services;
(m) data search integration and analysis;
(n) remote education excluding education content development;
(o) clinical database management services excluding clinical trials,
but does not include the research and development services;

 (iii) “Knowledge processes outsourcing services” means following business processes outsourcing services provided mainly with the assistance or use of information technology, namely:-
(a) geographic information system;
(b) human resources services;
(c) engineering and design services;
(d) animation or content development and management;
(e) business analytics;
(f) financial analytics;
(g) market research,
but does not include the research and development services ;

(iv) “intra-group loan” means loan advanced to wholly owned subsidiary being a nonresident, where the loan–
 (a) is sourced in Indian rupees;
(b) is not advanced by an enterprise in the nature of financial company including bank or financial institutions or enterprise engaged in lending or borrowing in the normal course of business; and
 (c) does not include credit line or any other loan facility which has no fixed term for repayment;

(v) “corporate guarantee” means explicit corporate guarantee in respect of any short-term or long-term borrowing by its wholly owned subsidiary being a non-resident;
(vi) “contract research and development services wholly or partly relating to software development” means the following, namely:-
(a) research and development producing new theorems and algorithms in the field of theoretical computer science;
(b) development of information technology at the level of operating systems, programming languages, data management, communications software and software development tools;
(c) development of Internet technology;
(d) research into methods of designing, developing, deploying or maintaining software;
(e) software development that produces advances in generic approaches for capturing, transmitting, storing, retrieving, manipulating or displaying information;
 (f) experimental development aimed at filling technology knowledge gaps as necessary to develop a software programme or system;
(g) research and development on software tools or technologies in specialised areas of computing (image processing, geographic data presentation, character recognition, artificial intelligence and other areas);
(h) upgradation of existing products where source code has been made available by the principal;
 (vii) “core auto components” means the following, namely:
(a) engine and engine parts including piston and piston rings; engine valves and parts; cooling systems and parts; and power train components;
(b) transmission & steering parts, including gears, wheels, steering systems, axles and clutches;
(c) suspension & braking parts, including brake and brake assemblies, brake linings, shock absorbers and leaf springs;
 (viii) “Non-core auto components” mean auto components other than core auto components;
(ix) “No tax or low tax country or territory” means a country or territory in which-
maximum marginal rate of income-tax is zero or less than 15 per cent. in respect of the associated enterprise.
(x) “operating expense” means the costs of the assessee incurred during the course of its normal operations and in connection with eligible international transactions for the previous year including depreciation and amortization expenses relating to the assets used by the assessee, but excluding the following, namely:-
(a) interest expense;
(b) provision for unascertained liabilities;
(c) pre-operating expenses;
(d) loss arising out of translation of foreign currency items;
(e) extra-ordinary items;
(f) loss on sale of assets/investments of the assessee;
(g) other items not relating to operating activities of the assessee; 5

(xi) “operating revenue” means the revenue of the assessee earned during the course of its normal operations and in connection with eligible international transactions for the previous year, but excluding the following, namely:-
(a) interest income;
(b) income arising out of translation of foreign currency items;
(c) income on sale of assets/investments of the assessee;
(d) refunds relating to income tax expense of the assessee;
(e) provisions no longer required written back;
(f) extra-ordinary items;
(g) other items not relating to operating activities of the assessee;

(xii) “operating profit margin in relation to operating expense” means the ratio of operating profit, being the operating revenue in excess of operating expense, to the operating expense expressed in terms of percentage.
Eligible assessee
10TB. (1) Subject to provisions of sub rules (2) and (3), “eligible assessee” means a person who has exercised the option for application of safe harbour rules in the manner specified in sub-rule(1) of Rule 10TE, and who -
(i) is engaged in providing software development services or information technology enabled services or knowledge processes outsourcing services, with insignificant risk, to a non-resident associated enterprise (hereinafter referred as foreign principal);
(ii) has made any intra-group loan ;
(iii) has provided a corporate guarantee; 6
(iv) is engaged in providing contract research and development services wholly or partly relating to software development, with insignificant risk, to a non-resident associated enterprise (hereinafter referred as foreign principal);
(v) is engaged in providing contract research and development services wholly or partly relating to generic pharmaceutical drugs, with insignificant risk, to a non-resident associated enterprise (hereinafter referred as foreign principal); or
(vi) is engaged in the manufacture and export of core and non-core auto components and where ninety per cent or more of total turnover during the relevant previous year are in the nature of Original Equipment Manufacturer (OEM) sales.

(2) An eligible assessee, with insignificant risk, referred to in item (i) of sub-rule (1) shall be identified having regard to the following factors, namely:-
(I) The foreign principal performs most of the economically significant functions involved, including critical functions such as conceptualization and design of the product and providing the strategic direction and framework, either through its own employees or through its other associated enterprises, while the eligible assessee carries out the work assigned to it by the foreign principal;
(II) The capital and funds and other economically significant assets including intangibles required, are provided by the foreign principal or its other associated enterprise(s), and the eligible assessee is only provided a remuneration for the work carried out by it;
(III) The eligible assessee works under the direct supervision of the foreign associated principal who not only has the capability to control or supervise but also actually controls or supervises the activities carried out, through its strategic decisions to perform core functions as well as by monitoring activities on a regular basis;
(IV) The eligible assessee does not assume or has no economically significant realized risks, and if the conduct of the foreign principal shows that the eligible assessee is actually doing so, the contractual terms shall not be the final determinant;
(V) The eligible assessee has no ownership right, legal or economic, on any intangible generated or on the outcome of any intangible generated or arising during the course of rendering of services, which vests with the foreign principal as evidenced by the contract as well as from the conduct of the parties.
(3) An eligible assessee, with insignificant risk, referred to in items (iv) and (v) of sub-rule (1) shall be identified having regard to the following factors, namely:-
(I) the foreign principal performs most of the economically significant functions involved in research or product development cycle, including critical functions such as conceptualization and design of the product and providing the strategic direction and framework, either through its own employees or through its associated enterprises while the eligible assessee carries out the work assigned to it by the foreign principal;
(II) the foreign principal or its associated enterprise(s) provides the funds or capital and other economically significant assets including intangibles required for research or product development and also provides a remuneration to the eligible assessee for the work carried out by it;
(III) the eligible assessee works under the direct supervision of the foreign principal or its associated enterprise which has not only the capability to control or supervise but also actually controls or supervises research or product development, through its strategic decisions to perform core functions as well as by monitoring activities on a regular basis;
(IV) the eligible assessee does not assume or has no economically significant realized risks, and if a contract shows that the foreign principal is obligated to control the risk but the conduct shows that the eligible assessee is doing so, the contractual terms shall not be the final determinant; and (V) the eligible assessee has no ownership right, legal or economic, on the outcome of the research which vests with the foreign principal and is evidenced by the contract as well as the conduct of the parties.
Eligible international transaction
10TC. ‘Eligible international transaction’ means an international transaction between the “eligible assessee” and its ‘associated enterprise’, either or both of whom are non-resident, comprising of:
(i) the provision of software development services where the aggregate value of such transactions entered into in the previous year does not exceed a sum of one hundred crore rupees;8
(ii)the provision of information technology enabled services where the aggregate value of such transactions entered into in the previous year does not exceed a sum of one hundred crore rupees;
(iii) the provision of knowledge process outsourcing services where the aggregate value of such transactions entered into in the previous year does not exceed a sum of one hundred crore rupees;
(iv) advance of intra-group loan;
(v) provision of corporate guarantee;
(vi) provision of contract research and development services wholly or partly relating to software development:
 (vii) provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs;
(viii) manufacture and export of core auto components;
 (ix) manufacture and export of non-core auto components, by the eligible assessee.
Safe Harbour
10TD. (1) Where an eligible assessee has entered into an eligible international transaction, the transfer price declared by the assessee in respect of such transaction shall be acceptable to income tax authorities in the circumstances as specified in sub-rule (2).
(2) The circumstances referred to in sub-rule (1) in respect of the eligible international transaction specified in column (2) of the Table below shall be as specified in the corresponding entry in column (3) of the said Table:-
S.No (1)        
Eligible International Transaction (2)                                                     
Circumstances (3)
1.
Provision of software development services referred to in clause (i) of rule 10TC
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is 20 per cent. or more.
2.
Provision of information technology enabled services referred to in clause (ii) of rule 10TC
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is 20 per cent. or more
3.
 Provision of knowledge process outsourcing services referred to in clause (iii) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is 30 per cent. or more.
4.
Advancing of intra-group loans referred to in clause (iv) of rule 10TC where the amount of loan does not exceed fifty crore rupees.
The Interest rate declared in relation to the eligible international transaction is equal to or greater than the base rate of State Bank of India (SBI) as on 30th June of the relevant previous year plus 150 basis points.

Advancing of intra-group loans referred to in clause (iv) of rule 10TC where the amount of loan exceeds fifty crore rupees
The Interest rate declared in relation to the eligible international transaction is equal to or greater than the base rate of SBI as on 30th June of the relevant previous year plus 300 basis points.

Providing corporate guarantee referred to in clause (v) of rule 10TC where the amount guaranteed does not exceed one hundred crore rupees
The commission or fee declared in relation to the eligible international transaction is at the rate of 2 per cent or more per annum on the amount guaranteed.

Provision of contract research and development services wholly or partly relating to software development referred to in clause (vi) of rule 10TC.
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is 30 per cent. or more.

Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs referred to clause (vii) of rule 10TC
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense incurred is 29 per cent. or more.

Manufacture and export of core auto components
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is 12 per cent. or more

. Manufacture and export of noncore auto components
The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is 8.5 per cent. or more.

(3) The provisions of sub-rules (1) and (2) shall be effective for the assessment years 2013-14 and
2014-15.

(4) For the removal of doubts, it is clarified that no comparability adjustment and
allowance under second proviso to section 92C(2) shall be made to the transfer price
declared by the eligible assessee and acceptable under sub-rules (1) and (2) above.

(5) For the removal of doubts, it is also clarified that provisions of sections 92D and 92E in respect of an international transaction shall continue to apply to an assessee, whether or not the assessee exercises his option for safe harbour in respect of the international transaction.

Procedure
10TE. (1) For the purposes of exercise of the option for safe harbour, every eligible assessee shall furnish a Form 3CEG , complete in all respects, to the Assessing Officer on or before the due date specified in Explanation 2 below sub-section (1) of section 139 for filing the return of income for the relevant assessment year.

(2) On receipt of the Form 3CEG, the Assessing Officer shall verify whether the assessee exercising the option is an eligible assessee and whether the transaction in respect of which the option is exercised is an eligible international transaction or not.
(3) Where after such verification the Assessing Officer finds that the option has been exercised by an eligible assessee in respect of an eligible international transaction, he shall proceed to verify whether the transfer price declared by the assessee in respect of such transaction is acceptable or not considering the circumstances specified in sub-rule (2) of rule 10TD.
(4) For the purposes of this rule, the Assessing Officer may require the assessee, by notice in writing, to furnish such information or documents or other evidence as he may consider necessary, and the assessee shall furnish the same within the time specified in such notice.
(5) Where-
(a) the assessee does not furnish the information or documents or other evidence required by the Assessing Officer; or
(b) the Assessing Officer finds that the assessee is not an eligible assessee; or
(c) the Assessing Officer finds that the transaction in respect of which the option
referred to in sub-rule (1) has been exercised is not an eligible international transaction; or
(d) the Assessing Officer finds that the transfer price declared by the assessee in respect of an eligible international transaction is not acceptable considering the circumstances specified in sub-rule (2) of rule 10TD,the Assessing Officer shall by order in writing declare the option exercised by the assessee to be invalid, and shall thereupon proceed to determine the arm’s length price in respect of the international transactions entered into by the assessee in accordance with section 92C without having regard to the profit margin or the price as specified in sub-rule (2) of rule 10TD:
Provided that no order declaring the option exercised by the assessee to be invalid shall be passed without giving a reasonable opportunity of being heard to the assessee.
 (6) For the purposes of making the verification referred to in sub-rules (3) to (6), the Assessing Officer may make a reference to the Transfer Pricing Officer under section 92CA, and thereupon the provisions of this rule shall apply to the Transfer Pricing Officer as they would apply to the Assessing Officer.
(7) Where no option for safe harbour is exercised under sub-rule (1) by an eligible assessee in respect of an eligible international transaction entered into by the assessee, the arm’s length price in relation to the international transaction shall be determined in accordance with the provisions of sections 92C and 92CA without having regard to the profit margin or the price as specified in sub-rule (2) of rule 10TD.
Safe harbour Rules not to apply in certain cases
10TF. Nothing contained in rule 10TA to rule 10TE shall apply in respect of eligible international transactions entered into with an associated enterprise located in any country or territory notified under section 94A or in a no tax or low tax country or territory.
Not eligible for MAP
10TG. Where transfer price in relation to an eligible international transaction declared by an eligible assessee is accepted by the income-tax authorities under section 92CB, the assessee shall not be entitled to invoke mutual agreement procedure under an agreement for avoidance of double taxation entered into with a country or territory outside India as referred to in sections 90 or 90A.
(B) In Appendix II, after Form No. 3CEF rule 10T, the following shall be inserted, namely:-
“Form No. 3CEG
(See sub-rule (1) of rule 10 …)
Application to Opt for Safe Harbour
To,
The Assessing Officer
…………………………….. 12
Sir/Madam,
I propose to opt for the safe harbour rules under section 92CB of the Income-tax Act, 1961
read with rule 10TA to rule 10TG of Income-tax Rules, 1962. In this regard, I give below the
necessary particulars:
1.      Particulars relating to the eligible assessee:
2.      Sir/Madam,
3.      I propose to opt for the safe harbour rules under section 92CB of the Income-tax Act, 1961
4.      read with rule 10TA to rule 10TG of Income-tax Rules, 1962. In this regard, I give below the
5.      necessary particulars:
6.      1. Particulars relating to the eligible assessee:
7.      a. Full name of the assessee:
8.      b. Permanent account number:
9.      c. Address of the assessee:
10.   d. Nature of business or activities of the assessee:
11.   e. Status:
12.   f. Previous year ended:
13.   g. Assessment Year:
14.   2. Eligible International Transaction:

Sl. No
Particulars in respect of eligible international transaction
Remarks

Has the eligible assessee entered into any
international transaction in respect of the provision
of software development services referred in item (i)
of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises (AE) with whom the eligible
international transaction has been entered
into.
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction.
(e) Amount received/receivable for the services
provided.
(f) Operating profit margin in relation to
operating expense declared
(g) Whether transfer price acceptable considering
the circumstances specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee entered into any
international transaction in respect of the provision
of information technology enabled services referred
to in item (ii) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises with whom the eligible
international transaction has been entered
into
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction
(e) Amount received for the services provided
(f) Operating profit margin in relation to
operating expense declared
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee entered into any
international transaction in respect of the provision
of knowledge process outsourcing services referred
to in item (iii) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises with whom the eligible
international transaction has been entered
into
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction
(e) Amount received for the services provided
(f) Operating profit margin in relation to
operating expense declared.
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee advanced intra-group loans as referred to in item (iv) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises with whom the eligible
international transaction has been entered
into
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction
(e) Interest charged in respect of each lending
(f) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee provided corporate
guarantees as referred to in item (v) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises with whom the eligible
international transaction has been entered
into
(b) Name of the country in which AE (s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction
(e) Commission/fee charged in respect of the
transaction declared
(f) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee entered into any
international transaction in respect of the provision
of contract research and development services wholly
or partly relating to software development as
referred to in item (vi) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises (AE) with whom the eligible
international transaction has been entered into.
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction.
(e) Amount received for the services provided.
(f) Operating profit margin in relation to
operating expense declared.
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee entered into any
international transaction in respect of the provision
of contract research and development services wholly
or partly relating to generic pharmaceutical drugs as
referred to in item (vii) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises (AE) with whom the eligible
international transaction has been entered
into.
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction.
(e) Amount received for the services provided.
(f) Operating profit margin in relation to
operating expense declared.
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

Has the eligible assessee entered into any
international transaction in respect of manufacturing
and export of core auto components as referred to in
item (viii) of Rule 10TC?
If Yes, provide the following details: enterprises (AE) with whom the eligible
international transaction has been entered
into.
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction.
(e) Amount received/receivable in relation to
such transaction.
(f) Operating profit margin in relation to
operating expense declared.
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
(a) Name and address of the associated
Yes/No

Has the eligible assessee entered into any
international transaction in respect of manufacturing
and export of non-core auto components as
prescribed in item (ix) of Rule 10TC?
If Yes, provide the following details:
(a) Name and address of the associated
enterprises (AE) with whom the eligible
international transaction has been entered
into.
(b) Name of the country or territory in which AE
(s) is located.
(c) Whether country or territory is a no tax or low
tax country or territory as defined in rule
10TA.
(d) Description of the eligible international
transaction.
(e) Amount received/receivable in relation to
such transaction.
(f) Operating profit margin in relation to
operating expense declared.
(g) Whether transfer price acceptable considering
the circumstance specified under rule 10TD
(yes/no).
Yes/No

I declare that to the best of my knowledge and belief, the information furnished herein is
correct and truly stated.
Yours faithfully,
Place:
Date:
Eligible assessee
Notes:
1. Particulars of each eligible international transaction should be reported separately along
with transfer price declared.
2. The application should be signed by the person authorized to sign the return of income

under section 140.





Link:http://www.incometaxindia.gov.in/archive/BreakingNews_DraftSafe_14082013.pdf

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