Applicability of Section 144C: Reference to dispute resolution panel for Transfer Pricing

Procedure and time limit for reference of Assessment Order to dispute resolution panel for order related to the Transfer Pricing.

CIRCULAR No.09/2013 [File No.142/20/2013-TPL] Dated Dated 19-11-2013

Sub: Clarification in respect of Circular No.5/2010–F.No.142/13/2010–SO (TPL) dated 03.06.2010- regarding.

Section 144C, providing for reference to Dispute Resolution Panel (DRP), was inserted in the Income-tax Act, 1961 by Finance (No.2) Act, 2009. Sub-section (1) of section 144C reads as under: “The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereinafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.” 2.

Explanatory Circular for Finance (No.2) Act, 2009 i.e. Circular No. 5 of 2010 dated 03.06.2010, in para 45 has explained the said new section 144C and the consequential amendments made in other sections of Income-tax Act. Para 45.5 of the Circular No.5/2010 dated 03.06.2010 reads as under:

“45.5 Applicability: These amendments have been made applicable with effect from 1st October, 2009 and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel Rules have been notified by S.O. No. 2958 (E) dated 20th November, 2009.”

In the above extracted Para 45.5 there has been an inadvertent error in stating the applicability of the provisions of section 144C inserted vide Finance (No.2) Act, 2009 that amendments will apply in relation to the assessment year 2010-11 and subsequent assessment years. Accordingly, para 45.5 is replaced with the following:

“45.5. Applicability: Section 144C has been inserted with effect from 1st April, 2009. Accordingly, the Assessing Officer is required to forward a draft assessment order to the eligible assessee, if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. In other words section 144C is applicable to any order which proposes to make variation in income or loss returned by an eligible assessee, on or after 1st October, 2009 irrespective of the assessment year to which it pertains. Amendments to other sections of the Income-tax Act referred to in para 45.3 of the circular 5/2010 dated 3rd June, 2010 shall also apply from 1st October, 2009”

Extension of Due Date of Furnishing of Electronic Tax Audit Report to 31st Oct 2013

Circular only relating to Electronic Furnishing of Tax Audit Report but Assesee has to furnish tax audit report to Assessing officer on or before due date.

F.No. 225/117/2013/ITA.II

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated- 26th September, 2013

Order under Section 119 of the Income-tax Act. 1961.

CBDT in exercise of power under sec 119(2)(a) of the IT Act, 1961 read with Sec 139 and Rule 12, has decided to relax the requirement of furnishing the Report of Audit electronically as prescribed under the proviso to sub-rule (2) of Rule 12 of the IT Rules for the Assessment Year 2013-14 as under-
(a) The assesses, who are presently finding it difficult to upload the prescribed Reports of Audit (as referred to above) in the system electronically may also furnish the same manually before the jurisdictional Assessing Officer within the prescribed due date.
(b) The said Report of Audit should however be furnished electronically on or before
31.10.2013.

Rohit Garg

Deputy-Secretary to Government of India

DISPUTE RESOLUTION PANEL (DRP) – REFERENCE TO – RECONSTITUTION OF DRP AT SPECIFIED AREAS OF JURISDICTION ORDER NO. 1/FT&TR/2013 [F.NO.500/15/2011-FT&TR-I], DATED 13-8-2013

SECTION 144C OF THE INCOME-TAX ACT, 1961 – DISPUTE RESOLUTION PANEL (DRP) – REFERENCE TO – RECONSTITUTION OF DRP AT SPECIFIED AREAS OF JURISDICTION

ORDER NO. 1/FT&TR/2013 [F.NO.500/15/2011-FT&TR-I], DATED 13-8-2013

In exercise of powers conferred by clause (a) of sub-section (15) of Section 144C of the’ Income-tax Act, 1961 [43 of 1961) r/w Income-tax (Dispute Resolution Panel) Rules, 2009, as amended by Notification No.33/2012 (F.No. 133/13/2012-SO(TPL)/SO1967(E), dated 24-8-2012, and in supersession of all earlier orders, the Central Board of Direct Taxes hereby constitutes, the Dispute Resolution Panel at the areas of jurisdiction given under column (2) of the Table below comprising of three Commissioners of Income Tax as Members of the Panel as per corresponding column (3) of the said Table, and in case any of the Members of the Panel specified under column (3) of the said Table was the supervising officer of the Transfer Pricing Officer at the time of Issuance of transfer pricing order or was the supervising officer of the Assessing Officer at the time of issuance of draft assessment order pending for direction of the Panel, the Panel shall, instead of comprising of the Members specified in column (3), aforesaid, comprise of the Members specified in the corresponding column (4) of the said Table, with respect to that said draft assessment order, namely:—

TABLE

S.No.

Areas of jurisdiction

Members of Panel

Members at panel

(1)

(2)

(3)

(4)

1

Delhi-I

Director of Income-tax (TP)-II, DelhiDirector of Income-tax (Intl. tax)-II, DelhiCommissioner of Income-tax (DR) ITAT, AgraDirector of Income-tax (TP)-II, DelhiDirector of Income-tax (Intl. Tax) -II, DelhiCommissioner of Income-tax-V, Delhi

2

Delhi-II

Director of Income-tax (Intl. Tax)-I DelhiDirector of Income-tax (TP)-I, DelhiCommissioner of Income-tax (Central- III), DelhiDirector of Income-tax (Intl.tax)-I, DelhiDirector of Income-tax (TP)-I, DelhiCommissioner of Income-tax-VIII (Delhi)

3

Mumbai-I

Director of Income-tax (Intl. Tax) -I, MumbaiDirector of Income-tax (TP-II), MumbaiCommissioner of Income-tax (A)26, MumbaiCommissioner of Income-tax (Appeals-X), MumbaiCommissioner of Income-tax (Appeals-I), MumbaiCommissioner of Income-tax (Appeals-VI), Mumbai

4

Mumbai-II

Director of Income-tax (Intl. Tax)-II, MumbaiDirector of Income-tax (TP-I), MumbaiCommissioner of Income-tax (Central-I), MumbaiCommissioner of Income-tax (Appeals-X), MumbaiCommissioner of Income-tax (Appeals-I), MumbaiCommissioner of Income-tax (Appeals-VI), Mumbai

5

Pune

Director of Income-tax (Intl. Tax), BangaloreCommissioner of Income-tax (Appeals)(IT & TP), PureCommissioner of Income-tax-V, PuneDirector of Income-tax (Intl. Tax), BangaloreCommissioner of Income-tax (Appeals) (IT&TP), PuneCommissioner of Income-tax- II, Pune

6

Kolkata

Director of Income-tax (IT), ChennaiDirector of income-tax (IT&TP), HyderabadCommissioner of Income-tax-XI, KolkataDirector of Income-tax (IT), ChennaiDirector of Income-tax (IT & TP), HyderabadCommissioner of Income-tax-III Kolkata

7

Ahmedabad

Director of Income-tax (IT & TP), PuneDirector of Income-tax (TP), BangaloreCommissioner of Income-tax IV, AhmedabadDirector of Income-tax (IT & TP), PuneDirector of Income-tax (TP), BangaloreCommissioner of Income-tax, Gandhinagar

8

Hyderabad

Commissioner of Income-tax -IV, HyderabadDirector of Income-tax (TP), ChennaiCommissioner of Income-tax (Appeals)-I, HyderabadCommissioner of Income-tax, VijaywadaDirector of Income-tax (TP), ChennaiCommissioner of Income-tax (Appeals)-I, Hyderabad

9

Bangalore

Director of Income-tax (IT & TP), AhmedabadDirector of Income-tax (IT & TP), KolkataCommissioner of Income-tax- IV, BangaloreDirector of Income-tax (IT&TP), AhmedabadDirector of Income-tax (IT & TP), KolkataCommissioner of Income-tax- I, Bangalore

10

Chennai

Director of Income-tax (IT & TP), PuneDirector of Income-tax (TP), BangaloreCommissioner of Income-tax-II, ChennaiDirector of income-tax (IT& TP), PuneDirector of Income-tax (TP), BangaloreCommissioner of Income-tax-X, Chennai

“However, If the taxpayer, who falls In the area of jurisdiction under column 2 of the Table above files no objection to their case being heard and considered by the DRP under corresponding column 3 of the said Table, the DRP shall comprise of the members specified in the corresponding column 3 of the said Table.”

2. The members of DRP shall perform such duties in addition to their regular duties, till the time of Issuance of direction with respect to the said draft order. This order will be effective from 19th August, 2013.

3. This issues with the approval of Chairperson CBDT.

Reference: Section 144 of the income Tax Act, 1961

Reference to dispute resolution panel.

 (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.

(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—

(a)  file his acceptance of the variations to the Assessing Officer; or

(b)  file his objections, if any, to such variation with,—

(i)  the Dispute Resolution Panel; and

(ii)  the Assessing Officer.

(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—

(a)  the assessee intimates to the Assessing Officer the acceptance of the variation; or

(b)  no objections are received within the period specified in sub-section (2).

(4) The Assessing Officer shall, notwithstanding anything contained in section 153 [or section 153B], pass the assessment order under sub-section (3) within one month from the end of the month in which,—

(a)  the acceptance is received; or

(b)  the period of filing of objections under sub-section (2) expires.

(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.

(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—

(a)  draft order;

(b)  objections filed by the assessee;

(c)  evidence furnished by the assessee;

(d)  report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;

(e)  records relating to the draft order;

(f)  evidence collected by, or caused to be collected by, it; and

(g)  result of any enquiry made by, or caused to be made by, it.

(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—

(a)  make such further enquiry, as it thinks fit; or

(b)  cause any further enquiry to be made by any income-tax authority and report the result of the same to it.

(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.

51[Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.]

(9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.

(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.

(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively.

(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.

(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 51a[or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.

(14) The Board may make rules52 for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.

The following sub-section (14A) shall be inserted after sub-section (14) of section 144C by the Finance Act, 2013, w.e.f. 1-4-2016 :

(14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Commissioner as provided in sub-section (12) of section 144BA.

(15) For the purposes of this section,—

(a)  “Dispute Resolution Panel” means a collegium comprising of three Commissioners of Income-tax constituted by the Board54 for this purpose;

(b)  “eligible assessee” means,—

 (i)  any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and

(ii)  any foreign company.

INSTRUCTIONS TO SUBORDINATE AUTHORITIES – EXTENSION OF DUE DATE FOR FILING RETURNS OF INCOME FROM 31-7-2013 TO 5-8-2013 ORDER [F. NO. 225/117/2013/ITA.II], DATED 31-7-2013

SECTION 119 OF THE INCOME-TAX ACT, 1961 – INCOME-TAX AUTHORITIES – INSTRUCTIONS TO SUBORDINATE AUTHORITIES – EXTENSION OF DUE DATE FOR FILING RETURNS OF INCOME FROM 31-7-2013 TO 5-8-2013

ORDER [F. NO. 225/117/2013/ITA.II], DATED 31-7-2013

The Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the ‘due date’ for filing Returns of Income from 31-7-2013 to 5-8-2013.

Reference: Section 119 of the income Tax Act, 1961

Instructions to subordinate authorities.

 (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :

Provided that no such orders, instructions or directions shall be issued—

(a)  so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b)  so as to interfere with the discretion of the [Commissioner (Appeals)] in the exercise of his appellate functions.

(2) Without prejudice to the generality of the foregoing power,—

27(a)  the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 28[115P, 115S, 115WD, 115WE,115WF, 115WG, 115WH, 115WJ, 115WK,] 29[139,] 143, 144, 147, 148, 154, 155 30[, 158BFA], 31[sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C], 271 and 273 or otherwise), general or special orders in respect of any class of incomes 32[or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order33 may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;

(b)  the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise 34[any income-tax authority, not being a

Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;

36[(c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:—

 (i)  the default in complying with such requirement was due to circumstances beyond the control of the assessee; and

(ii)  the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed :

Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament.

MASTER CIRCULAR ON APPOINTMENT & DELISTING OF BROKERS AND PAYMENT OF BROKERAGE ON RELIEF/SAVINGS BONDS CIRCULAR DGBA.CDD. NO. 7921/13.01.299/2013-14, DATED 1-7-2013

MASTER CIRCULAR ON APPOINTMENT & DELISTING OF BROKERS AND PAYMENT OF BROKERAGE ON RELIEF/SAVINGS BONDS

CIRCULAR DGBA.CDD. NO. 7921/13.01.299/2013-14, DATED 1-7-2013

Please refer to our Master Circular DGBA.CDD No. H-8576/13.01.299/2012-13 dated July 2, 2012 on the above subject.

2. In order to facilitate availability of all the current operative instructions on the above subject at one place, instructions issued up to June 30, 2013 by us are enclosed (Annexure). This circular has also been placed on RBI website.

Annexure

Master Circular on Appointment & Delisting of Brokers and Payment of Brokerage on Relief/Savings Bonds

(A) APPOINTMENT/DELISTING OF BROKERS

1.

Procedure for enrollment/registration of brokers
Agency banks may follow a simple procedure for enrollment/registration of brokers. The broker seeking enrollment/registration may submit the request for registration on their business letterhead together with business data to the agency banks. The agency banks should allot a code number to the broker which should be quoted by the broker on all applications tendered at the Receiving offices for claiming brokerage.
(Ref. No CO.DT./13.01.201/692/2000-01 dated August 9, 2000)

2.

Appointment of sub-agents by Agency banks
It has come to our notice that some banks designated/authorized by Reserve Bank of India (RBI) have engaged the services of other banks as brokers/agents for receiving applications and the latter are using the name of RBI in their publicity material and billboards stating that RBI has appointed them as brokers for Relief/Savings bonds business. We advise that in cases where authorised banks engage the services of other banks/institutions as a broker or agent, the agency banks who have appointed them are solely responsible for their activities as an agent/broker. RBI’s name should not be used by such banks.
(Ref. CO.DT./13.01.251/ 5341/2001-02 dated January 4, 2002)

3.

Delisting of brokers
The names of the dormant brokers, who have been dormant for say 2 years, may be delisted after giving a due notice if, no fresh business is forthcoming from these brokers.
(Ref. CO.DT./13.01.201/4890/1999-00 dated March 6, 2000)

(B) PAYMENT & RATES OF BROKERAGE FOR SAVINGS BONDS

1.

Rates of brokerage

a.

Brokerage at the rate of Rs. 1.00 (Rupee One only) per Rs. 100/- will be paid to brokers registered/enrolled with agency banks on applications tendered for investment in the bonds in the form of Bond Ledger Account (BLA) at designated branches on behalf of their clients and bearing their stamp.
[Ref. CO.DT./13.01.201/432/2000-01 dated July 25, 2000 and & GOI Notification No.F.4 (1)-W&M/99 dated July 21, 2000)]

b.

No brokerage is payable in case the broker is one of the investors/applicants.
(Ref. CO.DT./13.01.298/H-2411/2003-04 dated October 29, 2003)

2.

No TDS on payment of brokerage
No tax is required to be deducted at source by the agency banks while making payment of brokerage in respect of the Relief/Savings bonds business canvassed by brokers in terms of Section 194 (H) of the Income Tax Act, 1961.
(Ref. CO.DT./201/5900/2000-01 dated May 28, 2001 and C.O.DT./13.01.298/H-3660/2003-04 dated January 3, 2004)

3.

Brokerage claims

a.

Agency banks are to settle the brokerage claims expeditiously, and in any case, not later than 30 days from the date of subscription.

b.

Agency banks are advised to first settle the brokerage claims and thereafter seek reimbursement from RBI.
(Ref. CO.DT./13.01.201/4668/2000-01 dated March 8, 2001)

c.

As a measure towards improvement in customer service, agency banks may arrange to pay the brokerage to the agents, on a monthly basis by credit to their accounts through ECS after obtaining requisite mandate from them.
(Ref. CO.DT.13.01.298/H-4677/2002-03 dated May 23, 2003)

d.

Reimbursement of brokerage claims in respect of Relief/Savings bonds has been centralized at CAS Nagpur from July 01, 2002, and it has been decided that 90% of the brokerage due to agencies, on the basis of funds remitted/reported to CAS as at the close of business of the month, will be paid on the 3rd working day of the succeeding month. The balance 10% is to be settled on submission of Appendix IV statement.
(Ref. CO.DT.13.01.272/11032/2001-02 dated June 25, 2002 and CO.DT.13.01.272/ H-2906 / 2002-03 dated February 26, 2003)

INCOME TAX INVESTIGATION DIVISION OF CBDT OFFICE MEMORANDUM [F. NO. 414/5/2010-IT (INV.I), DATED 11-7-2013

REVISED ALLOCATION OF SUBJECTS AMONGST FIVE BRANCHES OF INVESTIGATION DIVISION OF CBDT

OFFICE MEMORANDUM [F. NO. 414/5/2010-IT (INV.I), DATED 11-7-2013

It has been decided with the approval of the Competent Authority to revise allocation of subjects amongst the five Branches of Investigation Division. The revised work allocation chart is enclosed herewith Annexure.

ANNEXURE

Revised allocation of subjects amongst the various Branches of the Investigation Division is as under:

Branch

Work allocation

Investigation-I

1.

Policy matters’ relating to tax evasion, including measures and suggestions for curbing evasion

2.

Policy matters relating to intelligence and investigation for detection of tax evasion

3.

Researchers and studies to monitor tax evasion and measures to curb tax evasion.

4.

Matters relating to survey operations under Direct Tax laws.

5.

Matters relating to investigation into foreign assets cases.

6.

Inter-Branch and Inter-Division coordination within the CBDT

7.

Inter-departmental coordination relating to investigation and enforcement agencies (other than those assigned to Inv-II to V) ;

8.

Matters relating to investigation not specifically allotted to Investigation-II to V.

9.

Matters relating to section 269SS of the Income-tax Act, 1961.

10.

Orders u/s. 119 of the Income-tax Act, 1961 relating to above.

11.

Complaints /representations, Parliament Questions, PAC, Consultative/Advisory Committee work relating to the above.

 

Investigation-II

1.

Matters relating to search & seizure operations and related reports including Two Hourly, Telex/Fax, search & seizure statistics.

2.

MIS Reports on searches and search assessments

3.

Administrative matters including complaints/petitions, disciplinary proceedings relating to Investigation Directorates, Central charges and Intelligence & Criminal Investigation Directorates.

4.

Matters relating to Multi Agency Centre (MAC) under the Ministry of Home Affairs.

5.

Matters relating to Data-Bank, N ATGRID and related issues.

6.

Matters relating to ITDMS, Cyber Forensic Labs and related software/tools/issues.

7.

Order u/s 119 of the Income-tax Act, 1961 relating to above.

8.

Complaints/representations, Parliament Questions, PAC, Consultative/Advisory Committee work relating to the above.

 

Investigation-III

1.

Matters relating to reward to informants including related reports.

2.

Matters relating to reward to officers and staff including related reports.

3.

Monitoring of DO letters and working of DsGIT(Inv.) and CCsIT(Central) and issues arising out of the same including centralization & decentralization of cases, search assessments and related reports.

4.

Monitoring Internal Action Plan of DsGIT(Inv.) and CCsIT(Central).

5.

Matters relating to Income-tax Settlement Commission, settlement cases and issues relating to Chapter XIX-A of the Income-tax Act, 1961 and Chapter VA of the Wealth Tax Act 1957.

6.

Orders u/s, 119 of the Income-tax Act, 1961 relating to above.

7.

Complaints/representations, Parliament Questions, PAC, Consultative/Advisory Committee work relating to me above.

 

Investigation-IV

1.

Matters relating to exchange of information with FIU-IND, stock and commodities regulators, market intermediaries, etc. and related coordination

2.

Matters relating to tax evasion petitions (TEPs)/complaints including from VIPs and monitoring action thereon.

3.

Monitoring of PEPs (Politically Exposed Persons), VHNIs (Very High Net-Worth Individuals) and HNIs (High Net-worth Individuals) to reduce tax risks and deepen the tax base in these groups of taxpayers.

4.

Information Management, data-warehousing and data mining relating to reduction of tax avoidance and curbing tax evasion, management of tax risks

5.

Matters relating to FATF and other similar bodies/agencies dealing with anti-money laundering (AML.) and counter terror fending (CFT) issues having bearing on direct taxes.

6.

Matters relating to 24×7 Control Room, Top Secret/Secret Record Management and related issues.

7.

Orders u/s. 119 of the Income-tax Act, 1961 relating to above.

8.

Complaints representations, Parliament Questions, PAC, Consultative/Advisory Committee work relating to the above.

 

Investigation-V

1.

Matters relating to coordination with Election Commission of India including monitoring of election-related expenditure, political funding.

2.

Matters relating to penalties under Chapter XXI of the Income-tax Act, 1961 and corresponding penalties under other direct tax laws.

3.

Matters relating to prosecution and compounding under Direct Tax law

4.

Matters relating to DGIT (I & CI) including CLB, AIR and information received through FT&TR Division under automatic exchange of information.

5.

Monitoring of DO letter, working and internal action plan of DGIT(I&CI) and issues arising out of the same.

6.

Matters relating to security of Direct Tax establishments, including CBDT, its attached Directorates and subordinate offices.

7.

Matters relating to establishment. of armed units, procurement of arms & ammunition, management of armoury and related issues.

8.

Matters relating to establishment of marine/air-borne units for the purposes of counter intelligence and special operations.

9.

Orders u/s. 119 of the Income-tax Act, 1961 relating to above.

10.

All complaints/representations, Parliament Questions, PAC, Consultative/Advisory Committee work relating to the above.

 

Note: Any of the above work areas can be reallocated to any of the Branches of Investigation Division with prior approval of Member(Inv.), CBDT.

EXTENSION OF DUE DATE FOR FILING RETURNS OF INCOME REQUIRED TO BE FURNISHED BY 31-7-2013 TO 31-10-2013 IN RESPECT OF ASSESSEES RESIDING OR ASSESSED IN STATE OF UTTARAKHAND ORDER [F. NO. 225/117/2013/ITA.II], DATED 23-7-2013

DUE DATE FOR INCOME TAX RETURN FOR ASSESSEES OF UTTARAKHAND FOR AY 2013-14 IS 31-10-2013.

SECTION 119 OF THE INCOME-TAX ACT, 1961 – INCOME-TAX AUTHORITIES – INSTRUCTIONS TO SUBORDINATE AUTHORITIES – EXTENSION OF DUE DATE FOR FILING RETURNS OF INCOME REQUIRED TO BE FURNISHED BY 31-7-2013 TO 31-10-2013 IN RESPECT OF ASSESSEES RESIDING OR ASSESSED IN STATE OF UTTARAKHAND

ORDER [F. NO. 225/117/2013/ITA.II], DATED 23-7-2013

Considering the large-scale devastation due to recent natural clamity in the State of Uttarakhand, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income-tax Act, 1961, hereby extends the ‘due-date’ for filing Returns of income required to be furnished by 31st July, 2013 to 31st October, 2013, in respect of income-tax assessees residing or assessed in the State of Uttarakhand.

Reference: Section 119 of the income Tax Act, 1961

Instructions to subordinate authorities.

 (1) The Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :

Provided that no such orders, instructions or directions shall be issued—

(a)  so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b)  so as to interfere with the discretion of the 25[* * *] 26[Commissioner (Appeals)] in the exercise of his appellate functions.

(2) Without prejudice to the generality of the foregoing power,—

27(a)  the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of the provisions of sections 28[115P, 115S, 115WD, 115WE,115WF, 115WG, 115WH, 115WJ, 115WK,] 29[139,] 143, 144, 147, 148, 154, 155 30[, 158BFA], 31[sub-section (1A) of section 201, sections 210, 211, 234A, 234B, 234C], 271 and 273 or otherwise), general or special orders in respect of any class of incomes 32[or fringe benefits] or class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order33 may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;

(b)  the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise 34[any income-tax authority, not being a

Commissioner (Appeals)] to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law;

36[(c) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order for reasons to be specified therein, relax any requirement contained in any of the provisions of Chapter IV or Chapter VI-A, where the assessee has failed to comply with any requirement specified in such provision for claiming deduction thereunder, subject to the following conditions, namely:—

 (i)  the default in complying with such requirement was due to circumstances beyond the control of the assessee; and

(ii)  the assessee has complied with such requirement before the completion of assessment in relation to the previous year in which such deduction is claimed :

Provided that the Central Government shall cause every order issued under this clause to be laid before each House of Parliament.]

FREE TRADE ZONE – CLARIFICATION ON ISSUES RELATING TO APPLICABILITY OF CHAPTER IV OF THE ACT AND SET OFF AND CARRY FORWARD OF BUSINESS LOSSES CIRCULAR NO. 7/DV/2013 [FILE NO.279/MISC./M-116/2012-ITJ], DATED 16-7-2013

SECTION 10A, READ WITH SECTIONS 10AA & 10B OF THE INCOME-TAX ACT, 1961 – FREE TRADE ZONE – CLARIFICATION ON ISSUES RELATING TO APPLICABILITY OF CHAPTER IV OF THE ACT AND SET OFF AND CARRY FORWARD OF BUSINESS LOSSES

CIRCULAR NO. 7/DV/2013 [FILE NO.279/MISC./M-116/2012-ITJ], DATED 16-7-2013

It has been brought to the notice of the Board that the provisions of 10A/10AA/10B/10BA of the Income-tax Act, with regard to applicability of Chapter IV of the Act and set off and carry forward of losses, are being interpreted differently by the Officers of the Department as well as by different High Courts.

2. The two sections 10A and 10B of the Act were initially placed on statute in 1981 and 1988 respectively, and continued with some modifications and amendments till 31.03.2001. Section 10A as inserted by Finance Act, 1981 read as under:

“10A. Special provision in respect of newly established industrial undertakings in the free trade zones.—(1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking to which this section applies shall not be included in the total income of the assessee.”

2.1 Similarly section 10B as inserted by Finance Act, 1988 read as under:

“10B. Special provision in respect of newly established hundred per cent export oriented undertakings.—Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per cent export oriented undertaking (hereafter in this section referred to as the undertaking) to which this section applies shall not be included in the total income of the assessee.”

3. Vide Finance Act, 2000 sections 10A and 10B of the Act were substituted. Section 10A as substituted by Finance Act, 2000 reads as under:

“10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed form the total income of the assessee….”

3.1 Similarly, section 10B as substituted by Finance Act, 2000 reads as under:

“10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee…”

3.2 The effect of the substitution of sections 10A and 10B of the Act has been elaborated in Circular No. 794 dated 9.8.2000 which clearly provides that the new provisions provide for deduction in respect of profits and gains derived by an undertaking from export of articles or things or computer software.

4. Sub-section (6) of sections 10A and 10B were amended by Finance Act, 2003 with retrospective effect from 1-4-2001. Circular No. 7/2003, dated 5-9-2003 explains the amendments brought by Finance Act, 2003. The relevant paragraph is reproduced below:

“20. Providing for carry forward of business losses and unabsorbed depreciation to units in Special Economic Zones and 100% Export Oriented Units.

20.1 Under the existing provisions of sections 10A and 10B, the undertakings operating in a Special Economic Zone (under section 10A) and 100% Export Oriented Units (EOU’s) (under section 10B) are not permitted to carry forward their business losses and unabsorbed depreciation.

20.2 With a view to rationalize the existing tax incentives in respect of such units, sub-section (6) in sections 10A and 10B has been amended to do away with the restrictions on the carry forward of business losses and unabsorbed depreciation.

20.3 The amendments have been brought into effect retrospectively from 1-4-2001 and have been made applicable to business losses or unabsorbed depreciation arising in the assessment year 2001-02 and subsequent years.”

5. From the above it is evident that irrespective of their continued placement in Chapter III, sections 10A and 10B as substituted by Finance Act, 2000 provide for deduction of the profits and gains derived from the export of articles or things or computer software for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such article or thing or computer software. The deduction is to be allowed from the total income of the assessee. The term ‘total income’ has been defined in section 2 (45) of the IT Act and it means the total amount of income referred to in section 5, computed in the manner laid down in the Income-tax Act.

5.1 All income for the purposes of computation of total income is to be classified under the following heads of income and computed in accordance with the provisions of Chapter IV of the Act-

Salaries

Income from house property

Profits and gains of business and profession

Capital gains

Income from other sources

5.2 The income computed under various heads of income in accordance with the provisions of Chapter IV of the IT Act shall be aggregated in accordance with the provisions of Chapter VI of the IT Act, 1961. This means that first the income/loss from various sources i.e. eligible and ineligible units, under the same head are aggregated in accordance with the provisions of section 70 of the Act. Thereafter, the income from one ahead is aggregated with the income or loss of the other head in accordance with the provisions of section 71 of the Act. If after giving effect to the provisions of sections 70 and 71 of the Act there is any income (where there is no brought forward loss to be set off in accordance with the provisions of section 72 of the Act) and the same is eligible for deduction in accordance with the provisions of Chapter VI-A or sections 10A, 10B etc. of the Act, the same shall be allowed in computing the total income of the assessee.

5.3 If after aggregation of income in accordance with the provisions of sections 70 and 71 of the Act, the resultant amount is a loss (pertaining to assessment year 2001-02 and any subsequent year) from eligible unit it shall be eligible for carry forward and set off in accordance with the provisions of section 72 of the Act. Similarly, if there is a loss from an ineligible unit, it shall be carried forward and may be set off against the profits of eligible unit or ineligible unit as the case may be, in accordance with the provisions of section 72 of the Act.

6. The provisions of Chapter IV and Chapter VI shall also apply in computing the income for the purpose of deduction under sections 10AA and 10BA of the Act subject to the conditions specified in the said sections.

Reference: Section 10 of the income Tax Act, 1961

Special provision in respect of newly established undertakings in free trade zone, etc.

10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the exportof articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years :

Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the  [undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone :

 [Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :]

Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April,  [2012] and subsequent years.

 [(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,—

  (i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;

 (ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Allowance Reserve Account”) to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :

25[Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.]

(1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are fulfilled, namely:—

 (a) the amount credited to the Special Economic Zone Re-investment Allowance Reserve Account is to be utilised—

   (i) for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next following the previous year in which the reserve was created; and

  (ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India;

 (b) the particulars, as may be prescribed26 in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use.

(1C) Where any amount credited to the Special Economic Zone Re-investment Allowance Reserve Account under clause (ii) of sub-section (1A),—

 (a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount so utilised; or

 (b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (1B), the amount not so utilised,

shall be deemed to be the profits,—

  (i) in a case referred to in clause (a), in the year in which the amount was so utilised; or

 (ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (1B),

and shall be charged to tax accordingly.]

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

  (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year—

  (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or

  (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park;

  (c) commencing on or after the 1st day of April, 2001 in any special economic zone;

 (ii) it is not formed by the splitting up26a, or the reconstruction26a, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.

(3) This section applies to the undertaking, if the sale proceeds26a of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.

Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.

Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.

27[(4) For the purposes of 28[sub-sections (1) and (1A)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.]

(5) The deduction under 28[this section] shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form29, alongwith the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—

  (i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years 30[ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;

 (ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years 30[ending before the 1st day of April, 2001];

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and

(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.

31[(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger,—

 (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and

 (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.]

32[(7B) The provisions of this section shall not apply to any undertaking, being a Unit referred to in clause (zc) of section 233 of the Special Economic Zones Act, 2005, which has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone.]

(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.

(9) 34[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

(9A) 35[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 1.— 36[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 2.—For the purposes of this section,—

  (i) “computer software”36a means—

  (a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or

  (b) any customized electronic data or any product or service of similar nature, as may be notified37 by the Board,

which is transmitted or exported from India to any place outside India by any means;

 (ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of 37a[the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder or any other corresponding law for the time being in force;

(iii) “electronic hardware technology park” means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified38 by the Government of India in the Ministry of Commerce and Industry;

(iv) “export turnover” means the consideration in respect of export 39[by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;

 (v) “free trade zone” means the Kandla Free Trade Zone and the Santacruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette,40 specify for the purposes of this section;

(vi) “relevant assessment year” means any assessment year falling within a period of ten consecutive assessment years referred to in this section;

(vii) “software technology park” means any park set up in accordance with the Software Technology Park Scheme notified41 by the Government of India in the Ministry of Commerce and Industry;

(viii) “special economic zone” means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section.]

42[Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]

43[Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting and polishing of precious and semi-precious stones.]

MASTER CIRCULAR ON APPOINTMENT & DELISTING OF BROKERS AND PAYMENT OF BROKERAGE ON RELIEF/SAVINGS BONDS CIRCULAR DGBA.CDD. NO. 7921/13.01.299/2013-14, DATED 1-7-2013

MASTER CIRCULAR ON APPOINTMENT & DELISTING OF BROKERS AND PAYMENT OF BROKERAGE ON RELIEF/SAVINGS BONDS

CIRCULAR DGBA.CDD. NO. 7921/13.01.299/2013-14, DATED 1-7-2013

Please refer to our Master Circular DGBA.CDD No. H-8576/13.01.299/2012-13 dated July 2, 2012 on the above subject.

2. In order to facilitate availability of all the current operative instructions on the above subject at one place, instructions issued up to June 30, 2013 by us are enclosed (Annexure). This circular has also been placed on RBI website.

Annexure

Master Circular on Appointment & Delisting of Brokers and Payment of Brokerage on Relief/Savings Bonds

(A) APPOINTMENT/DELISTING OF BROKERS

1.

Procedure for enrollment/registration of brokers
Agency banks may follow a simple procedure for enrollment/registration of brokers. The broker seeking enrollment/registration may submit the request for registration on their business letterhead together with business data to the agency banks. The agency banks should allot a code number to the broker which should be quoted by the broker on all applications tendered at the Receiving offices for claiming brokerage.
(Ref. No CO.DT./13.01.201/692/2000-01 dated August 9, 2000)

2.

Appointment of sub-agents by Agency banks
It has come to our notice that some banks designated/authorized by Reserve Bank of India (RBI) have engaged the services of other banks as brokers/agents for receiving applications and the latter are using the name of RBI in their publicity material and billboards stating that RBI has appointed them as brokers for Relief/Savings bonds business. We advise that in cases where authorised banks engage the services of other banks/institutions as a broker or agent, the agency banks who have appointed them are solely responsible for their activities as an agent/broker. RBI’s name should not be used by such banks.
(Ref. CO.DT./13.01.251/ 5341/2001-02 dated January 4, 2002)

3.

Delisting of brokers
The names of the dormant brokers, who have been dormant for say 2 years, may be delisted after giving a due notice if, no fresh business is forthcoming from these brokers.
(Ref. CO.DT./13.01.201/4890/1999-00 dated March 6, 2000)

(B) PAYMENT & RATES OF BROKERAGE FOR SAVINGS BONDS

1.

Rates of brokerage

a.

Brokerage at the rate of Rs. 1.00 (Rupee One only) per Rs. 100/- will be paid to brokers registered/enrolled with agency banks on applications tendered for investment in the bonds in the form of Bond Ledger Account (BLA) at designated branches on behalf of their clients and bearing their stamp.
[Ref. CO.DT./13.01.201/432/2000-01 dated July 25, 2000 and & GOI Notification No.F.4 (1)-W&M/99 dated July 21, 2000)]

b.

No brokerage is payable in case the broker is one of the investors/applicants.
(Ref. CO.DT./13.01.298/H-2411/2003-04 dated October 29, 2003)

2.

No TDS on payment of brokerage
No tax is required to be deducted at source by the agency banks while making payment of brokerage in respect of the Relief/Savings bonds business canvassed by brokers in terms of Section 194 (H) of the Income Tax Act, 1961.
(Ref. CO.DT./201/5900/2000-01 dated May 28, 2001 and C.O.DT./13.01.298/H-3660/2003-04 dated January 3, 2004)

3.

Brokerage claims

a.

Agency banks are to settle the brokerage claims expeditiously, and in any case, not later than 30 days from the date of subscription.

b.

Agency banks are advised to first settle the brokerage claims and thereafter seek reimbursement from RBI.
(Ref. CO.DT./13.01.201/4668/2000-01 dated March 8, 2001)

c.

As a measure towards improvement in customer service, agency banks may arrange to pay the brokerage to the agents, on a monthly basis by credit to their accounts through ECS after obtaining requisite mandate from them.
(Ref. CO.DT.13.01.298/H-4677/2002-03 dated May 23, 2003)

d.

Reimbursement of brokerage claims in respect of Relief/Savings bonds has been centralized at CAS Nagpur from July 01, 2002, and it has been decided that 90% of the brokerage due to agencies, on the basis of funds remitted/reported to CAS as at the close of business of the month, will be paid on the 3rd working day of the succeeding month. The balance 10% is to be settled on submission of Appendix IV statement.
(Ref. CO.DT.13.01.272/11032/2001-02 dated June 25, 2002 and CO.DT.13.01.272/ H-2906 / 2002-03 dated February 26, 2003)

TRANSFER PRICING – COMPUTATION OF ARM'S LENGTH PRICE – CLARIFICATIONS ON FUNCTIONAL PROFILE OF DEVELOPMENT CENTERS ENGAGED IN CONTRACT R&D SERVICES WITH INSIGNIFICANT RISK – CONDITIONS RELEVANT TO IDENTIFY SUCH DEVELOPMENT CENTERS – AMENDMENT OF CIRCULAR NO. 3/2013, DATED 26-3-2013 CIRCULAR NO.06/2013 [F NO. 500/139/2012], DATED 29-6-2013

SECTION 92C OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE – CLARIFICATIONS ON FUNCTIONAL PROFILE OF DEVELOPMENT CENTERS ENGAGED IN CONTRACT R&D SERVICES WITH INSIGNIFICANT RISK – CONDITIONS RELEVANT TO IDENTIFY SUCH DEVELOPMENT CENTERS – AMENDMENT OF CIRCULAR NO. 3/2013, DATED 26-3-2013

CIRCULAR NO.06/2013 [F NO. 500/139/2012], DATED 29-6-2013

It has been brought to the notice of CBDT that there is divergence of views amongst the field officers and taxpayers regarding the functional profile of development centres engaged in contract R&D services for the purposes of determining arm’s length price/transfer pricing. In some cases, while taxpayers insist that they are contract R&D service providers with insignificant risk, the TPOs treat them as full or significant risk-bearing entities and make transfer pricing adjustments accordingly. The issue has been examined in the CBDT.

The Research and Development Centres set up by foreign companies can be classified into three broad categories based on functions, assets and risk assumed by the centre established in India. These are:

1.

Centres which are entrepreneurial in nature;

2.

Centres which are based on cost-sharing arrangements; and

3.

Centres which undertake contract research and development.

While the three categories are not water-tight compartments, it is possible to distinguish them based on functions, assets and risk. It will be obvious that in the first case the Development Centre performs significantly important functions and assumes substantial risks. In the third case, it will be obvious that the functions, assets and risk are minimal. The second case falls between the first and the third cases.

More often than not, the assessee claims that the Development Centre in India must be treated as a contract R&D service provider with insignificant risk. Consequently, the assessee claims that in such cases the Transactional Net Margin Method (TNMM) must be adopted as the most appropriate method.

The CBDT has carefully considered the matter and lays down the following guidelines for identifying the Development Centre as a contract R&D service provider with insignificant risk.

1.

Foreign principal performs most of the economically significant functions involved in research or product development cycle either through its own employees or through its associated enterprises while the Indian Development Centre carries out the work assigned to it by the foreign principal. Economically significant functions would include critical functions such as conceptualization and design of the product and providing the strategic direction and framework;

2.

The foreign principal or its associated enterprise(s) provides funds/capital and other economically significant assets including intangibles for research or product development. The foreign principal or its associated enterprise(s) also provides a remuneration to the Indian Development Centre for the work carried out by the latter;

3.

The Indian Development Centre works under the direct supervision of the foreign principal or its associated enterprise which has not only the capability to control or supervise but also actually controls or supervises research or product development through its strategic decisions to perform core functions as well as monitor activities on regular basis;

4.

The Indian Development Centre does not assume or has no economically significant realized risks. If a contract shows that the foreign principal is obligated to control the risk but the conduct shows that the Indian Development Centre is doing so, then the contractual terms are not the final determinant of actual activities;

5.

In the case of a foreign principal being located in a country/territory widely perceived as a low or no tax jurisdiction, it will be presumed that the foreign principal is not controlling the risk. However, the Indian Development Centre may rebut this presumption to the satisfaction of the revenue authorities. Low tax jurisdiction shall mean any country or territory notified in this behalf under section 94A of the Act or any other country or territory that may be notified for the purpose of Chapter X of the Act;

6.

Indian Development Centre has no ownership right (legal or economic) on the outcome of the research which vests with the foreign principal and that this is evident from the contract as well as from the conduct of the parties.

The Assessing Officer or the Transfer Pricing Officer, as the case may be, shall have regard to the guidelines above and shall take a decision based on the totality of the facts and circumstances of the case. In doing so, the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be guided by the conduct of the parties and not merely by the terms of the contract.

The Assessing Officer or the Transfer Pricing Officer, as the case may be, shall bear in mind the provisions of section 92C of the Act and Rule 10A to Rule 10C of the Rules. He shall also apply the guidelines enumerated above and select the ‘most appropriate method’.

The above may be brought to the notice of all concerned.

Reference: Section 92 of the income Tax Act, 1961

Computation of arm’s length price.

 (1) The arm’s length price in relation to an international transaction 81[or specified domestic transaction] shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe82, namely :—

(a)  comparable uncontrolled price method;

(b)  resale price method;

(c)  cost plus method;

(d)  profit split method;

(e)  transactional net margin method;

(f)  such other method as may be prescribed83 by the Board.

(2) The most appropriate method referred to in sub-section (1) shall be applied, for determination of arm’s length price, in the manner as may be prescribed84 :

85[Provided that where more than one price is determined by the most appropriate method, the arm’s length price shall be taken to be the arithmetical mean of such prices:

Provided further that if the variation between the arm’s length price so determined and price at which the international transaction 86[or specified domestic transaction] has actually been undertaken does not exceed 87[such percentage 88[not exceeding three per cent] of the latter, as may be notified88a by the Central Government in the Official Gazette in this behalf], the price at which the international transaction 86[or specified domestic transaction] has actually been undertaken shall be deemed to be the arm’s length price.]

89[Explanation.—For the removal of doubts, it is hereby clarified that the provisions of the second proviso shall also be applicable to all assessment or reassessment proceedings pending before an Assessing Officer as on the 1st day of October, 2009.]

90[(2A) Where the first proviso to sub-section (2) as it stood before its amendment by the Finance (No. 2) Act, 2009 (33 of 2009), is applicable in respect of an international transaction for an assessment year and the variation between the arithmetical mean referred to in the said proviso and the price at which such transaction has actually been undertaken exceeds five per cent of the arithmetical mean, then, the assessee shall not be entitled to exercise the option as referred to in the said proviso.]

91[(2B) Nothing contained in sub-section (2A) shall empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154 for any assessment year the proceedings of which have been completed before the 1st day of October, 2009.]

(3) Where during the course of any proceeding for the assessment of income, the Assessing Officer is, on the basis of material or information or document in his possession, of the opinion that—

(a)  the price charged or paid in an international transaction 92[or specified domestic transaction] has not been determined in accordance with sub-sections (1) and (2); or

(b)  any information and document relating to an international transaction 92[or specified domestic transaction] have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or

(c)  the information or data used in computation of the arm’s length price is not reliable or correct; or

(d)  the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under sub-section (3) of section 92D,

the Assessing Officer may proceed to determine the arm’s length price in relation to the said international transaction 92[or specified domestic transaction] in accordance with sub-sections (1) and (2), on the basis of such material or information or document available with him:

Provided that an opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the arm’s length price should not be so determined on the basis of material or information or document in the possession of the Assessing Officer.

(4) Where an arm’s length price is determined by the Assessing Officer under sub-section (3), the Assessing Officer may compute the total income of the assessee having regard to the arm’s length price so determined :

Provided that no deduction under section 10A 93[or section 10AA] or section 10B or under Chapter VI-A shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under this sub-section :

Provided further that where the total income of an associated enterprise is computed under this sub-section on determination of the arm’s length price paid to another associated enterprise from which tax has been deducted 94[or was deductible] under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm’s length price in the case of the first mentioned enterprise.