TMI BlogIncome-tax (16th Amendment), Rules, 2013.X X X X Extracts X X X X X X X X Extracts X X X X ..... g to software development" means the following, namely: (i) research and development producing new theorems and algorithms in the field of theoretical computer science; (ii) development of information technology at the level of operating systems, programming languages, data management, communications software and software development tools; (iii) development of Internet technology; (iv) research into methods of designing, developing, deploying or maintaining software; (v) software development that produces advances in generic approaches for capturing, transmitting, storing, retrieving, manipulating or displaying information; (vi) experimental development aimed at filling technology knowledge gaps as necessary to develop a software programme or system; (vii) research and development on software tools or technologies in specialised areas of computing (image processing, geographic data presentation, character recognition, artificial intelligence and such other areas) ;or (viii) upgradation of existing products where source code has been made available by the principal; (b) "core auto components" means,- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business; and (iii) does not include credit line or any other loan facility which has no fixed term for repayment; (g) "knowledge process outsourcing services" means the following business process outsourcing services provided mainly with the assistance or use of information technology requiring application of knowledge and advanced analytical and technical skills, namely:- (i) geographic information system; (ii) human resources services; (iii) engineering and design services; (iv) animation or content development and management; (v) business analytics; (vi) financial analytics; or (vii) market research, but does not include any research and development services whether or not in the nature of contract research and development services; (h) "non-core auto components" mean auto components other than core auto components; (i) "no tax or low tax country or territory" means a country or territory in which the maximum rate of income-tax is less than fifteen per cent.; (j) "operating expense" means the costs incurred in the previous year by the assessee in relation to the international transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outsourcing services, with insignificant risk, to a non-resident associated enterprise (hereinafter referred as foreign principal) ; (ii) has made any intra-group loan; (iii) has provided a corporate guarantee; (iv) is engaged in providing contract research and development services wholly or partly relating to software development, with insignificant risk, to a foreign principal; (v) is engaged in providing contract research and development services wholly or partly relating to generic pharmaceutical drugs, with insignificant risk, to a foreign principal; or (vi) is engaged in the manufacture and export of core or non-core auto components and where ninety per cent. or more of total turnover during the relevant previous year is in the nature of original equipment manufacturer sales. (2) For the purposes of identifying an eligible assessee, with insignificant risk, referred to in item (i) of sub-rule (1) , the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall have regard to the following factors, namely:- (a) the foreign principal performs most of the economically significant functions involved, including the critical functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch or product development and also provides a remuneration to the eligible assessee for the work carried out by it; (c) the eligible assessee works under the direct supervision of the foreign principal or its other 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 by monitoring activities on a regular basis; (d) the eligible assessee does not assume or has no economically significant realised risks, and if a contract shows that the foreign principal is obligated to control the risk but the conduct shows that the eligible assessee is doing so, the contractual terms shall not be the final determinant; (e) the eligible assessee has no ownership right, legal or economic, on the outcome of the research which vests with the foreign principal and is evident from the contract as well as the conduct of the parties. 10TC. Eligible international transaction.- Eligible international transaction means an international transaction between the eligible assessee and its associated enterprise, either or both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gyenabledservices referred to in item (ii) of rule 10TC. The operating profit margin declared by the eligibleassesseefromtheeligible international transaction in relation to operating expense is - (i) not less than 20 per cent., where the aggregate value of such transactions entered into during the previous year does not exceed a sum of five hundred crore rupees; or (ii) not less than 22 per cent., where the aggregate value of such transactions entered into during the previous year exceeds a sum of fivehundred crore rupees. 3. Provision of knowledge process outsourcing services referred to in item (iii) of rule 10TC. The operating profit margin declared by the eligibleassesseefromtheeligible international transaction in relation to operating expense is not less than 25 per cent.. 4. Advancing of intra-group loans referred to in item (iv) of rule The Interest rate declared in relation to the eligible international transaction is not less 10TC where the amount of loan does not exceed fifty crore rupees. than the base rate of State Bank of India as on 30th June of the relevant previous year plus 150 basis po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to sub-section of section 92C shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and above. (5) The provisions of sections 92D and 92E in respect of an international transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction. 10TE. Procedure.- (1) For the purposes of exercise of the option for safe harbour, the assessee shall furnish a Form 3CEFA, complete in all respects, to the Assessing Officer on or before the due date specified in Explanation 2 below sub-section (1) of section 139 for furnishing the return of income for - (i) the relevant assessment year, in case the option is exercised only for that assessment year; or (ii) the first of the assessment years, in case the option is exercised for more than one assessment year: Provided that the return of income for the relevant assessment year or the first of the relevant assessment years, as the case may be, is furnished by the assessee on or before the date of furnishing of Form 3CEFA. (2) The option for safe harbour validly exercised shall continue to remain in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-rule (1) has been exercised is not an eligible international transaction, the Transfer Pricing Officer shall, by order in writing, declare the option exercised by the assessee under sub-rule (1) to be invalid and cause a copy of the said order to be served on the assessee and the Assessing Officer: Provided that no order declaring the option exercised by the assessee to be invalid shall be passed without giving an opportunity of being heard to the assessee. (7) If the assessee objects to the order of the Transfer Pricing Officer under sub-rule (6) or sub-rule (11) declaring the option to be invalid, he may file his objections with the Commissioner, to whom the Transfer Pricing Officer is subordinate, within fifteen days of receipt of the order of the Transfer Pricing Officer. (8) On receipt of the objection referred to in sub-rule (7) , the Commissioner shall after providing an opportunity of being heard to the assessee pass appropriate orders in respect of the validity or otherwise of the option exercised by the assessee and cause a copy of the said order to be served on the assessee and the Assessing Officer. (9) In a case where option exercised by the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to such international transaction shall be determined in accordance with the provisions of sections 92C and 92CA without having regard to the profit margin or the rate of interest or commission as specified in sub-rule of rule 10TD. (14) For the purposes of this rule,- (i) no reference under sub-rule(4) shall be made by an Assessing Officer after expiry of a period of two months from the end of the month in which Form 3CEFA is received by him; (ii) no order under sub-rule (6) or sub-rule (11) shall be passed by the Transfer Pricing Officer after expiry of a period of two months from the end of the month in which the reference from the Assessing officer under sub-rule(4) or sub-rule (10) , as the case may be, is received by him; (iii) the order under sub-rule (8) shall be passed by the Commissioner within a period of two months from the end of the month in which the objection filed by the assessee under sub-rule(7) is received by him. (15) If the Assessing Officer or the Transfer Pricing Officer or the Commissioner, as the case may be, does not make a reference or pass an order, as the case may be, within the time specified in sub-rule (14) , then the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with whom the eligible international transaction has been entered into. (b) Name of the country or territory in which AE (s) is located. (c) Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA. (d) Description of the eligible international transaction. (e) Amount received or receivable for the services provided. (f) Operating profit margin in relation to operating expense declared (g) Whether transfer price is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 2. Has the eligible assessee entered into any international transaction in respect of the provision of information technology enabled services referred to in item (ii) of rule 10TC? If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises withwhomtheeligible international transaction has been entered into (b) Name of the country or territory in which AE (s) is located. (c) Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA. (d) Description of the eligible international transaction (e) Amount received for the services provided (f) Opera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer price is in accordance with the circumstance specified under rule 10TD Yes/No Yes/No 6. Has the eligible assessee entered into any international transaction in respect of the provision of contract research and development services wholly or partly relating to software development services as referred to in item (vi) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises (AE) with whom the eligible international transaction has been entered into. (b) Name of the country or territory in which AE (s) is located. (c) Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA. (d) Description of the eligible international transaction. (e) Amount received for the services provided. (f) Operating profit margin in relation to operating expense declared. (g) Whether transfer price is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 7. Has theeligible assessee enteredintoany international transaction in respect of the provision of contract research and development services wholly or partly relating to generic pharm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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