09 accountants report ca. vaishali mane 100811 i - wirc andheril

Accountants Report

Intensive Study Course on Transfer PricingICAIMumbaiAugust 10, 2011Presented By:

Ms. Vaishali ManeDirector Transfer Pricing ServicesGrant Thornton, India

Agenda

Importance of Form 3CEB

Legislative Framework in India

Form 3CEB Clauses

Recent development

Form 3CEB Flow

Filing requirements in other countries

Revision of Form 3CEB

Management representation Letter



Form 3CEB Clauses

Recent development

Form 3CEB Flow



Management Representation Letter

Legislative Framework

International Transaction Associated Enterprise

Transfer Pricing applies

Study Report

Accountants Report



Form 3CEB Clauses

Recent development

Form 3CEB Flow



Management representation Letter

Importance of a Form 3CEB

•Statutory requirement in India

•Provides a birds eye view of the transfer pricing/transactions of the assessee to the Assessing Officer

('AO')

•Helps the AO to refer the transfer pricing matter to the special transfer pricing cell

•Helps the transfer pricing officer in the audit process

Listing of Associated enterprise

Contains a list of International transactions

Highlights whether the transactions are complex

Contains the value of international transactions

The transfer pricing methods followed

Other aspects of Form 3CEB

•It must be furnished on or before the due date applicable to such person

or filing its return of income for the relevant assessment year;

•No exemption from filing Form 3CEB - Even if international transactions <

1 crore

•Under section 271 BA of the Act, inserted with effect from 1st April 2002, if

a person fails to furnish this report, the Assessing Officer may direct that

such person shall pay by way of penalty, a sum of Rs. 1 Lac



Form 3CEB Clauses

Recent development

Form 3CEB Flow




Form 3CEB Flow

Engagement on assignment

Checklist Verification ProcessIssue

Form 3CEB

Form 3CEB and Clauses in Form 3CEB

Management Representation

Letter

Email

Engagement Process

• Person entering into International transaction to obtain the report from an Accountant

Accountant defined under Section 288 of the Act

– Chartered Accountant’s within the meaning of the Chartered Accountants Act, 1949 (38 of 1949);

– Statutory Auditor

• Communicate with the other accountant who has done examination in the earlier years

• Engagement Letter

• Two or more CA's can do examination

• An accountant responsible for writing or maintenance of accounts should not examine accounts

Email

Initially an email be sent to clients containing a Blank format

/ template of Form 3CEB, Annexure to Form 3CEB,

Management Representation Letter and Appendices to the

same

If the client engagement has already been worked upon in

the last year – attach files of last year

Other files

Information to be verified and data collected - Checklist

S. No. Particulars1 Reconciliation with related party - AS 182 Reconciliation with Forex Transaction with respect to Notes to A/c3 Sample Testing - Trial balance / Ledger A/c4 Sample Invoice check/ debit notes5 PAN card copy available in file6 Form 27 - If applicable7 Signed Audited Financials8 Segmental Financials verified with audited accounts9 Copies of Agreement

10 Budgets/ Forecast11 Management Representation Letter & Appendices thereto12 Tax Assessment inquiry

Form 3CEB

We have examined the accounts and records of ___, having their office at, ____ (PAN: __ relating to the international transactions entered into by the assessee during the previous year ended on ___.

In our opinion, proper information and documents as are prescribed have been kept by the assessee in respect of the international transactions entered into, so far as appears from our examination of the records of the assessee.

The particulars required to be furnished under section 92E are given in the Annexure to this Form. In our opinion and to the best of ourinformation and according to the explanations given to us, the particulars given in the Annexure are true and correct.

Case Study 1

Form 3CEB of a Permanent Establishment ('PE') in India


Form 3CEB Flow

Form 3CEB Clauses



Recent developments



Clauses in Form 3CEB

Particulars of the taxpayer – Clauses 1 to 6

Particulars of AE's with whom the taxpayer has entered into international transaction – Clause 7

Particulars in respect of International transactionsTangible property Clause 8

Intangible property Clause 9

Services Clause 10

Lending and Borrowing Money Clause 11

Mutual Agreement/Arrangement Clause 12

Any other transaction Clause 13

Standard Information to filled up in all clauses

Clauses 1 – 6

• Name of the assesseeNew and old name to be disclosed

• Address of the assesseeIn case of BranchIn case of CompanyIn case of Foreign company or a PE

• Permanent Account Number• Status• Previous Year ended • Assessment year

Clause 7: Details of AE

• Name and addresses AE

• The relevant sub clause of section 92A (2) under which such

relationship is covered should also be provided ;

• In most of the cases, the relationship would fall under sub clause (a) or

(b) out of the thirteen sub clauses;

• Additional care should be taken for cases falling under the other

clauses;

• Deemed AE – Note to be disclosed

Information in respect of Associated Enterprises (AE's) Clause 7

Sr. No. Name and address of AE Nature of relationship with AE (Refer Note 1 Below)

Brief description of AE's business

1 XYZ Corporation USA,P.O Box 661, Linville Road,Mt.Airy, New York,USA nc-27030

100% Subsidiary Company under Section 92A(1)(a) read with Section 92A(2)(a)

Manufacturing & Trading of products

Notes:1 Sections mentioned above refer to sections of the Income-tax Act, 1961.

Clause 7: Details of AE

Clause 8A and 8B: Raw Materials and Finished Goods1. Transactions to be disclosed in Clause 8A and 8B

2. Cross-check the purchase/sale transactions of raw materials / finished goods with AS-

18

3. As regards purchase of raw materials, ascertain whether the same are used further in

the manufacturing process or sold to a third party for manufacture or resold to the AE.

4. See the Ledger Account of the AE for the correctness of the amount

5. Sample Invoices of the product sold

6. Description of the product or terminology for describing the product

Clauses of Form 3CEB

Particulars in respect of Tangible Property - Purchase / Sale of Raw Materials

Clause 8A

Total Amount paid / payable as per

books

Total Amount paid / payable as per Arm's

Length Price (as computed by assessee)

(Refer Note 1 below)

Method Used

[See Section 92C(1)]1 XYZ Corporation USA,

P.O Box 661, Linville Road,Mt.Airy, New York,USA nc-27030

Purchase of Packing material

Nos 523,566 523,566 Transactional Net Margin Method ('TNMM')

Notes:1

2 Although the quantities of spare parts/ consumables/ packing materials have been stated they are of different grades.

As per the Transfer Pricing study undertaken by the assessee, the Transactional Net Margin Method was determined to be the mostappropriate method prescribed under Section 92C of the Income-tax Act, 1961. On the basis of the study, it was concluded that theprices of international transactions of the assessee were at arm’s length as provided under section 92C of the Income-tax Act, 1961.Accordingly, it was considered reasonable to use the book values of international transactions as representative of arm’s lengthprice of all such transactions.

(Rs.)

Sr. No. Name and address of AE Description of transaction

Quantity purchased



Particulars in respect of Tangible Property – Import / Export of Finished Goods

Clause 8B

Total Amount received /

receivable as per books

Total Amount received /

receivable as per ALP


Method Used


Sale of Finished Goods

Manufacturing and Export of ______

8,624,472 274,963,573 274,963,573 Transactional Net Margin Method ('TNMM')

Notes:1

2 Although the quantities of socks have been stated they are of different grades.

Sr. No.

As per the Transfer Pricing study undertaken by the assessee, the Transactional Net Margin Method was determined to bethe most appropriate method prescribed under Section 92C of the Income-tax Act, 1961. On the basis of the study, it wasconcluded that the prices of international transactions of the assessee were at arm’s length as provided under section 92Cof the Income-tax Act, 1961. Accordingly, it was considered reasonable to use the book values of international transactionsas representative of arm’s length price of all such transactions.

(Rs.)

Quantity Sold in Pairs


Class of Transaction

Description of transaction

Name and address of AE

Clause 8C: Tangible Movable/Immovable Property1. Disclose the details of Assets purchased / sold

2. Review the Asset Purchase Agreement

3. Valuation certificate issued by an expert

4. Shares purchased /sold

5. Free of cost assets

6. Assets purchased abroad and sold to India on back to back basis

7. Transfer of assets to India at Book Value and the relevant documents

8. Documents related to customs valuation

9. Some examples


Particulars in respect of Tangible Moveable/Immoveable Property - Purchase / sale of Capital Assets

Clause 8C

Total Amount paid / payable as

per books


Arm's Length Price (as computed by

assessee)(Refer Note 1 below)

Method Used



Purchase of Fixed Assets

Import of plant & Machinery

1 No. 13,956 13,956 Comparable Uncontrolled Price Method ('CUP')

Notes:1 As per the Transfer Pricing study undertaken by the assessee, the Comparable Uncontrolled Price Method was determined to be the most appropriate

method prescribed under Section 92C of the Income-tax Act, 1961. On the basis of the study, it was concluded that the prices of internationaltransactions of the assessee were at arm’s length as provided under section 92C of the Income Tax Act, 1961. Accordingly, it was consideredreasonable to use the book values of international transactions as representative of arm’s length price of all such transactions.

(Rs.)

Sr. No. Name and address of AE

Description of property and

nature of transaction

Class of Transaction

Number of units of each category

of moveable / immovable

property

Clause 9: Intangible property

• International transaction(s) in respect of purchase/sale/use of

intangible property such as know-how, patents, copyrights, licenses,

etc• For royalty

• CUP is the preferred method (where we find comparable agreements using Royalty Stat, Lexis Nexis etc.)

• IF CUP is not undertaken, TNMM could be used as the most appropriate method to test the arm’s length nature of royalty payment (assuming aggregation of transactions is possible)

• RBI approvals?

Clause 9: Intangible property

Obtain and review the agreements.

Ascertain the nature of benefits received from payment of royalty , designs, technical

drawings, know how etc.

Obtain Section 195 certificate, if necessary.

To ascertain the impact of royalty payment in internal / external TNMM, review impact of

royalty payments on the profitability of the relevant segment.

Check if there is any CUP (royalty paid to third party before entering into contract with group

entity). Also, check CUP in other countries ( if applicable)

Review Group policy to ascertain if any other group entity that avails same / similar technical

know-how at prescribed rate.

Verify the calculation of royalty payments.

Verify TP Report of the overseas entity ( if any)


Particulars in respect of transactions in Intangible PropertyClause 9

Sr. No.

Name and address of AE with whom the

international transaction has been entered into

Description of each transaction


books(Refer Note 2 below)


Length Price (as computed by

assessee) (Refer Note 1below)

Method used for determining the arm's

length price

1 XYZ Inc1313, N. Market Street, Wilmington DE 19894-0001, UK.

Royalty for Technical know-how

6,828,753 6,828,753 Comparable Uncontrolled Price Method.

Notes:1 As per the Transfer Pricing study undertaken by the assessee, the Comparable Uncontolled Price Method was

determined to be the most appropriate method prescribed under Section 92C of the Income Tax Act, 1961. On thebasis of the study, it was concluded that the prices of international transactions of the assessee were at arm’s lengthas provided under section 92C of the Income-tax Act, 1961. Accordingly, it was considered reasonable to use thebook values of international transactions as representative of arm’s length price of all such transactions.

Clause 10: Services

Covers international transaction(s) in respect of services such as

financial, administrative, technical, commercial services, etc

Review the Agreements for rendering /receiving services

• Nature of services rendered

• Compensation model

• Ownership of IP

• Payment terms comparable terms

Group Policy

Ledger Accounts, Invoices

Clause 10: Services

Verify on a test check basis the documents for services availed:• Emails• Minutes of conference calls in case of any

advice received• In case of actual visits of foreign

employees, details of tickets, hotel bills, services rendered while in India

Review TDS certificates, if any


Particulars in respect of services provided / availed off Clause 10

As per books of accounts

Arms' length price as computed by the assessee

(Refer Note 1)[See Section 92C(1)]

1 XYZ Inc. 101,Main Street, 16th Floor, Cambridge. Massachusetts -02142 ,USA

Rendering of Software Devlopment services

159,030,979 159,030,979 Transactional Net Margin Method

Notes:1

Name and address of AE with whom the international transaction has been

entered intoSr. No.

Amount received or receivable for services provided to AE

As per the Transfer Pricing study undertaken by the assessee, the Transactional Net Margin Method was determined to be the most appropriate method prescribed under Section 92C of the Income Tax Act, 1961. On the basis of the study, it was concluded that the prices of international transactions of the assessee were at arm’s length as provided under section 92C of the Income-tax Act, 1961. Accordingly, it was considered reasonable to use the book values of international transactions as representative of arm’s length price of all such transactions.

(Rs.)

Method used for determining the arm's

length price

Description of services provided to

AE

Clause 11: Lending and Borrowings

International transaction(s) in respect of granting/receiving loans/ advances• Name and address of AE• Nature of financing arrangement• Currency • Interest rates

Clause 11: Lending and Borrowings

Review the loan agreements.

Refer to AS-18 Related Party Transactions disclosures for loan transactions.

Check for loans taken/given and repaid during the year itself

Interest free loans given by Indian entity

• Case Laws – Perot Systems TSI India Private Limited

• Case Laws – VVF Limited

In case of Interest free loans given, examine the possibility of adjustment.

Insist on a robust loan/interest rate benchmarking to mitigate possible risk

exposure.


Particulars in respect of lending / borrowing money – granting / receiving loans / advances to / from associated enterprise

Clause 11

As per books of Accounts

Arm's length price as computed by the

assessee[See Section 92C(1)]


Loan USD LIBOR + 2%

xxxx xxxx Comparable Uncontrolled Price Method

Notes:1

Amount of paid / payable

Sr. No.

As per the Transfer Pricing study undertaken by the assessee, the Comparable Uncontolled Price Method was determinedto be the most appropriate method prescribed under Section 92C of the Income Tax Act, 1961. On the basis of the study, itwas concluded that the prices of international transactions of the assessee were at arm’s length as provided under section92C of the Income-tax Act, 1961. Accordingly, it was considered reasonable to use the book values of internationaltransactions as representative of arm’s length price of all such transactions.

( Rs.)

Name and address of AE with whom the

international transaction has been entered into

Nature of transaction

Currency in which

advance was received

Interest rate paid in respect of advance

Method used for determining the

Arm's Length Price

Clause 12: Mutual Agreements /Arrangements

This clause deals with mutual agreement or arrangement for the allocation or apportionment

of, or any contribution to, any cost or expense incurred or to be incurred in connection with a

benefit, service or facility provided or to be provided to any one or more of such enterprises

Particulars to be provided:

• Name and address of the AE

• Description of mutual agreement/ arrangement

• Amount – As per books and ALP

• Method use

Type of transactions covered – Cost Allocation / Cost sharing Arrangements

Review the Agreements


Particulars in respect of Mutual Agreement or ArrangementClause 12

Total Amount received / receivable as per

books

Total Amount received / receivable as per Arm's

Length Price (as computed by assessee)(Refer Note 1)


Management Fees xxxx xxxx Transactional Net Margin Method ('TNMM')

Notes:

1 As per the Transfer Pricing study undertaken by the assessee, the Transactional Net Margin Method was determined to be the most appropriate method prescribed under Section 92C of the Income-tax Act, 1961. On the basis of the study, it was concluded that the prices of international transactions of the assessee were at arm’s length as provided under Section 92C of the Income-tax Act, 1961. Accordingly, it was considered reasonable to use the book values of international transactions as representative of arm’s length price of all such transactions.

Rs.

Sr. No. Name and address of AEDescription of mutual

agreement / arrangement

Method Used

Facts of the Case:

• As per Management Services Agreement (MSA), Gemplus India’s AEs would provide need-based services.

• Services rendered were billed by the AEson the basis of time spent with an overall fixed cap.

• Selected the TNMM as the MAM.

• TPO contended that management services fees paid to AEs not deductible as the taxpayer did not prove that commensurate benefits accrued from these services.

• Taxpayer failed to prove the aspects, the management service fees were not at ALP and hence not allowable.

Management Service Fees

Gemplus India Pvt. Ltd.

Gemplus SingaporeGemplus Singapore



100%

Renders marketing and sales support, customer service support, finance, accounting and administration support and legal support services.

Gemplus’s contention TPO / CIT(A) contention ITAT contentionGemplus’s contention TPO / CIT(A) contention ITAT contention

Commendable Sales turnover achieved, which would not have been possible without services rendered by AE exclusively for the business of the assessee

Commendable Sales turnover achieved, which would not have been possible without services rendered by AE exclusively for the business of the assessee

Taxpayer did not derive any specific benefit from the management services and hence the payment towards management services was not justified and disallowed the expenses claimed.

Taxpayer did not derive any specific benefit from the management services and hence the payment towards management services was not justified and disallowed the expenses claimed.

Imperative on the part of Taxpayer to establish that the payment were made commensurate to the volume and quality of services and such cost are comparable.

Imperative on the part of Taxpayer to establish that the payment were made commensurate to the volume and quality of services and such cost are comparable.

There was no material on records to show that no services were rendered and that the payments were excessive compared to analogous transaction.

There was no material on records to show that no services were rendered and that the payments were excessive compared to analogous transaction.

MSA has been entered before the FY, and hence not possible to contemplate the nature and volume of services and their compensation

MSA has been entered before the FY, and hence not possible to contemplate the nature and volume of services and their compensation

No details available on records with respect to the nature of services rendered by the AE to Taxpayer and, hence, the TPO was justified.

No details available on records with respect to the nature of services rendered by the AE to Taxpayer and, hence, the TPO was justified.



Gemplus’s contention TPO / CIT(A) contention ITAT contentionGemplus’s contention TPO / CIT(A) contention ITAT contention

Employed a handful of persons in India and all the technical expertise was provided by the AE on a need basis.

Employed a handful of persons in India and all the technical expertise was provided by the AE on a need basis.

Taxpayer already has qualified personnel in its service in India and the Taxpayer has already incurred expenditure for similar services.

Taxpayer already has qualified personnel in its service in India and the Taxpayer has already incurred expenditure for similar services.

TNMM, could not be accepted to determine the AL nature of the services fees as the payment terms were independent of the nature or volume of services

TNMM, could not be accepted to determine the AL nature of the services fees as the payment terms were independent of the nature or volume of services

Services rendered by the AE were billed on the basis of the time spent for services rendered to the Taxpayer, with an overall fixed cap.

Services rendered by the AE were billed on the basis of the time spent for services rendered to the Taxpayer, with an overall fixed cap.

Cost has been apportioned by the AE for different country-centres on a mutually agreed basis and not on the basis of actual services rendered.

Cost has been apportioned by the AE for different country-centres on a mutually agreed basis and not on the basis of actual services rendered.

TPO was justified.

Taxpayer failed to prove the benefit test, the management services fees was not at arm’s length and hence not allowed.

TPO was justified.

Taxpayer failed to prove the benefit test, the management services fees was not at arm’s length and hence not allowed.

Benefit test and robust documentation are keys for proving management fees to be at ALP

Benefit test and robust documentation are keys for proving management fees to be at ALP



Clause 13: Other Transactions

Any other international transaction not specifically referred to above

Transactions reported in clause 13 pertain to re –imbursements of

expenses

Free of cost transactions disclosed by way of a note

Documentary evidence to be reviewed:• Nature of reimbursement of expenses – description

• Debit notes to understand description of expenses charged / recovered

• Support documents and vouchers


Particulars in respect of any other transactions -Reimbursements / Others Receipts / Other payments

Clause 13

Total Amount paid / payable as per books


Length Price (as computed by assessee)

(Refer Note 1)

Method Used



Reimbursement for travelling

18,025 18,025 Comparable Uncontrolled Price Method ('CUP')

Notes:

Sr. No. Name and address of AEDescription of each

transaction

Rs.

As per the Transfer Pricing study undertaken by the assessee, the Comparable Uncontrolled Price Method was determined to be the mostappropriate method prescribed under Section 92C of the Income-tax Act, 1961. On the basis of the study, it was concluded that the prices ofinternational transactions of the assessee were at arm’s length as provided under Section 92C of the Income-tax Act, 1961. Accordingly, itwas considered reasonable to use the book values of international transactions as representative of arm’s length price of all suchtransactions.

Refer Note 2 below


Form 3CEB Flow

Form 3CEB Clauses


Recent development




Recent development

Amadeus India Pvt. Ltd. Facts of the Case:

• Responsible for providing software access to the subscribers of the Amadeus products and computer database within the Indian sub-continent.

• TNMM selected as MAM- PLI selected as OP/TC

- TPO did not raise any objection to the method adopted or computation of ALP

• TPO alleged that assessee had incurred more than normal sales and marketing expenses to build “aMaDEUS” brand, which is legally owned by Amadeus Spain.

• TPO compared AMP/Sales% of 3 companies of 12.16% with assessee’s AMP% of 40.87%, hence adding a mark-up of 10% on more than normal marketing expenses

• TPO passed a draft order, later confirmed by DRP

Amadeus Associated Enterprises “AEs”

Amadeus India Pvt. Ltd.“Amadeus India”

Provides data processing and related services to its AEs.

Amadeus’s contention TPO / CIT(A) contention ITAT contentionAmadeus’s contention TPO / CIT(A) contention ITAT contention

Incurred normal sales and marketing expenses as the same were not disallowed by AO u/s 37(1)

Incurred normal sales and marketing expenses as the same were not disallowed by AO u/s 37(1)

Assessee had incurred more than normal sales and marketing expenses to build brand in India, which is legally owned by Amadeus Spain.

Assessee had incurred more than normal sales and marketing expenses to build brand in India, which is legally owned by Amadeus Spain.

Deletion of AMP expenditure related adjustments made by TPO as he acted beyond his jurisdiction, without approval from CIT

Deletion of AMP expenditure related adjustments made by TPO as he acted beyond his jurisdiction, without approval from CIT

AMP expenses were 3rd party expenses and the same were not recognised by the assessee as an international transaction in Form 3CEB

AMP expenses were 3rd party expenses and the same were not recognised by the assessee as an international transaction in Form 3CEB

TPO did not conclude that AMP expenditure incurred is an “international transaction”

TPO did not conclude that AMP expenditure incurred is an “international transaction”

AMP expenditure should be considered as an “international transaction” within meaning of Section 92B(1) of the Act

AMP expenditure should be considered as an “international transaction” within meaning of Section 92B(1) of the Act

When a file is referred to TPO, the AO is referring to the entire gamut of international transactions

When a file is referred to TPO, the AO is referring to the entire gamut of international transactions

The role of the TPO is restricted to only that transaction, referred to him by the AO (CBDT Inst. 3 of 2003)

The role of the TPO is restricted to only that transaction, referred to him by the AO (CBDT Inst. 3 of 2003)

Plain reading of Sec. 92CA(1) nowhere reveals that TPO can take any transaction suo motofor verification and adjustment

Plain reading of Sec. 92CA(1) nowhere reveals that TPO can take any transaction suo motofor verification and adjustment

Marketing Intangibles

Amadeus India Pvt. Ltd.

Amadeus’s contention TPO / CIT(A) contention ITAT contentionAmadeus’s contention TPO / CIT(A) contention ITAT contention

Avoidance of tax was not condition precedent for invoking TPR

Avoidance of tax was not condition precedent for invoking TPR

The TPR does not require the ‘form’ but also the overall arrangement/substance of the transactions before determining ALP.

Assessee incurred costs under a mutual agreement, not in writing, but proved from the conduct of the parties

The TPR does not require the ‘form’ but also the overall arrangement/substance of the transactions before determining ALP.

Assessee incurred costs under a mutual agreement, not in writing, but proved from the conduct of the parties

Bright Line Test done by TPO by applying AMP/Sales as a base for benchmarking is not 1 of the 5 methods prescribed under TPR in India

Bright Line Test done by TPO by applying AMP/Sales as a base for benchmarking is not 1 of the 5 methods prescribed under TPR in India

Proposed budget 2011 gives TPO the power to evaluate transaction not referred by AO

Proposed budget 2011 gives TPO the power to evaluate transaction not referred by AO

Marketing Intangibles

Amadeus India Pvt. Ltd.

Recent development

Open Technologies India Private Limited Facts of the Case:

• Assessee had not furnished Accountants Report before the due date of filing ROI for AY 2006 – 07

• Had obtained the Form 3CEB on September 1, 2006 which was beforethe due date

• Penalty proceedings under Section 271 BA of the Act were initiated by the AO

Taxpayer’s contention AO / CIT(A) contention ITAT contentionTaxpayer’s contention AO / CIT(A) contention ITAT contention

Online filing of return was mandatory for the first time –None of the documents were filed like audited accounts, TDS certificate, Form3CEB etc

Online filing of return was mandatory for the first time –None of the documents were filed like audited accounts, TDS certificate, Form3CEB etc

AO did not accept the contention and levied the penalty under Section 271 BA

AO did not accept the contention and levied the penalty under Section 271 BA

Assessee had obtained the Form 3CEB before the due date of return filing

Assessee had obtained the Form 3CEB before the due date of return filing

Form 3CEB filed in the due course of assessment. Affidavit from Director and CA were submitted that Form 3CEB was obtained on 1 -9 -2006

Form 3CEB filed in the due course of assessment. Affidavit from Director and CA were submitted that Form 3CEB was obtained on 1 -9 -2006

Section 273B provides that no penalty under Section 271 BA will be leviable if there is reasonable case for failure to comply

Section 273B provides that no penalty under Section 271 BA will be leviable if there is reasonable case for failure to comply

Assessee was under genuine belief that Annexures were not to be filed with the return.

Assessee was under genuine belief that Annexures were not to be filed with the return.

Open Technologies India Private Limited

CIT (A) upheld the penalty levied by the AO

CIT (A) upheld the penalty levied by the AO

Penalty was deletedPenalty was deleted




Form 3CEB Clauses

Form 3CEB Flow

Recent development



Facts of the Case:

• K Ltd, M Ltd and C Ltd are separate legal entities in India

• They have filed their Form 3CEB for April 2009 to March 2009 by September 2009

• The group wants to merge K ltd and M Ltd into C Ltd and have a single entity in India

• The Scheme of Amalgamation is approved by the High Court in October 2009 w.e.f January 1, 2009.


AEAE

K LtdK Ltd

Out of India

Prior to Merger

In India

M LtdM Ltd C LtdC Ltd


AEAE

Out of India

Post Merger

In India

C LtdC Ltd

K LtdK Ltd

M LtdM LtdApril to Dec

April to Dec

April to March

Form 3CEB filed by the entities are revised

Form 3CEB filed by the entities are revised

• No specific provisions in the Income tax Act for revision of Form 3CEB

• Guidance Note silent on this

• No legal precedent

• Revision of Form 3CEB – transaction affects the income reported in the Return of Income – Section 139 (5)


• Transaction not disclosed

• Wrong amount has been disclosed

• Wrong AE details have been disclosed

• Original 3CEB based on unaudited financials and the revised 3CEB is based on audited financials


Some examples



Form 3CEB Clauses


Form 3CEB Flow

Recent Developments




•Information and Documents maintained in the Study Report

•Ownership Structure

•Details of Associated Enterprises and international transactions with the

associated enterprises

•Segmental Financials of the Company

•Confirmation on foreign currency disclosures

•Confirmation on re - imbursements of expenses


Form 3CEB Clauses

Form 3CEB Flow

Recent developments





Filing Requirements – US and UK

•Filing of Form 5471 and 5472•Copy of CSA Statement filed

US

UK •None Specified

Filing Requirements – Western Europe

•Disclose details of RPT in forms filed for returnsSpain

•Returns include one question whether any RPT Netherlands

•State whether TP document maintained•Total amount of all RPTItaly

•NoneGermany

•NoneFrance

Filing Requirements – Asia

•Transactions with related party to be disclosedMalaysia

•Form GCN-01/QLT to be filed •Form to be filed within 90 days from year end

Vietnam

•No disclosureThailand

•3A Identity of related party and transaction detail •3A-1 Existence of study to support ALP

Indonesia

Thank you

09 accountants report ca. vaishali mane 100811 i - wirc andheril

Documents

management

transaction

xyz corporation

gemplus india

amp expenditure

arms length

interest free

purchase sale