Form 3CEB and recent amendments as per notification

Form 3CEB and recent amendments as per notification
What is Form 3CEB?
Form 3CEB is a document required under Indian tax laws. It is a report that needs to be furnished by certain specified persons such as auditors, accountants, or any other person as may be notified by the income tax authorities, who have undertaken any international transaction(s) or specified domestic transaction(s) with associated enterprises.

Entities subject to transfer pricing regulations under the Indian Income Tax Act are required to file Form 3CEB annually, typically by the due date for filing the income tax return, which is usually on or before September 30th of the assessment year. Form 3CEB is used for reporting specific details by entities entering into international transactions or specified domestic transactions. It’s a declaration of transfer pricing compliance and is filed by certain entities as required under section 92E of the Income Tax Act, 1961. The form requires detailed information regarding the international or specified domestic transactions entered into by the taxpayer.

Applicability of Form 3CEB:
Companies which are engaged in international or specified domestic transactions with any associated enterprises are required to furnish form 3CEB. Irrespective of the amount of the international transactions, companies have to mandatorily file this form whereas in case of domestic transactions, if the value esceeds Rs.20 crores, then only form 3CEB needs to be filed.

Transfer Pricing means the fees charged by one enterprise from its associated enterprise for providing goods or services. Following conditions are to be met for applicability of Form 3CEB:

• International transactions where two or more associated firms are involved, any or both of which can be foreign business entities
• Specified domestic transactions involving transfer pricing but not including international transactions.

The companies which engage in such businesses are required to obtain a report from an independent chartered accountant. The CA will audit such business transactions and issue the report accordingly.

Filling of Form 3CEB:
Following steps provides details regarding how to file form 3CEB online:

• First the company needs to Add CA in income tax portal
• Upon acceptance by CA, company assigns the Form 3CEB to CA
• CA upon verification, accepts the form and submits details required for filing the form 3CEB
• The 3CEB form prepared by CA is then transferred to company for verification and acceptance
• Upon receipt of this form for “Pending for acceptance”, the company has to accept the work done by CA to successfully submit the form. Upon approval by company of the form 3CEB online, it is said to be filed.

Structure of Form 3CEB:
Form 3CEB is basically divided in three parts i.e. Part A,B and C.

Initially, the form contains basic details of company and Chartered Accountant who files the form.

Part A deals with basic information of the company and Aggregate value of either international transaction or specified domestic transaction.

Part B requires extensive information like details of associated enterprises, nature of transaction, details of property, details of service provided, information related to international transactions of marketable securities, equity shares, debentures, preference shares, etc.

Part C deals exclusively with the specified domestic transactions.

Recent Ammendments in Form 3CEB:
One particular change made in Part C which deals with specified domestic transactions, serial no. 25 will now become serial no.26. This new entry, numbered 25, focuses on specified domestic transactions related to business dealings between individuals mentioned in sub-section (4) of section 115BAE.

Following details are required if a taxpayer engaged in such a transaction which results in extraordinary profits:

• Name of the person with whom the specified domestic transaction has been entered into
• Description of the transaction, including quantitative details, if any
• Total amount received or receivable or paid or payable in the transaction, both as per books of account and as computed by the assessee considering the arm’s length price.
• Method used for determining the arm’s length price [See sub-section (1) of section 92C].

Other Changes mentioned in the Notification containing amendments to Form 3CD/3CEB:
Form 65 has been amended with various significant changes.

A new clause (5) is added under the “Verification” section, requiring certification that the applicant company is an International Financial Services Centre ( IFSC ) unit and has filed the application within three months from the date when the deduction under section 80LA of the Income-tax Act, 1961 is no longer applicable.

PART A has been revised in the Annexure of Form 65. Clause 6 now requires the date on which the company became a qualifying company (applicable only if the company becomes qualifying after the initial period). A new clause 6A is introduced, requiring whether the applicant company has availed of the deduction under section 80LA of the Income-tax Act, 1961, and if so, requesting the specific date on which such deduction is no longer applicable.

Conclusion:
Form 3CEB is mandatory for companies who are engaged in foreign or domestic business with associated enterprises. International transactions and specified domestic transactions are briefly explained in Section 92E of income tax act which delas with transfer pricing provisions. Amendments to Form 3CEB has widened its scope to include transactions that relates to provisions under section 115BAE where tax regime option is given to manufacturing co-operative society.

About Author:

CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.