Accountant’s Report - SIRC

1 Accountant s Reportu/s. 92E of the Income Tax Act, 1961 CPE Study Circle Meeting at SIRC of ICAI12 November 2014 FinanceMinister sspeechontherationaleforintroducingTrans ferPricingRegulations Mr. Yashwant Sinha Finance Minister, Government of India February 28, 2001 Transfer Pricing Introduction in India TheFinanceAct, ,2001(fromAY2002-03).Rule10 Ato10 Ewithreferencethesesections92havebeennot ifiedsubsequently. TheprovisionsofChapterXasregardstransfer pricinghavebeenextendedbyFinanceAct,2012 tospecifieddomestictransaction(SDTs)with effectfromassessmentyear2013-14. CBDT hasissuedtheNotification#41dated10 June2013amendingtherelevantrulesandrevis ingtheAccountant (TP)coveringSpecifiedDomesticTransaction s(SDT).

2 TheAmendedIncomeTaxRules,hasbeenbroughtw itheffectfromthe1stofApril2013-Primarily ,thewords InternationalTransaction hasbeensubstitutedwith InternationaltransactionoraSpecifiedDome sticTransaction Transfer Pricing ProvisionLegislative FrameworkSection 92 International and Specified Domestic TransactionArms length Price -Section 92 CSix Methods-Rule 10B and 10 CDocumentation-Section 92 DFurnishing of factual information-Rule 10 DAccountant s Report -Section 92 ETrue and Correct-Rule 10 EAccountant s Report Section 92 ESection92E Everyperson whohasenteredintoaninternationaltransact ionorSDTduringapreviousyear shallobtainareportfromanaccountantandfur nishsuchreport

3 Onorbeforethespecifieddateintheprescribe dform dulysignedandverifiedintheprescribedmann erbysuchaccountant andsettingforthsuchparticularsasmaybepre scribedRule10 EThereportfromanaccountantrequiredtobefu rnishedundersection92 Ebyeverypersonwhohasenteredintoaninterna tionaltransactionorSDTduringapreviousyea r, Form No. 3 CEB entailed covering of International transactions with Associated Enterprises However Domestic Transfer Pricing was made applicable from assessment year 2013 -14 whereby the existing Form No. 3 CEB was revised to include Part C covering clauses 21 to 25 to capture data relating to specified domestic transactions (SDT) With the advent of the same, the term related party is also used along with the traditional term Associated Enterprise for addressing specified domestic transactionsForm 3 CEB EveryPerson-AppliestobothResidents&NonRe sidents(ForeignCompanies)-Branch,PE.

4 NoexemptionfromfilingForm3 CEB-Evenif,theAssesseehasenteredintointe rnationaltransactionsofINR1,Form3 CEBmustbefiled. ReportingofDomestictransactionsisapplica bleiftheaggregatevalueoftheSDTis>INR5cro re ThethresholdlimitforSDTcanbecomputedeith eronnetbasis( ,VAT,etc.)iftheassesseeisavailingcredito fthoseindirecttaxesorongrossbasisiftheas sesseeisnotavailingcredit,dependingupont hemethodofaccountingregularlyfollowed. Reportintheprescribedform Informationasrequiredinrespectiveclauses mustbeprovided CanbeissuedbyStatutoryauditororanyotherC AinpracticeAccountants Report Sec 92E Preparedbyeveryperson/enterpriseentering intoaninternationaltransactionorSDTwithA E/relatedparty Tobefiledbytheduedateforfilingreturnofin come Opinionastowhetherprescribeddocumentshav ebeenmaintainedandtheparticularsintherep ortare trueandcorrect AnimportantdocumentfortheAssessingOffice r Containssummaryofinternationaltransactio ns/SDTs; Containsdetailsoftaxpayer.

5 ContainsmethodemployedtodetermineALP DigitalSignature,Name,Membershipnumber,D ate,FirmNameandRegistrationnumberForm No. 3 CEB [See rule 10E] Report from an accountant to be furnished undersection 92E relating to international transaction(s) or specified domestic transaction(s) <<nameoftheentity>>,withitsregisteredofficeat<<insertaddress>>havingPermanentAccountNumber<<XXX>>thathavebeenmadeavailabletousrelatingto theinternationaltransaction(s)orspecifie ddomestictransaction(s) (s)orspecifieddomestictransaction(s) ,theparticularsgivenintheAnnexure,asread withnotesappendedthereto, :_____Date : _____For XXXX Chartered AccountantsMembership NumberFeatures of Form 3 CEBPara 1*I/we have examined the accounts and records of.

6 (name and address of the assessee with PAN) relating to the international transactions and specified domestic transactions entered into by the assessee during the previous year ending on 31st March, .. where books/ accounts of foreign companies are not available ?2. Reliance on the statutory audited results in case you are not the statutory auditor. For the purpose of this Report we have relied upon the accounts of the assessee for the year ended 31 March 2014 audited by <<insert name of the auditors>> vide their audit Report dated <<insert date>>. 3. Reliance on management prepared accounts in case of different statutory year of Form 3 CEBPara 2In *my/our opinion proper information and documents as are prescribed have been kept by the assessee in respect of the international transactions and the specified domestic transactions entered into so far as appears from *my/our examination of the records of the assessee.

7 Signing the Form 3ceb, needs to check whether proper documentation maintained requirement prescribed in Sec 92 D read with Rule 10 from preparing detailed documentation, if the international transaction value less than INR 1 crores -However, the Assessee must maintain documents to justify ALP. onus on auditor to satisfy whether adequate / appropriate documentation maintained --If any required document is not maintained, the Accountant should qualify the Report or disclose the and Documentation, if SDT exceeds INR 5 crores Features of Form 3 CEBPara 3 The particulars required to be furnished under section 92E are given in the Annexure to this Form.

8 In *my/our opinion and to the best of my/our information and according to the explanations given to *me/us, the particulars given in the Annexure are true and correct and correct v/s True and fair -Emphasis on factual companies disclose the incapacity to gather all information the scope of work and review procedures to extent certified by him in Form 3 CEB appropriate method -Para of the revised GN International Transaction Section 92 BInternational TransactionsTangible PropertyPurchase, Sale, Transfer, Lease /Use of property/article/ product/ thingIncludes Building, Vehicle, machinery propertyPurchase, Sale, Transfer, Lease/Use of IPIncludes Transfer of ownership/use of rights/other commercial rightMarketing IntangiblesCapital FinancingLong/short term borrowing/lendingGuaranteePurchase/Sale SecuritiesAdvances/ receivables.

9 Payments/any debt of servicesMarket Research/ DevelopmentTechnical ServiceScientific ResearchLegal/ Accounting Service restructuringTransaction of Business restructuring/reorganization with AE irrespective of bearing profit/income/loss or assets at the time of transaction/future dateSpecified Domestic Transactions Section 92 BASpecified domestic transactionsAny expenditure in respect of which payment has been made or is to be made to a person referred in clause (b) of subsection 2 of 40 AAny transaction referred to in section 80 AAny transfer of goods or services referred to in subsection (8) of section 80-IAAny business transacted between assessee and other person as referred to in subsection (10) of section 80-IAAny transaction referred to in any other section under Chapter VIA or section 10AA to which subsection (8) or (10) of section 80-IA applies Any other transaction as may be prescribedThe New Form 3 CEB VidetheNotification,theGovernmenthasnoti fiedthenewForm3 CEB,aspartofAppendix IIofthePrimaryRules.

10 The3 CEB,erstwhilewith13clausesforinternaltra nsactionshasnowbeenreplacedwithanewform, with25clauses: Further, , 3 CEBPart A General Information9 Clauses (01-09)Part B International Transactions11 Clauses (10-20)Part C Specified Domestic Transactions5 Clauses (21-25)Annexure to Form No. 3 CEB A GlimpseAnnexure to Form No. 3 CEBPARTAC lausesDescriptionClause 1: Name of assessee FullandcompletenameIncaseofchangeinname, writebothnewandoldnameClause 2: AddressIncaseofforeigncompany,providefor eignaddressClause 3: PANP ermanentAccountNumberClause 4: Nature of business or activities of the assesseeCodefornatureofbusinesstobefille dinasperinstructionsforfilingFormITR6 Clause 5: StatusReferstothepersondefinedunderSecti on2(31) 6: Previous Year ended31 March2014 Clause 7: Assessment year2014-15 Clause 8: Aggregatevalue of international transactionsReferstovalueoftransactionsa sperbooksofaccountsClause 9.