Maintenance, keeping and furnishing of information and document by certain persons.
The Section 92D of the Income Tax Act, 1961, 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 of such transactions which are prescribed by the department of income tax. Refer Rule 10D below.
Threshold limit for maintenance of prescribed information and documents
However, this requirement is not applicable where the aggregate value of international transactions in a financial year does not exceed Rs. 1 crore as per the books of account of the assessee.
Time for which the records are to be kept
All the information in relation to such international transactions shall be kept for a period of 8 years from the end of the relevant assessment year, i.e., for Financial Year 2020-21 the relevant assessment year is AY 2021-22, the records to be kept for 8 years i.e., up to FY 2029-30.
Power of Assessing Office or Commissioner Income Tax (Appeals) to ask for the information and documents
The Assessing Office or Commissioner Income Tax (Appeals) may require any assessee to furnish information and documents maintained by the assessee within a period of 30 days from the date of receipt of the notice in this regard. However, a further extension of 30 days can be provided on application of the assessee.
Rule 10D – Information and documents to be kept and maintained under section 92D
Every person who has entered into an international transaction or a specified domestic transaction shall keep and maintain the following information and documents, namely:
- a description of the ownership structure of the assessee enterprise with details of shares or other ownership interest held therein by other enterprises
- a profile of the multinational group of which the assessee enterprise is a part along with the name, address, legal status and country of tax residence of each of the enterprises comprised in the group with whom international transactions or specified domestic transactions, as the case may be, have been entered into by the assessee, and ownership linkages among them
- 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
- the nature and terms (including prices) of international transactions or specified domestic transactions entered into with each associated enterprise, details of property transferred or services provided and the quantum and the value of each such transaction or class of such transaction
- a description of the functions performed, risks assumed and assets employed or to be employed by the assessee and by the associated enterprises involved in the international transaction or the specified domestic transaction
- a record of the economic and market analyses, forecasts, budgets or any other financial estimates prepared by the assessee for the business as a whole and for each division or product separately, which may have a bearing on the international transactions or the specified domestic transactions entered into by the assessee
- a record of uncontrolled transactions considered for analyzing their comparability with the international transactions or the specified domestic transactions entered into, including a record of the nature, terms and conditions relating to any uncontrolled transaction with third parties which may be of relevance to the pricing of the international transactions or specified domestic transactions, as the case may be
- a record of the analysis performed to evaluate comparability of uncontrolled transactions with the relevant international transaction or specified domestic transaction
- a description of the methods considered for determining the arm’s length price in relation to each international transaction or specified domestic transaction or class of transaction, the method selected as the most appropriate method along with explanations as to why such method was so selected, and how such method was applied in each case
- a record of the actual working carried out for determining the arm’s length price, including details of the comparable data and financial information used in applying the most appropriate method, and adjustments, if any, which were made to account for differences between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions
- the assumptions, policies and price negotiations, if any, which have critically affected the determination of the arm’s length price
- details of the adjustments, if any, made to transfer prices to align them with arm’s length prices determined under these rules and consequent adjustment made to the total income for tax purposes
- any other information, data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the arm’s length price
Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in whatsoever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.