Section 92D of the Income tax Act 1961 related to Maintenance and keeping of information and document by persons entering into an international transaction   or specified domestic transaction requires that Every person who has entered into an international transaction   or specified domestic transaction] shall keep and maintain such information and document in respect thereof as prescribed in Rule 10D.

Rule 10D of the Income Tax Rules have been amended by the Notification No. 11/2015 [F.No. 142/7/2014-TPL] dated 04-02-2015. As per the amendment a new sub-rule 2A has been inserted in Rule 10D providing for the exclusion of an eligible specified domestic transaction. Further Rules 10THA to Rule 10THD related to Safe Harbour Rules for Specified Domestic Transactions  has also been inserted.

As per Sub Rule 2A to Rule 10D, provides that the rule 10D shall not apply to an eligible specified domestic transaction (referred to in rule 10 THB) in a case of an eligible assessee (referred to in rule 10 THA)subject to that the eligible assessee, shall keep and maintain the following information and documents:
(i) a description of the ownership structure of the assessee enterprise with details of shares or other ownership interest held therein by other enterprises;
(ii) a broad description of the business of the assessee and the industry in which the assessee operates, and of the business of the associated enterprises with whom the assessee has transacted; (iii) the nature and terms (including prices) of specified domestic transactions entered into with each associated enterprise and the quantum and the value of each such transaction or class of such transaction;
(iv) a record of proceedings if any before the regulatory commission and orders of such commission relating to the specified domestic transaction;
(v) a record of the actual working carried out for determining the transfer price of the specified domestic transaction;
(vi) the assumptions, policies and price negotiations, if any, which have critically affected the determination of the transfer price; (vii) any other information, data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the transfer price.”;

Safe Harbour Rules for Specified Domestic Transactions

10TH. Definitions.- For the purposes of this rule and rules 10THA to 10THD,-
(a) "Appropriate Commission” shall have the same meaning as assigned to it in sub-section (4) of section 2 of the Electricity Act, 2003 (36 of 2003);
(b) “Government company”shall havethe same meaning as assigned to it in subsection (45) of section 2 ofthe CompaniesAct,2013 (18 of 2013);

10THA. Eligible assessee.– The ‘eligible assessee’ means a person who has exercised a valid option for application of safe harbour rules in accordance withthe provisions of rule 10 THC, and is a Government company engaged in the business of generation, transmission or distribution of electricity.

10THB. Eligible specified domestic transaction.– The “Eligible specified domestic transaction” means a specified domestic transaction undertaken by an eligible asseessee and which comprises of:
(i) supply of electricity by a generating company; or
(ii) transmission of electricity; or
(iii) wheeling of electricity.

Safe Harbour
10THC. (1) Where an eligible assessee has entered into an eligible specified domestic transaction in any previous year relevant to an assessment year and the option exercised by the said assessee is treated to be validly exercised under rule 10THD, the transfer price declared by the assessee in respect of such transaction for that assessment year shall be accepted by the incometax authorities, if it is in accordance with the circumstances as specified in sub-rule (2).
(2) The circumstances referred to in sub-rule (1) in respect of the eligible specified domestic transaction specified in column (2) of the Table below shall be as specified in the corresponding entry in column (3) of the said Table:-

S No.	Eligible specified domestic Transaction	Circumstances
1	2	3
1	Supply of electricity, transmission of electricity, wheeling of electricity referred to in item (i), (ii) or (iii) of rule THB,as the case may be.	The tariff in respect of supply of electricity, transmission of electricity, wheeling of electricity, as the case may be, is determined by the Appropriate Commission in accordance with the provisions of the Electricity Act, 2003 (36 of 2003).

(3) No comparability adjustment and allowance under the second proviso to sub-section (2) of section 92C shall be made to the transfer price declared by the eligible assessee and accepted under sub-rule (1).
(4) The provisions of sections 92D and 92E in respect of a specified domestic transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction.

Procedure.
10 THD.(1) For the purposes of exercise of the option for safe harbour, the assessee shall furnish a Form 3CEFB, complete in all respects, to the Assessing Officer on or before the due date specified in Explanation 2 to subsection (1) of section 139 for furnishing the return of income for the relevant assessment year :
Provided that the return of income for the relevant assessment year is furnished by the assessee on or before the date of furnishing of Form 3CEFB:
Provided further that in respect of eligible specified domestic transactions undertaken during the previous year relevant to the assessment year beginning on the 1st day of April, 2013 orbeginning on the 1st day of April, 2014, Form 3CEFB can be furnished by the assessee on or before the 31st day of March, 2015.

(2) On receipt of Form 3CEFB, the Assessing Officer shall verify whether-
(i) theassessee exercising the option is an eligible assessee; and
(ii) the transaction in respect of which the option is exercised is an eligible specified domestic transaction, before the option for safe harbour by the assessee is treated to be validly exercised.

(3) Where the Assessing officer doubts the valid exercise of the option for the safe harbour by an assessee, he may require the assessee, by notice in writing, to furnish such information or documents or other evidence as he may consider necessary, and the assessee shall furnish the same within the time specified in such notice.

(4) Where-
(a) theassessee does not furnish the information or documents or other evidence required by the Assessing Officer; or
(b) the Assessing Officer finds that the assessee is not an eligible assessee; or
(c) the Assessing Officer finds that the specified domestic transaction in respect of which the option referred to in sub-rule (1) has been exercised is not an eligible specified domestic transaction; or
(d) the tariff is not in accordance with the circumstances specified in sub-rule (2) of rule 10 THC,
the Assessing 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:
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.

(5) If the assessee objects to the order of the Assessing Officer under subrule (4) declaring the option to be invalid, he may file his objections with the Principal Commissioner or the Commissioner or the Principal Director or the Director, as the case may be, to whom the Assessing Officer is subordinate, within fifteen days of receipt of the order of the Assessing Officer.

(6) On receipt of the objection referred to in sub-rule (5), the Principal Commissioner or the Commissioner or the Principal Director or the Director, as the case may be, 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.

(7) For the purposes of this rule,-
(i) no order under sub-rule(4) shall be made by an Assessing Officer after expiry of a period of three months from the end of the month in which Form 3CEFB is received by him;
(ii) the order under sub-rule (6) shall be passed by the Principal Commissioner or Commissioner or Principal Director or Director, as the case may be, within a period of two months from the end of the month in which the objection filed by the assessee under sub-rule(5) is received by him.

(8) If the Assessing Officer or the Principal Commissioner or the Commissioner or the Principal Director or the Director, as the case may be, does not pass an orderwithin the time specified in sub-rule (7), then the option for safe harbour exercised by the assessee shall be treated as valid.’;

(B) in Appendix II, after Form No. 3CEFA, the following Form shall be inserted, namely:-
“Form No. 3CEFB (See sub-rule (1) of rule 10THD) Application for Opting for Safe Harbour in respect of Specified Domestic Transactions.

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