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TMI BlogManner of determination of fair market value and reporting requirement for Indian concern-Indirect transfer provisions-section 9(1) of the Income-tax Act, 1961-Draft RuleX X X X Extracts X X X X X X X X Extracts X X X X ..... it value substantially from assets located in India, if fair market value (FMV) of assets located in India comprise at least 50% of the FMV of total assets of the company or entity. The computation of FMV of Indian and global assets is to be in the prescribed manner. 3. Further, section 285A of the Act mandates reporting requirement on the Indian concern through or in which the foreign company or entity holds the assets in India. The information to be furnished and its manner is also required to be prescribed. 4. Therefore, the manner of computation of FMV of assets of the foreign company or entity and the reporting requirement by the Indian concern are proposed to be provided through the amendments of the Income-tax Rules, 1962 . The draft rules and forms, on which comments and suggestion of stakeholders and general public on the draft rules and forms as above may be sent electronically by 29th May, 2016 at the email address, [email protected] in this regard, are as under: 11UB : Fair market value of assets in certain cases (1) The fair market value of assets (tangible and intangible) as on the specified date, held directly or indirectly by a company or an entity re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) and (4) shall be estimated to be the price it would fetch if sold in the open market on the specified date as determined by a report from a merchant banker or an accountant as increased by the liability, if any, considered in such estimation. (6) The fair market value of all the assets of the foreign company or the entity shall be determined in the following manner, namely:- (i) Where the transfer of share of, or interest in, the foreign company or entity is between persons who are not associated persons and the consideration for transfer of share or interest is determined on the basis of a report prepared by an accountant or merchant banker of international repute, then the fair market value of all the assets of the foreign company or the entity shall be the value determined in such report as increased by the aggregate amount of liabilities, if any, that have been reduced for computing the value of assets for determination of such consideration; (ii) In any other case, - (a) Where, as on the specified date, the share of the foreign company or entity is listed on a stock exchange, the fair market value of all the assets owned by the foreign company or entity sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of equity shares/members interest. (iv) specified date shall have the meaning as assigned to it in clause (d) of Explanation 6 to clause (i) of subsection (1) of section 9; (v) the terms accountant , merchant banker and recognised stock exchange shall have the meaning as assigned to them in rule 11U ; (vi) balance sheet ,- (a) in relation to an Indian company, means the balance-sheet of such company (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date which has been audited by the auditor of the company appointed under the laws relating to companies in force and where the balance-sheet on the specified date is not drawn up, the balance-sheet (including the notes annexed thereto and forming part of the accounts) drawn up as on a date immediately preceding the specified date which has been approved and adopted in the annual general meeting of the shareholders of the company; (b) in any other case, means the balance-sheet of the company or entity (including the notes annexed thereto and forming part of the accounts) as drawn up on the specified date or as drawn up on a date immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company or entity incorporated outside India (hereafter referred to as foreign company or entity ) referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9 has taken place: Provided that where the transaction in respect of the share or the interest had the effect of directly or indirectly transferring the right of management or control in relation to the Indian concern, the information shall be furnished in the said form within thirty days of the transaction. (3) The Indian concern shall maintain the following (an English translation has to be prepared if the documents originally prepared are in foreign languages) and produce the same when called upon to do so by any income-tax authority in the course of any proceeding to substantiate the information furnished under sub-rule (2), namely: - (i) details of the immediate holding company or entity, intermediate holding company or companies or entity or entities and ultimate holding company or the entity of the Indian concern; (ii) details of other entities in India of the group of which the Indian concern is a constituent ; (iii) the holding structure of the shares of, or the interest in, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (ii) intermediate holding company or entity means a company or an entity that has controlling interest in another company or entity and is itself controlled by or is subsidiary of another company or entity; (iii) immediate holding company or the entity means the company or entity that directly maintains the controlling interest in the Indian concern . 5. The following Forms are proposed to be provided: (A) FORM NO. 3CT [See rule 11UC] Income attributable to assets located in India under section 9 of the Income-tax Act, 1961 * I/We have examined the accounts and records of M/s ** (name and address of the assessee) having PAN .. being transferor of the share of, or interest in, ..(name of company or entity incorporated outside India)# referred to in Explanation 5 to clause (i) of sub-section (1) of section 9 during the previous year ended on .. * I/We have obtained all the information and explanations which to the best of my/our * knowledge and belief were necessary for the purposes of ascertaining the income of the said assessee attributable to the assets located in India . * I/We certify that in respect of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) Name (b) Country of incorporation (c) Country of which it is tax resident (B) Intermediate holding entity: - (a) Name (b) Country of incorporation (c) Country of which it is tax resident (C) Ultimate holding entity: - (a) Name (b) Country of incorporation (c) Country of which it is tax resident 8. (a) Whether share of, or interest in, any company or entity derives its value substantially from assets located in India, which are held in or through, the Indian concern; (b) If yes, give details of the company (ies) or entity (ies). Yes/No PART B [To be filled in to report the transaction resulting in transfer of right of management or control] 9. Whether any transaction in respect of share of, or interest in, any company or entity referred to in 8 has the effect of transferring the right of management or control over the Indian concern. If yes give details. (i). Name of the company or entity (ii). Details of the transactions including consideration for such transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... _/__ If No ,- (a) reason for not furnishing the Form 49D (b) furnish the following details: (i). Holding chart in respect of shares of, or interest in, the company or entity before and after the transfer (ii). Financial and accounting statements of the company or entity (iii). Basis of determining location of share of, or interest in, the company or entity (iv). Value and breakup of assets of the Indian concern immediately before the date of transfer Yes/No Yes/No 12. Value and breakup of assets of the Indian concern, - (i). at the beginning of the year (ii). at the end of the year 13. Basis of valuation of assets referred to in items 10(v), 11(b) (iii) and (iv) and 12. 14. Details of supporting documents in respect of items 10(v), 11(b)(iii) and (iv) and 12. - Circular - Trade Notice - Public Notice - Instructions - Office orders Tax Management India - taxmanagementindia - taxmanagement - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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