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GUIDANCE NOTE ON REPORT UNDER SECTION 92E INCOME-TAX ACT, 1961 ( Transfer Pricing )

GUIDANCE NOTE ON REPORT UNDER SECTION 92E INCOME-TAX ACT, 1961 ( Transfer Pricing )

Section 92E Income Tax Act : Guidance Notes’ are primarily designed to provide guidance to members on matters which may arise in the course of their professional work and on which they may desire assistance in resolving issues which may pose difficulty. Guidance Notes are re commendatory in nature. A member should ordinarily follow recommendations in a guidance note relating to an auditing matter except where he is satisfied that in the circumstances of the case, it may not be necessary to do so. Similarly, while discharging his attest function, a member should examine whether the recommendations in a guidance note relating to an accounting matter have been followed or not. If the same have not been followed, the member should consider whether keeping in view the circumstances of the case, a disclosure in his report is necessary”. We provides Guidance note on reports under section 92E Income tax act, 1961 ( Transfer Pricing ) particular downloads  pdf books  in last paragraph download and read well,,,,

Section 92E Income Tax Act

Section 92E Income Tax Act

Recommended Read :  Transfer Pricing under Income Tax Act 1961

GUIDANCE NOTE ON REPORT UNDER SECTION 92E INCOME-TAX ACT, 1961 ( Transfer Pricing ) 

ICAI Guidance Note on report under section 92E has been divided under nine chapters as under:

 1. Chapter 1 – Introduction
 2. Chapter 2 – Responsibility of an enterprise and the Accountant
Chapter 3 – Associated Enterprise
Chapter 4 – International transaction
Chapter 4A – Specified Domestic Transactions
Chapter 5 – Arm’s Length Price
Chapter 6 – Methods of computation of arm’s length price
Chapter 7 – Documentation and verification
Chapter 8 – Penalties
Chapter 9 – Scope of examination under section 92E

1. Chapter 1 – Introduction

Legislative framework
Terms and abbreviations used
Objective of the guidance note
Applicability of the provisions

2. Chapter 2 – Responsibility of an enterprise and the Accountant

Responsibility of an enterprise
Accountant’s responsibility
Professional misconduct

Chapter 3 – Associated Enterprise

Associated enterprises and deemed associated Enterprises

Chapter 4 – International transaction

Definition
Impact of Amendment
Tangible and Intangible property
Services, finances and costs etc.
Cross-border transactions

Chapter 4A – Specified Domestic Transactions

Definition 47 Threshold Limit

Chapter 5 – Arm’s Length Price

Meaning and determination
Uncontrolled transaction
Comparable uncontrolled transactions
Distinctive nature of the property and services
Analysis of functions performed
Analysis of assets employed
Analysis of risks assumed
Characterisation
Tested party
Contractual terms
Market conditions
Business strategies, commercial considerations and economic principles
Power of Assessing Officer

Chapter 6 – Methods of computation of arm’s length price

Meaning of relevant terms
Comparable Uncontrolled Price Method
Resale Price Method
Cost Plus Method
Profit split method
Transactional net margin method
Other Method of determination of arm’s length price
Most appropriate method

Chapter 7 – Documentation and verification

Types of information and documents
Ownership, profile and business
Details of international transactions
Records having a bearing on international transaction
Description of methods considered and working Thereof
Relief from maintenance of specific records
Supporting documents
Contemporaneity of data

Chapter 8 – Penalties

Penalty for concealment of income or furnishing inaccurate particulars thereof
Penalty for under reporting and misreporting of income
Penalty for failure to keep and maintain information and documents in respect of international transaction or specified domestic transaction
Penalty for failure to furnish report under section 92E
Penalty for failure to furnish information or document under section 92D
Penalty for failure to furnish information or documents under Section 286

Chapter 9 – Scope of examination under section 92E

Report under section 92E
Annexure to Form No.3CEB

Section 92E Income Tax Act : Dear Member and Student It gives me immense pleasure to inform you that ICAI has released the 4th Edition of the Guidance Note on Report under Section 92E of the Income Tax Act 1961. Under this Guidance note, Chapter 4A related to Specified Domestic Transaction mentioned that if and when a new revised format of Form No. 3CEB is notified, contents of this Guidance Note may need to be reviewed, and an addendum issued, or separate or amended Guidance Note issued. Subsequent to this, there is a change in Form No. 3CEB for reporting International Transactions between Associated Enterprises.

Section 92E Income Tax Act :  Further Part C of 3CEB has been inserted to report Specified Domestic Transactions u/s 92 BA. Therefore, urgent need to update the third edition of Guidance Note was widely felt. The Guidance Note is mainly revised to give guidance to the members for reporting the transaction between Associated Enterprises u/s 92E of Income Tax Act, 1961.

Recommended Read : income tax act 1961 Section 44AB

GUIDANCE NOTE ON REPORT UNDER SECTION 92E INCOME-TAX ACT, 1961 ( Transfer Pricing ) 

Section 92E Income Tax Act : The law relating to transfer pricing is dynamic and the members of the Institute are getting acquainted with the practical implications of the law and the rules relating to transfer pricing. The Finance Act, 2012 has made major Amendments such as Advance Pricing Agreement (APA), Specified Domestic Transaction, Expansion of TPO Power etc.
Section 92E Income Tax Act : Guidance has been introduced with regard to how the accountant should exercise due diligence while inspecting international transactions in view of the increased scope of the definition of International Transactions. Therefore, the Committee on International Taxation decided to bring out this revised edition Guidance Note on Report under Section 92E of the Income Tax Act, 1961 (Transfer Pricing) for its members.
The legal, Financial and accounting aspects relating transfer pricing are highly complex and have global ramifications. It is indeed a matter of honour to chartered accountants who have been given the onerous responsibility of reporting on International as well as specified domestic transactions. I am sure that the members will discharge this responsibility to the satisfaction of the government.

GUIDANCE NOTE ON REPORT UNDER SECTION 92E INCOME-TAX ACT, 1961 ( Transfer Pricing ) 

Legislative Framework

Section 92E Income Tax Act : I an era of liberalisation and globalisation of trade and investment and the emergence of e-commerce, the perceptible results have been – increase in the number of cross-border transactions, the complexity, speed and lack of transparency with which global business can be transacted. There is a general belief that multi-national corporations, in an effort to manage and minimise their global tax outflows, have employed creative transfer pricing approaches in the context of flow of goods, services, funds, intangibles, etc.
Section 92E Income Tax Act :  When increase in the number of cross-border transactions are entered into between independent enterprises, the consideration therefore is determined by market forces. However, when associated enterprises deal with each other, it is possible that the commercial and financial aspects of the transactions are not influenced by external market forces but are determined based on internal factors. In such a situation, when the transfer price agreed between the associated enterprises does not reflect market forces and the arm’s length principle, the profit arising from the transactions, the consequent tax liabilities of the associated enterprises and the tax revenue of the host countries could be distorted.

 Recommended Read : Assessment procedure under Income tax Act – 1961

Section 92E Income Tax Act :  The existence of different tax rates and rules in different countries offers a potential incentive to multinational enterprises to manipulate their transfer prices to recognise lower profit in countries with higher tax rates and vice versa. This can reduce the aggregate tax payable by the multinational groups and increase the after tax returns available for distribution to shareholders.

Recommended Read : Best Judgement Procedures Under Income Tax Act 1961

Section 92E Income Tax Act : In India, the Act had hitherto not dealt with this problem in a detailed manner. The erstwhile section 92 sought to determine the amount of profits which may reasonably be deemed to have been derived from a business carried on between a resident and a non-resident which, owing to the close connection between them is so arranged that it produced, to the resident, either no profits or less than the ordinary profits which might be expected to arise in that business.
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