Section 92 of the Income Tax Act, 1961, deals with regulations of transfer pricing in India. It is a practice of determining the price of the transactions between associate enterprises and computation of Income from International transaction at Arm’s Length Price. This section has significant implications for Multi National Enterprises (MNE) operating in India and also on Specified Domestic Transaction (SDT).
Section 92E (Audit under Transfer Pricing):
Every person who has entered into an international transaction (IT) or specified domestic transaction (SDT) during a previous year shall obtain a report from an accountant (Chartered Accountant) and furnish such report on or before the “specified date” in the prescribed form (3CBE) duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed.
Prescribed form for report from accountant is Form No. 3CEB. Under proviso to rule 12(2) audit report shall be furnished electronically.
“Specified date” means the date one month prior to the due date for furnishing the return of income under sub-section (1) of section 139 for the relevant assessment year.[Section 92F(iv)] As due date for ITR in transfer pricing cases is 30th November of the relevant assessment year, specified date is 31St October. Report from accountant (CA) will have to be furnished on or before 31st October of relevant assessment year in Form 3CEB.
PENALTY ON ASSESSEE FOR FAILURE TO FURNISH REPORT UNDER SECTION 192E [SECTION 271BA]
If any person fails to furnish a report from an accountant as required by section 92E, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees ie.Rs.1,00,000.
PENALTY ON AUDITOR FOR FURNISHING INCORRECT INFORMATION IN REPORTS OR CERTIFICATES
Section 271J of the Act provides for Penalty for furnishing incorrect information in reports or certificates. Section 271J provides that where the Assessing Officer or the Commissioner (Appeals), in the course of any proceedings under the Income Tax Act, 1961, finds that an accountant has furnished incorrect information in any report or certificate furnished under any provision of Income Tax Act or the rules made thereunder, the Assessing Officer or the Commissioner (Appeals) [or Joint Commissioner (Appeals) may direct that such accountant (CA), shall pay, by way of penalty, a sum of Rs. 10,000 for each such report or certificate.
HOW TO FILE FORM 3CEB:
Form 3CEB can be filed online by following these easy steps
Step 1: You need to avail the services of a Chartered Accountant (CA) who will audit the business transactions. For this log in to your e-Filling portal account, navigate to the ‘My Chartered Accountants’ page and add a CA authorised by you.
Step 2: Once you select a CA from the list, you must assign Form 3CEB to him/her. You can assign the form by selecting the CA’s name, selecting the filing type and entering the assessment year.
Step 3: Once the form has been successfully assigned, the CA can find it in his/her work list in the ‘For Your Action’ section. He/she can either accept or reject the assignment. If the assigned CA rejects it, you must reassign the form.
Step 4: If the CA accepts the task, he will fill in all the necessary details in the form after proper assessment and auditing.
Step 5: Once done, you can find the form uploaded by the CA in the Taxpayer’s work list. You can click the ‘For Your Action’ button and find the form marked ‘Pending for Acceptance’. You can either accept or reject it after reviewing the form. Once you approve it, Form 3CEB will be filed.
Form 3CEB comprises three parts – Part A, Part B and Part C.
Part A contains basic details that need to be filled up.
Part B have a lot of information related to international transactions must be provided. It includes information about associate enterprises, nature and particulars of transactions.
Part C of the form is solely dedicated to specified domestic transactions. While Part B focuses on international transactions, Part C is on engagements with domestic enterprises.
As per Section 92E of the Income Tax Act, which relates to international transactions and specified domestic transactions, filing Form 3CEB is mandatory for companies who are engaged in foreign or domestic business with associated enterprises. Taxpayers must strictly follow the requirements listed in Form 3CEB; otherwise, there are penalty rules which might be enforced.