The case of the petitioner interalia was that there was a change in law as brought about by the decision of the Supreme Court. The Delhi High Court while holding that in considering a delay condonation application facts and circumstances of the each case are required to be considered, held that the facts of the case warranted condonation of delay of 25 days.
PFA
An inside into 'Safe Harbour Rules' for Specified Domestic transactions of Govt. Electricity Cos
January 22, 2014
An inside into 'Safe Harbour Rules' for Specified Domestic transactions of Govt. Electricity Cos
Specified Domestic Transactions
1.0 Introduction:
Safe Harbour means the circumstances in which the Income-tax authorities shall accept the transfer price declared by the assessee. Thus, in order to reduce the transfer pricing litigation the Government had notified 'Safe Harbour Rules' on September 18, 2013. Such Rules were notified only for international transactions and not for 'specified domestic transactions'. Now the CBDT has notified 'Safe Harbour Rules' for specified domestic transactions undertaken by Government companies engaged in business of generation, transmission or distribution of electricity.
2.0 Applicability of 'Safe Harbour Rules'
2.1 Electricity Companies: Government Companies engaged in the business of generation, transmission or distribution of electricity (i.e., eligible assessee) can opt for 'Safe Harbour Rules.
2.2 Eligible 'Specified Domestic Transactions' (Eligible SDTs): The Safe Harbour Rules are applicable to 'eligible SDTs'.
The eligible SDTs shall means specified domestic transactions undertaken by an 'eligible assessee' which are comprised of: –
(a) Supply of electricity by a generating company; or
(b) Transmission of electricity; or
(c) Wheeling of electricity.
3.0 Circumstances in which transfer price declared by assessee shall be accepted by Income-Tax tax authorities
The transfer price declared by the assessee in respect of eligible SDTs shall be accepted by Income-tax-authorities if the tariff in respect of supply of electricity, transmission of electricity, wheeling of electricity, as the case may be, is determined by appropriate commission as per provisions of the Electricity Act, 2003.
4.0 Comparability adjustment and tolerance range
No comparability adjustment and allowance of tolerance range under second proviso to Section 92C(2)(CBDT has prescribed tolerance range of 1% in respect of wholesale trading and 3% in other cases) shall be made to the transfer price declared by the eligible assessee.
5.0 Maintenance of documents and filing of audit report
5.1 Maintenance of documents: Eligible assessee who has entered into an Eligible SDTs shall keep and maintain following information and documents for period of 8 years from end of relevant assessment year:
• Description of ownership structure of assessee's enterprise with details of shares and other ownership interests held therein by other enterprises.
• Broad description of business of assessee and the industry in which he operates and of the business of associates enterprises with whom the assessee has transacted.
• Nature, terms (including prices), quantum and value of specified domestic transactions entered into with each associate enterprise.
• Record of proceeding, if any, before regulatory commission and orders of such commission relating to specified domestic transactions.
• Record of actual working carried out for determining transfer pricing of specified domestic transactions.
• Assumptions, policies and price negotiation, if any, which have critically affected the determination of transfer price.
• Any other information or data which may be relevant for determination of transfer price.
5.2 Audit report: The assessee should file transfer pricing audit report electronically in form 3CEB along with the return of income upto November 30th of the relevant Assessment Year.
6.0 Procedure to opt for 'Safe Harbour Rule'
• Eligible assessee can furnish application to the AO in Form 3CEFB to opt for Safe Harbour Rules in respect of eligible SDTs.
• Such application is required to be furnished on or before September 30 of relevant assessment year, provided that return of income is furnished by assessee on or before the date of furnishing form 3CEFB.
• Form 3CEFB can be furnished on or before 31st march 2015 in respect of eligible SDTs undertaken during previous years 2013-14 and 2014-15.
• The AO, on receipt of Form 3CEFB, shall verify whether assessee is an eligible assessee; and the transaction is eligible SDT, before the option for safe harbour is treated to be validly exercised.
• If AO doubts the valid exercise of the option for safe harbour by an assessee, he may require the assessee to furnish such information or documents as he may consider necessary.
• AO can declare the option exercised by assessee as invalid after giving opportunity of being heard if –:
(a) The assessee does not furnish the information or documents required by AO; or
(b) The AO finds that the assessee is not an eligible assessee; or
(c) That the transaction in respect of which option has been exercise is not an eligible SDT; or
(d) The tariff is not determined by commission.
• If the assessee objects to the order of AO he may file his objections within 15 days of receipt of order of AO.
• On receipt of objection of assessee, the Principal CIT or CIT or Principal Director or Director, as the case may be, shall pass appropriate orders.
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