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October 2012

Part A : DIRECT TAXES

By Pinky Shah, Sonalee Godbole, Chartered Accountants
Reading Time 4 mins
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1) Where the variation between the arm’s length price determined u/s. 92C and the price at which the international transaction has actually been undertaken does not exceed five per cent of the latter, the price at which the international transaction has actually been undertaken shall be deemed to be the arm’s length price for assessment year 2012-13.Notification No. 31/2012 dated 17th August,2012

2) Income-tax (Dispute R esolution Panel)(first amendment) R ules, 2012 – Notification No. 33/2012 dated 24th August,2012

CBDT will assign one CIT as a Reserve Member to each panel who would replace any Member of the Panel as and when the DGIT(Intl Tax) deems it necessary. He would function as a Member of the Panel in addition to his regular duties. Further, the notification states that the DGIT (Intl Tax) maytransfer the case of an eligible assessee from one Panel to the other after giving him due opportunity of being heard.

3) Report u/s. 115JC of the Income-tax Act, 1961 for computing adjusted total income and alternate minimum tax for LLP –Rule 40BA and Form 29C introduced– Notification no. 34/2012 dated 28th August 2012

4) Multilateral convention on mutual administrative assistance on tax matters with OECD member countries signed on 26th January, 2012 notified – Notification 35/2012 dated 29th August,2012

5) Advance Pricing Agreement Scheme notified- Notification 36/2012 dated 30th August, 2012

Income-tax (10th Amendment) Rules, 2012 notifies following rules detailing the Advance Pricing Agreement Scheme:

  •  Rule 10F explains the meaning of the terms application, bilateral agreement, covered transactions, most appropriate transfer pricing method, etc
  •  Rule 10G any person who has entered into an international transaction or any person contemplating to do so, can take benefit of this scheme.
  •  Rule 10H contains provisions for the Pre-filing Consultation.Before filing an application – in Form 3CEC to DGIT(Intl tax), meeting will be held between the team involving IT authorities and experts nominated by DGIT(Intl tax) and the person filing the application.
  •  Rule 10I specifies the procedure for making an application for Advance Pricing Agreement in Form 3CED along with the requisite fee. Such an application should be made to the DGIT(Intl tax) in case of a unilateral agreement and to the Competent Authority in case of a bilateral or multilateral agreements. Time limits are also prescribed for filing such application.
  •  Rule 10J contains procedure for withdrawal of the application by the assessee before finalisation of the terms of agreement in Form 10 CEE. Fees paid alonwith the application would not be refunded on withdrawal.
  •  Rule 10K details procedure for preliminary processing of application wherein any deficiencies or defects would be identified and applicant would be given the opportunity to rectify the same within prescribed time limit. In case thesame is not done, The DGIT(Intl tax) or the Competent Authority, as the case may pass an order after giving due opportunity, not allowing the application to be processed further. Rule 10L lays down the procedure for framing the agreement.
  •  Rule 10M provides that the Agreement would not be binding on the Board or the applicant if any of the critical assumptions change. In such an event, a notice needs to be given and the Agreement can be modified by following the prescribed procedure. The revision or the cancellation of the agreement shall be in accordance with rules 10Q and 10R respectively.
  •  Rule 10N provides for revision of the application.
  •  Rule 10O provides for the Annual Compliance Report to be furnished by the applicant in Form 3CEF.
  •  Rule 10P details the Annual Compliance Audit of the Agreement by the jurisdictional TPO.  

Rules 10S prescribes the renewal of the said agreement and Rule 10T deals with Miscellaneous matters. Rule 44GA has been introduced, which prescribes the procedure to be followed to deal with requests for bilateral or multilateral agreements

6) Income-tax (11th Amendment) Rules, 2012. -Notification No. 37 dated 12th September 2012 Rule 31ACB and Form 26A introduced being the format of the certificate to be issued by an Accountant under the first proviso to sub-section (1) of section 201. Rule 37J and Form 27BA introduced being the format of the certificate to be issued by an Accountant under first proviso to sub-section (6A) of section 206C

7) Cost Inflation Index for the financial year 2012-13 is 852 – Notification No. 38/2012 dated 17 September 2012

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