VittSphere ONE Calculators Blog CA Prabhakar Kumar · FCA · ICAI 560762
Case lawCBDT Circulars & Instructions › Statutory position — s.92D(1)(ii) and s.92D(4) with Rule 10DA: the master file — PART A OF FORM 3CEAA IS FILED BY EVERY CONSTITUENT ENTITY EVEN IF NEITHER THRESHOLD IS CROSSED, and the two thresholds that both have to be crossed before Part B is due
CBDT Circulars & InstructionsCuts both waysValidity unconfirmeds.92Ds.92D(1)(ii)s.92D(2)s.92D(3)s.92D(4)s.286s.286(1)s.286(9)s.271AAs.271AA(2)s.139(1)Rule 10DARule 10DBRule 10D

Statutory position — s.92D(1)(ii) and s.92D(4) with Rule 10DA: the master file — PART A OF FORM 3CEAA IS FILED BY EVERY CONSTITUENT ENTITY EVEN IF NEITHER THRESHOLD IS CROSSED, and the two thresholds that both have to be crossed before Part B is due

Our group is nowhere near the master file thresholds. Do we still have to file anything under Rule 10DA?

Our group is nowhere near the master file thresholds. Do we still have to file anything under Rule 10DA?

Yes. This is the most-missed compliance in Indian transfer pricing. Rule 10DA(3) says in terms: "The constituent entity shall furnish Part A of Form No. 3CEAA even if the conditions specified under sub-rule (1) are not satisfied." Every constituent entity of an international group files Part A, regardless of any threshold. Part B — the substantive master file information in clauses (a) to (n) of Rule 10DA(1) — is due only where BOTH conditions in sub-rule (1) are satisfied: (i) the consolidated group revenue of the international group for the accounting year, as reflected in its consolidated financial statement, exceeds FIVE HUNDRED CRORE RUPEES; AND (ii) the aggregate value of international transactions during the accounting year, as per the books of account, exceeds FIFTY CRORE RUPEES, or, in respect of purchase, sale, transfer, lease or use of intangible property, exceeds TEN CRORE RUPEES. The obligation itself comes from s.92D(1)(ii), which requires every person being a constituent entity of an international group to keep and maintain such information and document in respect of an international group as may be prescribed, and from s.92D(4), which requires the person referred to in that clause to furnish it to the authority prescribed under s.286(1) in the prescribed manner and by the prescribed date. Section 92D was substituted in this form by Act No. 23 of 2019 with effect from 1 April 2020; for assessment years 2018-19 and 2019-20 the same obligation sat in a proviso to s.92D(1), and s.92D(4) then referred to "the person referred to in the proviso to sub-section (1)". Rule 10DA(2) fixes that date as the s.139(1) due date for the return of income, and Rule 10DA(4) allows one designated constituent entity to file for all of them, provided the designation is conveyed in Form No. 3CEAB to the Joint Director referred to in Rule 10DB(1) THIRTY DAYS BEFORE the due date for furnishing Form No. 3CEAA.

Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Section 92D of the Income-tax Act, 1961 as substituted with effect from 1 April 2020, transcribed from incometaxindia.gov.in/w/section-92d-19 (heading "Maintenance, keeping and furnishing of information and document by certain persons", Year: 2021) and read again on incometaxindia.gov.in/w/section-92d-20 (Year: 2022); the pre-substitution text read on incometaxindia.gov.in/w/section-92d-16 (Year: 2017) and -18 (Year: 2019 (No. 2)); Rule 10DA transcribed from incometaxindia.gov.in/w/rule-10da (Income-tax Rules, 1962, no "Year:" stamp). It bears on section 92D, section 92D(1)(ii), section 92D(2), section 92D(3), section 92D(4), section 286, section 286(1), section 286(9), section 271AA, section 271AA(2), section 139(1), section Rule 10DA, section Rule 10DB, section Rule 10D of the Income Tax Act 1961, in Assessment & Scrutiny, Penalty and How Tax Law Is Read matters.

Validity check could not be completed. Validity check could not be completed. The section text is verified on two departmental pages with different "Year:" stamps (2021 and 2022) printing the text as substituted by Act No. 23 of 2019 with effect from 1 April 2020, and the pre-substitution text is recorded from the Year 2017 and Year 2019 (No. 2) pages. The latest page located is /w/section-92d-20 (Year: 2022), so a later amendment cannot be excluded. The rule text is verified on the departmental rule page and the critical sub-rule (3) was independently located on indiankanoon, but departmental rule pages carry no "Year:" stamp and I did not retrieve the footnotes to Rule 10DA, so I cannot say whether the thresholds in sub-rule (1) have been amended since the rule was made. I found no decision construing Rule 10DA and did not check judicial treatment.

Why it matters

The Part A filing is missed constantly, because advisers screen for the thresholds and stop when the group fails them. Rule 10DA(3) is a standalone obligation that does not depend on the thresholds at all, and the sanction for missing it is s.271AA(2) — a flat penalty of five hundred thousand rupees for failure to furnish the information and document required under s.92D(4). A group below every threshold can therefore be exposed to a Rs 5 lakh penalty per constituent entity for not filing a form that takes an afternoon. Three further points. First, the sub-rule (1) conditions are cumulative for Part B — "exceeds five hundred crore rupees; AND" — so a group with very large international transactions but consolidated revenue of Rs 400 crore does not file Part B. Second, within condition (ii) the two limbs are alternatives — Rs 50 crore of international transactions generally, OR Rs 10 crore of intangible-property transactions — so an intangibles-heavy group crosses far earlier. Third, the Form 3CEAB designation is due THIRTY DAYS BEFORE Form 3CEAA, and a group that files 3CEAB late loses the single-filing concession in Rule 10DA(4) and is back to every constituent entity filing. Rule 10DA(6) requires the information to be kept for eight years from the end of the relevant assessment year, which is longer than the ordinary retention period practitioners work to.

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