Special Provision in respect of transaction with person located in Notified Jurisdictional Area - Section 94A - International Taxation - Income Tax

Special Provision in respect of transaction with person located in Notified Jurisdictional Area (NJA) - Section 94A Purpose - The Central Government may, having regard to the lack of effective exchange of information with any country or territory outside India, specify by notification in the Official Gazette such country or territory as a notified jurisdictional area in relation to transactions entered into by any assessee. Note - Clarification on removal of Cyprus from the list of notified jurisdictional areas under section 94A. [ Circular no. 15/2017 , dated 21.04.2017 ] If an Assessee enters into transaction with any person located in NJA then: all the parties to the transaction shall be deemed to be associated enterprises within the meaning of section 92A ; Such transaction may be in the nature of purchase, sale or lease of tangible or intangible property or provision of service or lending or borrowing money or any other transaction having a bearing on the profits, income, losses or assets of the assessee including a mutual agreement or arrangement for 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 by or to the assessee shall be deemed to be an international transaction within the meaning of section 92B , Person Includes: Person located in NJA shall include a person who is a resident of NJA and a person not being an Individual, which is established in the NJA, it would also include a permanent establishment of any other person in NJA. Authorisation: Payments made to any financial institution located in NJA would not be allowed as deduction unless the assessee authorizes the CBDT or any other Income-Tax authority acting in behalf seeking relevant information from financial institution on behalf of the assessee. Maintenances of Documents : No deduction in respect of any other expenditure or allowance (including depreciation) arising from the transaction with a person located in a NJA shall be allowed under any other provision of this Act, unless the assessee maintains such other documents and furnishes such information as may be prescribed (i.e. Rule 21AC) , in this behalf. Furnishing of authorisation and maintenance of documents etc. for the purposes of section 94A [ Rule 21AC ] Furnishing Authorisation Form (1) For the purposes of section 94A(3)(a) , the authorisation to be submitted by the assessee, shall be in Form No.10FC . (2) The assessee shall cause the first copy of the duly filled Form No.10FC to be deposited with or transmitted to the financial institution referred to in section 94A(3)(a) . (3) The second copy of the Form No.10FC along with the evidence of the first copy of said Form having been deposited or transmitted to the financial institution shall be submitted by the assessee to the Assessing Officer having jurisdiction over him (4) For the purpose of ensuring that the authorisation in Form No.10FC is legally enforceable, the assessee shall take all necessary steps as are required under any law for the time being in force in India or outside India. Documents maintained by specified person required in addition to specified under rule 10D(1) (5) For the purposes of section 94A(3)(b) , the assessee who has entered into a transaction with a person located in a notified jurisdictional area (hereinafter referred to as the specified person) shall, in addition to information and documents referred to in rule 10D(1) , keep and maintain the following information and documents, namely:- (a) a description of the ownership structure of the specified person, including name and address of individuals or other entities, whether located in the notified jurisdictional area or outside, having directly or indirectly more than ten per cent. shareholding or ownership interests; (b) a profile of the multinational group of which the specified person is a part along with the name, address, legal status and country of tax residence of each of the enterprises comprised in the group with whom the assessee has entered into a transaction, and ownership linkage among them; (c) a broad description of the business of the specified person and the industry it operates in; (d) any other information, data or document, which may be relevant for the transaction with the specified person. Retention period of Document specified under rule 21AC( (6) The information and documents specified in rule 21AC(5) shall be for the period upto the due date of filing of return of income under section 139(1) . (7) The information and documents specified in rule 21AC(5) shall be kept and maintained for a period of eight years from the end of the relevant assessment year. Proper Explanation required: Where, in any previous year, the assessee has received or credited any sum from any person located in a NJA area and the assessee does not offer any explanation about the source of the said sum in the hands of such person or in the hands of the beneficial owner (if such person is not the beneficial owner of the said sum) or the explanation offered by the assessee, in the opinion of the AO, is not satisfactory, then, such sum shall be deemed to be the income of the assessee for that previous year. Rate of TDS: If any payment made to person located in NJA the TDS to be deducted from such payments at the rate or rates in force; at the rate specified in the relevant provisions of this Act; at the rate of 30%.