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TMI BlogStatutory Reporting & Penalties for persons entering into international and specified domestic transactions : Clause 172 of the Income Tax Bill, 2025 Vs. Section 92E of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... tain and furnish a report from an accountant. This clause, situated within the broader framework of special provisions relating to the avoidance of tax, signifies the legislature's continuing commitment to ensuring transparency, accountability, and compliance in cross-border and specified domestic dealings. The provision is substantially similar to the existing Section 92E of the Income-tax Act, 1961, which, along with Section 271BA and Rule 10E of the Income-tax Rules, 1962, forms the core of the Indian transfer pricing compliance regime. This commentary provides an in-depth analysis of Clause 172, its objectives, detailed provisions, practical implications, and a comparative evaluation with the extant legal framework, namely Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d compliance. The inclusion of "specified domestic transactions" (SDTs), following the amendments brought by the Finance Act, 2012, reflects a policy shift to extend transfer pricing compliance beyond cross-border dealings to certain high-value domestic transactions between related parties, thereby plugging potential loopholes in the domestic tax base. Detailed Analysis of Clause 172 of the Income Tax Bill, 2025 Key Elements * Applicability: The clause applies to "every person" who has entered into (a) an international transaction, or (b) a specified domestic transaction during a tax year. The language is broad and encompasses all categories of taxpayers-individuals, firms, companies, LLPs, etc.-engaged in such transactions. * Obliga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpact on Taxpayers The practical effect of Clause 172 is to impose a compliance burden on taxpayers engaged in international or specified domestic transactions. They must: * Maintain detailed documentation and records to facilitate the preparation of the accountant's report. * Engage a qualified accountant, usually a chartered accountant, to review, certify, and report on the transactions in the prescribed format. * Ensure timely submission of the report to avoid penal consequences. Compliance Requirements The requirement to furnish a report in the prescribed form (currently Form 3CEB u/r 10E) necessitates the disclosure of comprehensive details, including: * Nature and value of international/SDTs. * Relationship between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Form and particulars prescribed u/r 10E (Form 3CEB) Scope Substantially similar; covers both international and specified domestic transactions Substantially similar; covers both international and specified domestic transactions (SDT included w.e.f. 2013) The comparison reveals that Clause 172 is, in essence, a restatement of Section 92E, with minor drafting changes. The substitution of "tax year" for "previous year" is in line with the terminology used in the new Income Tax Bill, but does not alter the substance. Comparison with Section 271BA of the Income-tax Act, 1961 Section 271BA provides for a penalty of INR 1,00,000 in case of failure to furnish the report required u/s 92E. While Clause 172 itself does not stipulate the pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Enabling provision; details to be set out in rules Operational provision; sets out the exact form and particulars The new regime under Clause 172 is likely to continue with the same or a similar form and manner of verification, unless there is a policy decision to revise the reporting format. Key Issues, Ambiguities, and Potential Challenges 1. Definition and Scope of "Accountant" Both the current and proposed provisions refer to "an accountant," a term defined in Section 288(2) of the Income-tax Act, 1961, to mean a chartered accountant. The continued use of this term maintains the requirement for professional certification and accountability. 2. Prescribed Form and Particulars The clause leaves the form and particulars to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Increased compliance costs, particularly for entities with multiple or complex transactions. * Potential exposure to penalties and scrutiny in case of non-compliance or incomplete disclosures. * Enhanced need for robust transfer pricing documentation and internal controls. For Accountants * Greater responsibility and professional risk in certifying the accuracy and completeness of the report. * Need for specialized knowledge of transfer pricing regulations and evolving jurisprudence. * Exposure to disciplinary action in case of negligence or misrepresentation. For Tax Authorities * Availability of standardized and comprehensive information for risk assessment and audit selection. * Facilitation of targeted inquiries and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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