36/2012 notification 36 date of issue 30/8/2012

Page 1 of 28 [TO BE PUBLISHED IN THE GAZETTE OF INDIA EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (ii)] GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE [CENTRAL BOARD OF DIRECT TAXES] Notification New Delhi, the 30th day of August, 2012 INCOME-TAX S.O.2005(E).- In exercise of the powers conferred by sub-section (9) of section 92CC read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:- 1. (1). These rules may be called the Income-tax (10th Amendment) Rules, 2012. (2). They shall come into force on the date of their publication in the official Gazette. 2. In the Income-tax Rules, 1962 (hereafter referred to as the principal rules), - (a) after rule 10E, the following rule shall be inserted, namely.- “Advance Pricing Agreement Scheme Meaning of expressions used in matters in respect of advance pricing agreement. 10F For the purposes of this rule and rules 10G to 10T,– (a) ‘agreement’ means an advance pricing agreement entered into between the Board and the applicant, with the approval of the Central Government, as referred to in sub-section (1) of section 92CC of the Act; (b) “application” means an application for advance pricing agreement made under rule 10 I ; (c) “bilateral agreement” means an agreement between the Board and the applicant, subsequent to, and based on, any agreement Page 2 of 28 referred to in rule 44 GA between the competent authority in India with the competent authority in the other country regarding the most appropriate transfer pricing method or the arms’ length price; (d) “competent authority in India” means an officer authorised by the Central Government for the purpose of discharging the functions as such for matters in respect of any agreement entered into under section 90 or 90A of the Act; (e) “covered transaction” means the international transaction or transactions for which agreement has been entered into; (f) “critical assumptions” means the factors and assumptions that are so critical and significant that neither party entering into an agreement will continue to be bound by the agreement, if any of the factors or assumptions is changed; (g) “most appropriate transfer pricing method” means any of the transfer pricing method, referred to in sub-section (1) of section 92C of the Act, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or function performed by such persons or such other relevant factors prescribed by the Board under rule 10B and 10C; (h) “multilateral agreement” means an agreement between the Board and the applicant, subsequent to, and based on, any agreement referred to in rule 44GA between the competent authority in India with the competent authorities in the other countries regarding the most appropriate transfer pricing method or the arms’ length price; (i) “tax treaty” means an agreement under section 90, or section 90A, of the Act for the avoidance of double taxation; (j) “team” means advance pricing agreement team consisting of income-tax authorities as constituted by the Board and including such number of experts in economics, statistics, law or any other field as may be nominated by the Director General of Income Tax (International Taxation); (k) “unilateral agreement” means an agreement between the Board and the applicant which is neither a bilateral nor multilateral agreement. Page 3 of 28 Persons eligible to apply 10G Any person who – (i) has undertaken an international transaction; or (ii) is contemplating to undertake an international transaction, shall be eligible to enter into an agreement under these rules. Pre-filing Consultation 10H (1) Every person proposing to enter into an agreement under these rules shall, by an application in writing, make a request for a pre-filing consultation. (2) The request for pre-filing consultation shall be made in Form No. 3 CEC to the Director General of Income Tax (International Taxation). (3) On receipt of the request in Form No. 3 CEC, the team shall hold pre- filing consultation with the person referred to in rule 10G. (4) The competent authority in India or his representative shall be associated in pre-filing consultation involving bilateral or multilateral agreement. (5) The pre-filing consultation shall, among other things,- (i) determine the scope of the agreement; (ii) identify transfer pricing issues; (iii) determine the suitability of international transaction for the agreement; (iv) discuss broad terms of the agreement. (6) The pre-filing consultation shall– (i) not bind the Board or the person to enter into an agreement or initiate the agreement process; (ii) not be deemed to mean that the person has applied for entering into an agreement. Page 4 of 28 Application for advance pricing agreement 10 I (1) Any person, who has entered into a pre-filing consultation as referred to in rule 10H may, if desires to enter into an agreement furnish an application in Form No. 3 CED alongwith the requisite fee. (2) The application shall be furnished to Director General of Income Tax (International Taxation) in case of unilateral agreement and to the competent authority in India in case of bilateral or multilateral agreement. (3) Application in Form No. 3 CED may be filed by the person referred to in rule 10G at any time– (i) before the first day of the previous year relevant to the first assessment year for which the application is made, in respect of transactions which are of a continuing nature from dealings that are already occurring; or (ii) before undertaking the transaction in respect of remaining transactions. (4) Every application in Form No. 3 CED shall be accompanied by the proof of payment of fees as specified in sub-rule (5). (5) The fees payable shall be in accordance with following table based on the amount of international transaction entered into or proposed to be undertaken in respect of which the agreement is proposed: Amount of international transaction entered into or proposed to be undertaken in respect of which agreement is proposed during the proposed period of agreement. Fee Amount not exceeding Rs. 100 crores 10 lacs Amount not exceeding Rs. 200 crores 15 lacs Amount exceeding Rs. 200 crores 20 lacs Withdrawal of application for agreement 10 J (1) The applicant may withdraw the application for agreement at any time before the finalisation of the terms of the agreement. (2) The application for withdrawal shall be in Form No. 3CEE. Page 5 of 28 (3) The fee paid shall not be refunded on withdrawal of application by the applicant. Preliminary processing of application 10 K (1) Every application filed in Form No. 3CED shall be complete in all respects and accompanied by requisite documents. (2) If any defect is noticed in the application in Form No. 3CED or if any relevant document is not attached thereto or the application is not in accordance with understanding reached in pre-filing consultation referred to in rule 10H, the Director General of Income-tax (International Taxation) (for unilateral agreement) and competent authority in India (for bilateral or multilateral agreement) shall serve a deficiency letter on the applicant before the expiry of one month from the date of receipt of the application. (3) The applicant shall remove the deficiency or modify the application within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf, may be extended, so however, that the total period of removal of deficiency or modification does not exceed thirty days.