TaxTMI 
TaxTMI 
Income-tax (16th Amendment), Rules, 2013.
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....vices wholly or partly relating to software development" means the following, namely: (i) research and development producing new theorems and algorithms in the field of theoretical computer science; (ii) development of information technology at the level of operating systems, programming languages, data management, communications software and software development tools; (iii) development of Internet technology; (iv) research into methods of designing, developing, deploying or maintaining software; (v) software development that produces advances in generic approaches for capturing, transmitting, storing, retrieving, manipulating or displaying information; (vi) experimental development aimed at filling technology knowledge gaps as necessary to develop a software programme or system; (vii) research and development on software tools or technologies in specialised areas of computing (image processing, geographic....
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....nbsp; (xi) support centres; (xii) website services; (xiii) data search integration and analysis; (xiv) remote education excluding education content development; or (xv) clinical database management services excluding clinical trials, but does not include any research and development services whether or not in the nature of contract research and development services; (f) "intra-group loan" means loan advanced to wholly owned subsidiary being a non- resident, where the loan- (i) is sourced in Indian rupees; (ii) is not advanced by an enterprise, being a financial company including a bank or a financial institution or an enterprise engaged in lending or borrowing in the normal course of business; and (iii) does not include credit line or any other loan facility which has no fixed term for repayment; (g) "knowledge process outsourcing services" means the followi....
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....ncome; (ii) income arising on account of foreign currency fluctuations; (iii) income on transfer of assets or investments; (iv) refunds relating to income-tax; (v) provisions written back; (vi) extraordinary incomes; and (vii) other incomes not relating to normal operations of the assessee; (l) "operating profit margin" in relation to operating expense means the ratio of operating profit, being the operating revenue in excess of operating expense, to the operating expense expressed in terms of percentage; (m) "software development services" means,- (i) business application software and information system development using known methods and existing software tools; (ii) support for existing systems; (iii) converting or translating computer languages; (iv) add....
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....t assets including the intangibles required, are provided by the foreign principal or its other associated enterprises, and the eligible assessee is only provided a remuneration for the work carried out by it; (c) the eligible assessee works under the direct supervision of the foreign principal or its associated enterprise which not only has the capability to control or supervise but also actually controls or supervises the activities carried out through its strategic decisions to perform core functions as well as by monitoring activities on a regular basis; (d) the eligible assessee does not assume or has no economically significant realised risks, and if a contract shows that the foreign principal is obligated to control the risk but the conduct shows that the eligible assessee is doing so, the contractual terms shall not be the final determinant; (e) the eligible assessee has no ownership right, legal or economic, on any intangible generated or on the outcome of any intangible generated or arising during the course of rendering of services, which vests with the foreign principal as evident from the contract and the conduct of the p....
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....cing services; (iv) advance of intra-group loan; (v) provision of corporate guarantee, where the amount guaranteed,- (a) does not exceed one hundred crore rupees; or (b) exceeds one hundred crore rupees, and the credit rating of the associated enterprise, done by an agency registered with the Securities and Exchange Board of India, is of the adequate to highest safety; (vi) provision of contract research and development services wholly or partly relating to software development; (vii) provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs; (viii) manufacture and export of core auto components; or (ix) manufacture and export of non-core auto components, by the eligible assessee. 10TD. Safe Harbour.- (1) Where an eligible assessee has entered into an eligible international transaction and the option exercised by the said assessee is not held to be invalid under rule 10TE, the transfer price declared by the assessee in respect of such transaction s....
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....n to the eligible international transaction is not less than the base rate of State Bank of India as on 30th June of the relevant previous year plus 300 basis points. 6. Providing corporate guarantee referred to in sub-item (a) of item (v) of rule 10TC. The commission or fee declared in relation to the eligible international transaction is at the rate not less than 2 per cent. per annum on the amount guaranteed. 7. Providing corporate guarantee referred to in sub-item (b) of item (v) of rule 10TC. The commission or fee declared in relation to the eligible international transaction is at the rate not less than 1.75 per cent. per annum on the amount guaranteed. 8. Provision of contract research and development services wholly or partly relating to software development referred to in item (vi) of rule 10TC. The operating profit margin declared by the eligibleassesseefromtheeligible international transaction in relation to operating expense incurred is not less than 30 per cent.. 9. Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs referred to in item (vii) of rule 10TC. The operating pr....
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....ssessing Officer before furnishing return of income of that year, providing details of eligible transactions, their quantum and the profit margins or the rate of interest or commission shown: Provided further that an option for safe harbour shall not remain in force in respect of any assessment year following the initial assessment year, if - (i) the option is held to be invalid for the relevant assessment year by the Transfer Pricing Officer under sub-rule (11) or by the Commissioner under sub-rule (8) in respect of an objection filed by the assessee against the order of the Transfer Pricing Officer under sub-rule (11) , as the case may be; or (ii) the eligible assessee opts out of the safe harbour, for the relevant assessment year, by furnishing a declaration to that effect, to the Assessing Officer. (3) On receipt of Form 3CEFA,the Assessing Officer shall verify whether- (i) the assessee exercising the option is an eligible assessee; and (ii) the transaction in respect of which the option is exercised is an eligible international transaction, before ....
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....ransfer price declared by the assessee in respect of the relevant eligible international transactions is in accordance with the circumstances specified in sub-rule of rule 10 TD and, if it is not in accordance with the said circumstances, the Assessing Officer shall adopt the operating profit margin or rate of interest or commission specified in sub-rule of rule 10TD. (10) Where the facts and circumstances on the basis of which the option exercised by the assessee was held to be valid have changed and the Assessing Officer has reason to doubt the eligibility of an assessee or the international transaction for any assessment year other than the initial Assessment Year falling within the period for which the option was exercised by the assessee, he shall make a reference to the Transfer Pricing Officer for determination of eligibility of the assessee or the international transaction or both for the purpose of safe harbour. Explanation.- For purposes of this sub-rule the facts and circumstances include:- (a) functional profile of the assessee in respect of the international transaction; (b) the risks being undertaken by the assessee; ....
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....n sub-rule (14) , then the option for safe harbour exercised by the assessee shall be treated as valid. 10TF. Safe harbour rules not to apply in certain cases.- Nothing contained in rules 10TA, 10TB, 10TC, 10TD or rule 10TE shall apply in respect of eligible international transactions entered into with an associated enterprise located in any country or territory notified under section 94A or in a no tax or low tax country or territory. 10TG. Mutual Agreement Procedure not to apply.- Where transfer price in relation to an eligible international transaction declared by an eligible assessee is accepted by the income- tax authorities under section 92CB, the assessee shall not be entitled to invoke mutual agreement procedure under an agreement for avoidance of double taxation entered into with a country or specified territory outside India as referred to in sections 90 or 90A.'; (B) in Appendix II, after Form No. 3CEF, the following shall be inserted, namely:- "Form No. 3CEFA (See sub-rule (1) of rule 10 ...) Application for Opting for Safe Harbour To, The Assessing Officer ................................... Sir/Madam, I propose to opt for the safe h....
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....scription of the eligible international transaction (e) Amount received for the services provided (f) Operating profit margin in relation to operating expense declared (g) Whether transfer price is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 3. Hastheeligible assessee entered intoany international transaction in respect of the provision of knowledge processes outsourcing services referred to in item (iii) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises withwhomtheeligible international transaction has been entered into (b) Name of the country or territory in which AE (s) is located. (c) Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA. (d) Descriptionof theeligible international transaction (e) Amount received for the services provided (f) Operatingprofit margin inrelation to operating expense declared. (g) Whether transfer price is in accordance with the circumstances specified under rule 10TD Yes/No Yes/No 4. Has the eligible assessee advanced intra-group loans as referred to in item (iv) of rule ....
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....act research and development services wholly or partly relating to generic pharmaceutical drugs as referred to in item (vii) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises (AE) with whom the eligible international transaction has been entered into. (b) Name of the country or territory in which AE (s) is located. (c) Whether country or territory is a no tax or low tax country or territory as defined in rule 10TA. (d) Descriptionof the eligible international transaction. (e) Amount received for the services provided. (f) Operatingprofitmargininrelation to operating expense declared. (g) Whether transfer price is in accordance with the circumstance specified under rule 10TD Yes/No Yes/No 8. Has the eligible assessee entered into any international transaction in respect of manufacturing and export of core auto components as referred to in item (viii) of rule 10TC?If Yes, provide the following details*: (a) Nameandaddressoftheassociated enterprises (AE) with whom the eligible international transaction has been entered into. (b) Name of the country or territory in which AE (s) is located. (c) Wh....