Statutory position — s.285A with rule 114DB and rules 11UB and 11UC: the Indian concern's own reporting duty when an offshore share derives its value substantially from Indian assets
CBDT Circulars & InstructionsCuts both waysNo later treatment found
Our foreign parent has sold shares in an intermediate holding company abroad. Nobody in India has been paid anything and we are not a party. Why are we being asked for Form 49D, and what is the penalty if we do not file it?
Because the duty is on you, not on the transferor. Section 285A provides that where any share of, or interest in, a company or an entity registered or incorporated outside India derives, directly or indirectly, its value substantially from the assets located in India, as referred to in Explanation 5 to clause (i) of sub-section (1) of section 9, and such company or entity holds, directly or indirectly, such assets in India through, or in, an Indian concern, then such Indian concern shall, for the purposes of determination of any income accruing or arising in India under section 9(1)(i), furnish within the prescribed period to the prescribed income-tax authority the information or documents, in such manner, as may be prescribed. Rule 114DB prescribes Form No. 49D, filed with the Assessing Officer having jurisdiction over the Indian concern, within ninety days from the end of the financial year, and within ninety days of the transaction where the transaction had the effect of transferring the right of management or control; documents are to be kept for eight years from the end of the relevant assessment year. Rule 11UB fixes the fair market value of the Indian assets and of all the assets, and rule 11UC apportions the income by the formula A x B / C and requires a report in Form No. 3CT from an accountant. Failure attracts penalty under section 271GA — two per cent of the value of the transaction where the right of management or control passed, and five hundred thousand rupees in any other case.
