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TMI BlogRevised and Updated Guidance for Implementation of Transfer Pricing ProvisionsX X X X Extracts X X X X X X X X Extracts X X X X ..... 02-2003 and have seen a number of amendments over the years, including the insertion of Safe Harbour and Advance Pricing Agreement provisions and the extension of the applicability of transfer pricing provisions to Specified Domestic Transactions. 2. In terms of the provisions, any income arising from an international transaction or specified domestic transaction between two or more associated enterprises shall be computed having regard to the Arm's Length Price. Instruction No. 3 was issued on 20th May, 2003 to provide guidance to the Transfer Pricing Officers and the Assessing Officers to operationalise the transfer pricing provisions and to have procedural uniformity. Due to a number of legislative, procedural and structu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (4) of Section 92CA of the Act . 3.2 In order to make a reference to the TPO, the AO has to first satisfy himself that the taxpayer has entered into an international transaction with an associated enterprise. One of the sources from which the factual information regarding international transaction can be gathered is Form No. 3CEB filed by the taxpayer, which is in the nature of an accountant's report containing basic details of an international transaction entered into by the taxpayer during the year and the associated enterprise with which such transaction is entered into, the nature of documents maintained and the method followed. Thus, the primary details regarding such international transactions would normally be ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the taxpayer. In all the above situations, the AO must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise. 3.3 The exercise of finding out whether any income arises and/or is affected or potentially arises and/or is potentially affected by the determination of the ALP of the international transaction would certainly be a factor, in addition to other factors, in determining whether or not it is necessary or expedient to refer the matter to the TPO. In case no objection is raised by the taxpayer to the applicability of Chapter X [ Sections 92 to 92F ] of the Act , then the prima-facie view of the AO would be sufficient before referring the international transaction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of all international transactions. The only exception to this would be a case selected for scrutiny on non-TP parameters where the AO comes to know that the taxpayer has entered into international transaction or transactions but the taxpayer has either not filed the Accountant's report under Section 92E or has not disclosed the said international transaction or transactions in the Accountant's report filed. In such exceptional situations, the AO may refer the matter to the TPO after providing an opportunity of being heard to the taxpayer. 3.6 Since the case will be selected for scrutiny before making the reference to the TPO, the AO may proceed to examine other aspects of the case during the pendency of assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him, shall determine the ALP and pass a speaking order. The TPO, being an Additional/Joint CIT, shall obtain the approval of the jurisdictional CIT (Transfer Pricing) before passing the order. On the other hand, the TPO, being a Deputy/ Assistant CIT, shall obtain the approval of the jurisdictional Additional/Joint CIT before passing the order. The jurisdictional CIT (TP) should assign a limited number of important and complex cases, not exceeding 50, to the Additional/Joint CsIT(TPOs) working in the same jurisdiction. For the selection of such important and complex cases by the CsIT(TP), the concerned CCsIT(International Taxation) shall frame appropriate guidelines. 4.2 The order passed by the TPO should contain details of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assesse having regard to the ALP determined by him under sub-section (3) of the same Section. Where the determination of ALP is done by the TPO under sub-section (3) of Section 92CA of the Act , the AO has to compute the total income of the assessee under sub-section (4) of Section 92C (read with sub-section (4) of Section 92CA ) in conformity with the ALP so determined by the TPO. 6. Maintenance of Data Base It is to be ensured by the CIT (Transfer Pricing) that the references received from the AOs by the TPOs in his jurisdiction are dealt with expeditiously and accurate record of all events connected with the whole process of determination of ALP is maintained. This record is to be maintained by each TPO in the format ..... X X X X Extracts X X X X X X X X Extracts X X X X
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