1. By: CA.Gaurav Garg

2.  Section 92 E “Every person who has entered into an international transaction or specified domestic transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed”  Section 271 BA If any person fails to furnish a report from an accountant as required by section 92 E the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of one hundred thousand rupees.

3.  Applicable on all type of Assessee who has entered into specified domestic transaction  Value of Specified domestic transaction should not be less than 5 cr in aggregate  Accountant means Chartered Accountant in practice  Specified date shall have the same meaning as assigned to “due date” in Explanation 2 below sub-section (1) of section 139 i.e. 30 th day of November of the assessment year

4. Scope of examination under section 92 E of the Act  The Accountant’s Report has got two parts  Form 3 CEB, &,  Annexure to Form 3 CEB  Annexure to Form 3 CEB has again two parts  Part A – Clause 1 to 6 – Particulars of the tax payers  Part B – Clause 7 – Particulars of AEs - Clause 8 – 13 – Information about various transactions

5. Scope of examination under section 92 E of the Act  Form 3 CEB Para 1 “*I/we have examined the accounts and records of ……………….. (name and address of the assessee with PAN) relating to the specified domestic transactions entered into by the assessee during the previous year ending on 31st March, ……….”

6.  The scope of examination envisaged by section 92 E is restricted to such examination of accounts and records of the taxpayer relating to the international transaction entered into by the assessee during the previous year under examination  Ensuring completeness of the listing of international transactions is the responsibility of the taxpayer  MRL should be obtained from the client

7. Scope of examination under section 92 E of the Act  Guidance Note on Transfer Pricing issued by the ICAI “ 36.9 Ensuring completeness of the listing of international transactions is the responsibility of the assessee….” “ 36.10 The accountant should obtain a written representation from the assessee providing him with the name, address, legal status and country of tax residence of each of the enterprises with whom international transactions have been entered into by the assessee, and association linkages among them.”

8. Scope of examination under section 92 E of the Act  Form 3 CEB Para 2 “ 2. In *my/our opinion proper information and documents as are prescribed have been kept by the assessee in respect of the international transaction(s) entered into so far as appears from *my/our examination of the records of the assessee”.

9.  The Accountant needs to give opinion on  Ensuring completeness of the listing of international transactions is the responsibility of the taxpayer  MRL should be obtained from the client

10. Scope of examination under section 92 E of the Act  Guidance Note on Transfer Pricing issued by the ICAI “ 36.12…… I t should however be noted that the accountant is not responsible for the content of the transactions and documentation maintained by the assessee.” “ 36.13 ….If any document is not maintained, then the accountant should suitably qualify his report or disclose the same in his report depending upon the facts and circumstances of each case. The accountant should state the qualification in the report making it comprehensive and self explanatory…”

11. Scope of examination under section 92 E of the Act  Form 3 CEB Para 2 “ 3. The particulars required to be furnished under section 92 E are given in the Annexure to this Form. In *my/our opinion and to the best of my/our information and according to the explanations given to *me/us, the particulars given in the Annexure are true and correct”.

12. Scope of examination under section 92 E of the Act  Guidance Note on Transfer Pricing issued by the ICAI “36.16… As mentioned above, the particulars should be obtained from the assessee, duly authenticated, which should be reviewed by the accountant. In case of any negative remark or qualification about this matter, the same should be properly reported.”

13. Scope of examination under section 92 E of the Act  Guidance Note on Transfer Pricing issued by the ICAI “36.17 The accountant must limit his scope of work and the review procedures to the extent certified in Form No.3CEB. For e.g. in the Annexure the method which has been used to determine the arm’s length price needs to be stated. In this context the accountant is only required to ensure that the method stated as being used to determine the arm’s length price by the assessee has actually been used and it is not the accountant’s responsibility to ensure that the method so used is the most appropriate method as prescribed by the Board.”

14. Scope of examination under section 92 E of the Act  Annexure to Form 3 CEB  13 Clauses  Clause 1 – Name of the assessee  Clause 2 – Address  Clause 3 – Permanent account number  Clause 4 – Status  Clause 5 – Previous year ended  Clause 6 – Assessment year

15. Scope of examination under section 92 E of the Act  Annexure to Form 3 CEB  Clause 7 – List of the associated enterprises with whom the assessee has international transactions S.NoParticulars a.Name of associated enterprise. b.Nature of relationship with the associated enterprise as referred to in section 92 A(2). c.Brief description of the business carried on by the associated enterprise.

16.  Clause 8 – Particulars in respect of transactions in tangible property. ▪ A - Purchase/sale of raw material, consumables or any other supplies for assembling/processing/manufacturing of goods/articles from/to AE S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of transaction and quantity purchased /sold c. Total amount paid/received or payable/receivable in the transaction (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

17. B. If the assessee has entered into any international transaction in respect of purchase/sale of traded/finished goods, then: S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of transaction and quantity purchased /sold c. Total amount paid/received or payable/receivable in the transaction (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

18. C. purchase/sale of any other tangible movable/immovable property or lease of such property, then: S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of property and nature of transaction. c. Number of units of each category of movable/immovable property involved in the transaction. d. Total amount/lease rent paid/received or payable/receivable in respect of each transaction of purchase/sale or lease provided/entered into: (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. e. Method used for determining the ALP

19.  Clause 9 – Particulars in respect of intangible property ▪ Purchase/sale/use of intangible property such as know-how, patents, copyrights, licenses etc, then: S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of intangible property and nature of transaction. c. Total amount paid/received or payable/receivable for purchase/sale/use of each category of intangible property: (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

20.  Clause 10 – Particulars in respect of providing services ▪ In respect of services such as financial, administrative, technical, commercial services, etc, then: S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of services provided/availed of/from the AE. c. Total amount paid/received or payable/receivable for the services provided/taken: (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

21.  Clause 11 - Particulars in respect of lending or borrowing of money ▪ Granting/receiving loans/advances to or from AE, then S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Nature of financing arrangement. c. Currency in which loan/advance granted/received. d. Interest rate charged/paid in respect of each loan/advance. e. Total amount paid/received or payable/receivable in the transaction : (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. f. Method used for determining the ALP

22.  Clause 12 – Particulars in respect of mutual agreement or arrangement. ▪ Mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any or more of such enterprises: S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of such mutual agreement or arrangement. c. Total amount paid/received or payable/receivable in each such transaction: (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

23.  Clause 13 - Particulars in respect of any other transactions ▪ Any other international transaction not specifically referred to above, with AE S.NoParticulars a. Name and address of the AE with whom the international transaction has entered into. b. Description of the transaction. c. Total amount paid/received or payable/receivable in each such transaction: (i)as per books of account. (ii)as computed by the assessee having regard to the arm’s length price. d. Method used for determining the ALP

24. Transfer Pricing Documentation

25.  Refer section 92 D of the Act read with Rule 10 D of the Rules Types of Documents Enterprise - wise Transaction specific Computation related 25

26.  Enterprise-wise documents  Ownership structure of the taxpayer  Profile of the Group  Name of Associated Enterprises, address,, legal status, country of tax residence, ownership linkage and business  Business of the taxpayer, description of industry 26

27.  Transaction-specific documents  Description of transaction  Functional Asset & Risk Analysis  Industry / market condition, forecasts/ budget, financial estimates  Uncontrolled transactions and comparability analysis  Computation related  Most appropriate method  Assumptions and adjustments if any  Arm’s length price 27

28.  Section 92 D of the Act read with Rule 10 E of the Rules  Should be prepared on contemporaneous basis  Should be kept and maintained for 8 years from the end of the relevant assessment year  No fresh documentation required for continuing transactions unless there is some significant change which can have impact on pricing 28

29. Sufficiency Reasonableness Accuracy Contemporaneous Regulation 29

31. CA. Gaurav Garg JGarg Economic Advisors Email: gaurav@jgarg.com gaurav@jgarg.com Mobile: +91 9899994934 www.jgarg.com 13 Nov 2011