clarification on reporting of share capital transaction in form 3ceb n.
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Submission of Form 3CEB is under section 92E of Income Tax Act, 1961 read with Rule 10E and it can be filed electronically under the proviso to Rule 12(2).\nGET FREE CONSULTANCY \nHelpline: 91 9069142028 \nEmail: info@enterslice.com \nWebsite: www.enterslice.com\n

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clarification on reporting of share capital transaction in form 3ceb

Clarification on Reporting of Share Capital Transaction in FORM 3CEB

ENTERSLICE VALUE ADVISORS LLP

E-57, SECTOR-63, NOIDA, UP – 201301 (INDIA)

deriving laws of

Deriving Laws of

Audit Report to be issued by Chartered Accountant for Transfer Pricing u/s 92E of Income Tax Act, 1961

Section 92E read as “Every person who has entered into an international transaction or specified domestic transaction during a previous year shall obtain a report from an accountant and furnish such report on or before the specified date in the prescribed form duly signed and verified in the prescribed manner by such accountant and setting forth such particulars as may be prescribed”

Submission of Form 3CEB is under section 92E of Income Tax Act, 1961 read with Rule 10E and it can be filed electronically under proviso to Rule 12(2).

continued

Continued ………

Rule 10E read as “The report from an accountant required to be furnished under section 92E by every person who has entered into an international transaction $[or a specified domestic transaction] during a previous year shall be in Form No. 3CEB and be verified in the manner indicated therein.

$ Inserted by IT sixth Amendment Rules 2013 w.e.f. 01-04-2013

Hence as the FORM 3CEB don’t have Share Capital Transaction clause to be reported under Specified Domestic Transaction and it is guided under principle of Transfer Pricing reporting under section 92E of Income Tax Act, 1961

form 3ceb java utility showing only clause

Form 3CEB java utility showing only Clause 16 of Part B where Share Capital Transaction to be reported

explanation of form 3ceb clause 16 only

Explanation of Form 3CEB Clause 16 Only

  • The form is designed under Questionnaire format where has the assesse entered into any international transaction(s) in respect of purchase or sale of marketable securities or issue of equity shares including transaction specified in explanation (i) (c) under section 92B(2) is asked, if answer is affirmative then assesse is required to provide details of:-
  • Name and address of the associated enterprise with whom the international transaction has been entered into.
  • Nature of Transaction
  • Currency in which the transaction was undertaken
  • Consideration charged/paid in respect of the transaction
  • Method used for determining the arm’s length price as given u/s 92C (1) of Income Tax Act, 1961.
  • If the answer of above given question is Negative or No, then no need to fill the Clause 16 of Form 3CEB.
  • Further, in and above irrespective of capital transaction the transaction stated in Section 92B (2) explanation (i) (c) need to reported. Section 92B (2) (i) (c) read as “ capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business”
important definition

Important Definition:

Income Tax Act, 1961

  • Person [Section 2(31)]: includes an Individual, Hindu Undivided Family (HUF), Company, Firm, Association of Person (AOP)/Body of Individuals (BOI) whether incorporated or not, Local Authority and Every Artificial Juridical Person, not falling within any of the above.
  • International Transaction [Section 92B]: means transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of , or any contribution to, any cost or expenses incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises.
continued 1

Continued …………….

Section 2 (81) defines Securities as mention in Section 2 (h) of Securities Contracts (Regulation) Act, 1956 which read as, “shares, scrips, stocks, bond, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; derivative; units or any other instrument issued by any collective investment scheme to the investors in such schemes; security receipt as defined in clause (zg) of Section 2 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [in short SARFAESI]; units or any other such instrument issued to the investors under any mutual fund scheme; Government Securities; such other instrument as may be declared by the Central Government to be securities; and right or interest in securities.”

  • Debenture [Section 2 (30): includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not provided instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 and Such other instrument as may be prescribed by Central Government in consultation with Reserve Bank of India, issued by company shall not be treated as Debenture.
after going through definition of securities

After going through definition of Securities & Debenture, here it can be observed contradictory views in two governing Act, in the case of Debenture where definition of Debenture read with Chapter III-D of Reserve Bank Act, 1934 (given in Section 2(30) of companies act, 2013) exclude the Derivative transaction whereas the same was included in definition of Securities (given in companies act derived from Section 2(h) of SCRA 1956).

Here debenture is not defined in Income Tax Act, 1961 and hence best judgment is required to take as per nature of company to report such transaction in FORM 3CEB.

Hence it can be concluded those companies under which RBI is regulatory then no need to report derivative on debenture whereas in all other cases it is to justify the proper reporting structure assigned by Act, the concerned is required to report all kinds of capital transaction in respect of international transaction in clause 16 of Form 3CEB under given parameters of Form.

The Form 3CEB on which Section 92 Transfer Pricing related transaction is reported to Department of Central Board of Direct Tax by 30th November of following year on which Financial Year end. More or less strictly speaking in reporting of Share Capital Transaction of any person specified Income tax Act, prescribes all types of shares, bond, debenture and capital financing explanation (i) (c) of Section 92B (2) of Income Tax Act, 1961.

for any query and assistance feel free to contact

For any query and assistance:Feel Free to Contact:

Enterslice Value Advisors, LLP

E-57, Sector-63, Noida

Mail at: info@enterslice.com