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TMI BlogIncome-tax (16th Amendment), Rules, 2013.X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and development producing new theorems and algorithms in the field of theoretical computer science; (ii) development of information technology at the level of operating systems, programming languages, data management, communications software and software development tools; (iii) development of Internet technology; (iv) research into methods of designing, developing, deploying or maintaining software; (v) software development that produces advances in generic approaches for capturing, transmitting, storing, retrieving, manipulating or displaying information; (vi) experimental development aimed at filling technology knowledge gaps as necessary to develop a software programme or system; (vii) research and development on software tools or technologies in specialised areas of computing (image processing, geographic data presentation, character recognition, artificial intelligence and such other areas) ;or (viii) upgradation of existing products where source code has been made available by the principal; (b) "core auto components" means,- (i) engine and engine parts, including piston and piston rings, engine valves and parts cooling systems and parts and power trai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on technology requiring application of knowledge and advanced analytical and technical skills, namely:- (i) geographic information system; (ii) human resources services; (iii) engineering and design services; (iv) animation or content development and management; (v) business analytics; (vi) financial analytics; or (vii) market research, but does not include any research and development services whether or not in the nature of contract research and development services; (h) "non-core auto components" mean auto components other than core auto components; (i) "no tax or low tax country or territory" means a country or territory in which the maximum rate of income-tax is less than fifteen per cent.; (j) "operating expense" means the costs incurred in the previous year by the assessee in relation to the international transaction during the course of its normal operations including depreciation and amortisation expenses relating to the assets used by the assessee, but not including the following, namely:- (i) interest expense; (ii) provision for unascertained liabilities; (iii) pre-operating expenses; (iv) loss arising on account of foreign currency fluctuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, with insignificant risk, to a foreign principal; or (vi) is engaged in the manufacture and export of core or non-core auto components and where ninety per cent. or more of total turnover during the relevant previous year is in the nature of original equipment manufacturer sales. (2) For the purposes of identifying an eligible assessee, with insignificant risk, referred to in item (i) of sub-rule (1) , the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall have regard to the following factors, namely:- (a) the foreign principal performs most of the economically significant functions involved, including the critical functions such as conceptualisation 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; (b) the capital and funds and other economically significant assets including the intangibles required, are provided by the foreign principal or its other associated enterprises, and the eligible assessee is only provided a remuneration for the work carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignificant realised 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; (e) the eligible assessee has no ownership right, legal or economic, on the outcome of the research which vests with the foreign principal and is evident from the contract as well as the conduct of the parties. 10TC. Eligible international transaction.-'Eligible international transaction' means an international transaction between the eligible assessee and its associated enterprise, either or both of whom are non-resident, and which comprises of: (i) provision of software development services; (ii) provision of information technology enabled services; (iii) provision of knowledge process outsourcing services; (iv) advance of intra-group loan; (v) provision of corporate guarantee, where the amount guaranteed,- (a) does not exceed one hundred crore rupees; or (b) exceeds one hundred crore rupees, and the credit rating of the associated enterprise, done by an agency registered with the Securities and Exchange Board of India, is of the adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible international transaction in relation to operating expense is not less than 25 per cent.. 4. Advancing of intra-group loans referred to in item (iv) of rule The Interest rate declared in relation to the eligible international transaction is not less 10TC where the amount of loan does not exceed fifty crore rupees. than the base rate of State Bank of India as on 30th June of the relevant previous year plus 150 basis points. 5. Advancing of intra-group loans referred to in item (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 not less than the base rate of State Bank of India as on 30th June of the relevant previous year plus 300 basis points. 6. Providing corporate guarantee referred to in sub-item (a) of item (v) of rule 10TC. The commission or fee declared in relation to the eligible international transaction is at the rate not less than 2 per cent. per annum on the amount guaranteed. 7. Providing corporate guarantee referred to in sub-item (b) of item (v) of rule 10TC. The commission or fee declared in relation to the eligible international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for the relevant assessment year or the first of the relevant assessment years, as the case may be, is furnished by the assessee on or before the date of furnishing of Form 3CEFA. (2) The option for safe harbour validly exercised shall continue to remain in force for the period specified in Form 3CEFA or a period of five years whichever is less: Provided that the assessee shall, in respect of the assessment year or years following the initial assessment year, furnish a statement to the Assessing Officer before furnishing return of income of that year, providing details of eligible transactions, their quantum and the profit margins or the rate of interest or commission shown: Provided further that an option for safe harbour shall not remain in force in respect of any assessment year following the initial assessment year, if - (i) the option is held to be invalid for the relevant assessment year by the Transfer Pricing Officer under sub-rule (11) or by the Commissioner under sub-rule (8) in respect of an objection filed by the assessee against the order of the Transfer Pricing Officer under sub-rule (11) , as the case may be; or (ii) the eligible assessee opts out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the validity or otherwise of the option exercised by the assessee and cause a copy of the said order to be served on the assessee and the Assessing Officer. (9) In a case where option exercised by the assessee has been held to be valid, the Assessing officer shall proceed to verify whether the transfer price declared by the assessee in respect of the relevant eligible international transactions is in accordance with the circumstances specified in sub-rule of rule 10 TD and, if it is not in accordance with the said circumstances, the Assessing Officer shall adopt the operating profit margin or rate of interest or commission specified in sub-rule of rule 10TD. (10) Where the facts and circumstances on the basis of which the option exercised by the assessee was held to be valid have changed and the Assessing Officer has reason to doubt the eligibility of an assessee or the international transaction for any assessment year other than the initial Assessment Year falling within the period for which the option was exercised by the assessee, he shall make a reference to the Transfer Pricing Officer for determination of eligibility of the assessee or the international transaction or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Pricing Officer or the Commissioner, as the case may be, does not make a reference or pass an order, as the case may be, within the time specified in sub-rule (14) , then the option for safe harbour exercised by the assessee shall be treated as valid. 10TF. Safe harbour rules not to apply in certain cases.- Nothing contained in rules 10TA, 10TB, 10TC, 10TD or 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. 10TG. Mutual Agreement Procedure not to apply.- 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 specified territory outside India as referred to in sections 90 or 90A.'; (B) in Appendix II, after Form No. 3CEF, the following shall be inserted, namely:- "Form No. 3CEFA (See sub-rule (1) of rule 10 …) Application for Op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 3. Hastheeligible assessee entered intoany international transaction in respect of the provision of knowledge processes outsourcing services referred to in item (iii) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises withwhomtheeligible 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) Descriptionof theeligible international transaction (e) Amount received for the services provided (f) Operatingprofit margin inrelation to operating expense declared. (g) Whether transfer price is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 4. Has the eligible assessee advanced intra-group loans as referred to in item (iv) of rule 10TC?If Yes, provide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical drugs as referred to in item (vii) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated 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) Descriptionof the eligible international transaction. (e) Amount received for the services provided. (f) Operatingprofitmargininrelation to operating expense declared. (g) Whether transfer price is in accordance with the circumstance specified under rule 10TD Yes/No Yes/No 8. 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*: (a) Nameandaddressoftheassociated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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