ICAI Revised Guidance Note on Transfer Pricing Report u/s 92E of Income-Tax Act. 2020 Edition

ICAI Revised Guidance Note on Transfer Pricing Report Under Section 92E of the Income-Tax Act 1961 based on law as amended by Finance Act, 2020


[Based on the law as amended by the Finance Act, 2020]
(Revised Seventh Edition 2020)

The ICAI has issued the revised Guidance note on Report Under Section 92E of The Income-Tax Act, 1961.

The object of this guidance note is to provide guidance to accountants in discharging their responsibilities under section 92E of the Act.

The Finance Act, 2001 had introduced Transfer Pricing Regulation in India by substituting existing Section 92 of the Act and introducing new sections 92 to 92F w.e.f April, 2001 (from AY 2002-03). Rule 10A to 10E with reference these sections 92 have been notified subsequently.

Section 92E, every person who enters into an international transaction or SDT during a previous year  is obligated to obtain a report from a chartered accountant and file it on or before the specified date in the prescribed form. Under Rule 10E, The said report is in Form No. 3CEB.

Subsequent to the ICAI 6th Edition of November 2017, the Finance (No. 2) Act, 2019 made amendments to section 92CD, 92CE, 92D and 286 of the Act. Further the Finance Act, 2020 made certain amendments to sections 92CB, 92CC, 92F and 94B

The Institute of Chartered Accountants of India (ICAI), in order to keep its members updated, has again issued a revised Guidance Note on Transfer Pricing related provisions. 

Chapter 1

Legislative framework
Terms and abbreviations used
Objective of the guidance note
Applicability of the provisions

Chapter 2 – Responsibility of an Enterprise and the Accountant
Responsibility of an enterprise
Accountant’s responsibility
Professional misconduct

Chapter 3 – Associated Enterprise
Associated enterprises and deemed associated enterprises
Source definition [Section 92A(1)]
Deemed definition [Section 92A(2)]
Relationship between Head Office and Branch Office
Associated Enterprises in relation to ‘Specified Domestic Transactions’

Chapter 4 – International Transaction

Tangible and Intangible property
Services, finances and costs etc.
Capital financing Transactions
Cost Contribution arrangement
Free of cost services
Cross-border transactions

Chapter 4A – Specified Domestic Transactions
Threshold limit

Chapter 5 – Arm’s Length Price
Meaning and determination
Uncontrolled transaction
Comparable uncontrolled transactions
Distinctive nature of the property and services
Analysis of functions performed
Analysis of assets employed
Analysis of risks assumed
Tested Party
Contractual terms
Market conditions
Business strategies, commercial considerations and economic principles
Power of Assessing Officer

Chapter 6 – Methods of computation of arm’s length price
Meaning of relevant terms
Comparable Uncontrolled Price Method (CUP Method)
Resale Price Method (RPM)
Cost Plus Method (CPM)
Profit Split Method (PSM)

Transactional Net Margin Method (TNMM)
Other Method of determination of arm’s length price
Most appropriate method

Chapter 7 – Documentation and verification
Types of information and documents
Ownership, profile and business
Details of international transactions/Specified domestic transactions
Records having a bearing on international transaction/ Specified domestic transactions
Description of methods considered and working thereof
Relief from maintenance of specific records
Supporting documents
Contemporaneity of data

Chapter 8 – Penalties
Penalty for concealment of income or furnishing inaccurate particulars thereof

Penalty for under reporting and misreporting of income
Penalty for failure to keep and maintain information and documents in respect of international transaction or specified domestic transaction
Penalty for failure to furnish report under section 92E
Penalty for failure to furnish information or document under section 92D
Penalty for failure to furnish information or documents under section 286
Penalty for failure incorrect information in reports and certificates

Chapter 9 – Scope of examination under section 92E
Report under section 92E
Other aspects

Annexure to Form No.3CEB

I. Statutory Provisions
II. Relevant Rules and Forms
III. Extracts from the Memorandum explaining the provisions of the respective Finance Bill(s)
IV. Circulars
V. Mandatory Communication – Relevant Extracts from the Code of Ethics.
VI. Revision of recommended scale of fee chargeable for the professional assignments done by Chartered Accountants
VII. Standard on Auditing (SA) 610 (Revised) Using the Work of Internal Auditors

Download ICAI Revised Guidance Note on Transfer Pricing Click Here >>

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