Form 3 ceb
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
02 January 2015
if the international transactions exceeds more than 1 crore? if they should liable to file form 3 ceb?
02 January 2015
If during the year, if their is any international transactions with the associated enterprises, then its mandatory to file file form 3ceb with tax audit report. Associated Enterprise has been defined under section 92A of the income tax Act,1956.
02 January 2015
why do you think that there is any limit for INTERNATIONAL transaction?
The limit is for "specified domestic transaction"
The limit is for "specified domestic transaction"
02 January 2015
Agree with Amol. There is no limit in case of international transaction. in case of Specified domestic transaction the limit of 5 Crore has been prescribed.
Querist : Anonymous
Querist :
Anonymous
(Querist)
03 January 2015
if a foreign company has 50% share in indian company does it should file form 3 ceb
03 January 2015
the transaction should be INTERNATIONAL transaction.... why are you getting confused with HOLDING?
Tell me what is your reasoning, please
Tell me what is your reasoning, please
Querist : Anonymous
Querist :
Anonymous
(Querist)
03 January 2015
3.4 One enterprise holds, directly or indirectly, shares carrying not
less than twenty-six per cent of the voting power in the other
enterprise.
[Section 92A(2)(a)]
Two enterprises shall be associated enterprises based on the shareholding
of one enterprise in the other if the investing enterprise holds shares carrying
not less than twenty-six per cent of the voting power in the other enterprise.
Holding for this purpose includes indirect holding too.
As the terms used are “shares” and “voting power”, it is apparent that this
clause applies only to those cases where the investee enterprise is a
company. This is further supported by the fact that clause (j) refers to
individuals, clause (k) to Hindu undivided families and clause (l) to firms,
association of persons and body of individuals.
3.5 Any person or enterprise holds, directly or indirectly, shares
carrying not less than twenty-six per cent of the voting power in each of
such enterprises.
[Section 92A(2)(b)]
Under this clause, two enterprises are deemed associated enterprises, even
though one enterprise may not hold any shares in the other enterprise. This Associate Enterprises
19
clause comes into play when one person or enterprise simultaneously holds
shares carrying not less than twenty-six per cent voting power in each such
enterprise. For example, if AA of UK holds 26% voting power in BB of
Germany and also in CC of India, then BB and CC shall be deemed to be
associated enterprises. Even for this clause, shareholding may be direct or
indirect holding.
3.6 A loan advanced by one enterprise to the other enterprise
constitutes not less than fifty-one per cent of the book value of the total
assets of the other enterprise.
[Section 92A(2)(c)]
Where the lender enterprise’s loans to the borrower enterprise constitute
more than 51% of the ‘book value’ of the total assets of the borrowing
enterprise, then both the lender and the borrower enterprises would be
treated as ‘associated enterprises’.
3.7 One enterprise guarantees not less than ten per cent of the total
borrowings of the other enterprise.
[Section 92A(2)(d)]
Where the guarantor enterprise guarantees 10% or more of the total
borrowing of the enterprise seeking guarantee, then they would become
‘associated enterprises’.
3.8 More than half of the board of directors or members of the
governing board, or one or more executive directors or executive
members of the governing board of one enterprise, are appointed by the
other enterprise.
[Section 92A(2)(e)]
Where one enterprise has appointed
(a) more than one-half of the board of directors or members of the
governing board; or
(b) one or more executive directors or executive members of that board
in another enterprise the two enterprises shall be deemed to be
associated enterprises.
This clause refers to “board of directors” and “governing board”. As per
section 2(6) of the Companies Act, 1956, the term “board of directors” would
refer to the board of directors of a company. The term “governing board”, Guidance Note – Transfer Pricing
20
correspondingly, would refer to a body or council that has the executive
authority to manage the affairs of the enterprise to which it relates. These
enterprises could be artificial juridical non-corporate bodies.
For the purposes of this clause, the appointment of even one person to the
post of executive director or executive member would make the enterprises
associated enterprises.
3.9 More than half of the directors or members of the governing
board, or one or more executive directors or executive members of the
governing board of each of the two enterprises are appointed by the
same person or persons.
[Section 92A(2)(f)]
Clause (f) is an extension of the principle laid down in clause (e). This clause
is applicable where the same person has
(a) appointed more than one-half of the board of directors or members of
the governing board; or
(b) appointed one or more executive directors or executive members of
the governing board of two or more enterprises
For example, the appointment of seven out of twelve members of board of
directors of B Ltd. and six out of ten members of the board of directors of C
Ltd. is controlled and has been made by A Ltd. By virtue of clause (f), B Ltd.
and C Ltd. are associated enterprises.
Further, if the appointment of the executive director of B Ltd. and six out of
ten members of the board of directors of C Ltd. have been made by A Ltd.,
then B Ltd. and C Ltd. shall be regarded as associated enterprises.
8.10 The manufacture or processing of goods or articles or business
carried out by one enterprise is wholly dependent on the use of knowhow,
patents, copyrights, trade-marks, licences, franchises or any other
business or commercial rights of similar nature, or any data,
documentation, drawing or specification relating to any patent,
invention, model, design, secret formula or process, of which the other
enterprise is the owner or in respect of which the other enterprise has
exclusive rights.
[Section 92A(2)(g)]
Two enterprises are deemed to be associated, if one is wholly dependent on
the other for the use of know-how, patents, copyrights etc. for the Associate Enterprises
21
manufacture or processing of goods or articles or business carried on by
such enterprise. It should be noted that such know-how, patents, copyrights
etc. must be either owned by the other enterprise or the exclusive rights
thereto must vest with the other enterprise. If an Indian enterprise is wholly
dependent on the licence granted by a non-resident enterprise for
manufacture or processing of goods or articles or business carried out by the
Indian enterprise both enterprises shall be deemed to be associated
enterprises.
3.11 Ninety per cent or more of the raw materials and consumables
required for the manufacture or processing of goods or articles carried
out by one enterprise, are supplied by the other enterprise or by
persons specified by the other enterprise, and the prices and other
conditions relating to the supply are influenced by such other
enterprise.
[Section 92A(2)(h)]
There are two situations dealt with in this clause and they are as follows:
(i) 90% or more of the raw materials and consumables required for
manufacturing or processing of goods or articles are supplied by the
other enterprise,
or
(ii) 90% or more of the raw materials and consumables required for
manufacturing or processing of goods or articles are supplied by
persons specified by the other enterprise,
and
the prices and other conditions relating to supply (by the specified
person) are influenced by the other enterprise.
Since this clause relates to manufacture or processing of goods, it is
important to note that the 90% criteria should be applied exclusively to raw
materials and consumables used for manufacturing and processing only.
3.12 The goods or articles manufactured or processed by one
enterprise, are sold to the other enterprise or to persons specified by
the other enterprise, and the prices and other conditions relating
thereto are influenced by such other enterprise.
[Section 92A(2)(i)]Guidance Note – Transfer Pricing
22
Where the goods or articles manufactured and processed by one enterprise,
(say, enterprise A) are sold
(i) to another enterprise (say, enterprise B)
or
(ii) sold to another enterprise (say, enterprise C) specified by enterprise
B,
and
the prices and other conditions relating thereto are influenced by
enterprise B, then enterprises A and B shall be associated
enterprises.
While in clause (h), a minimum criteria of 90% has been mentioned, no such
quantification has been done in clause (i). This clause covers only sale of
goods manufactured or processed and not the sale of traded goods.
3.13 Where one enterprise is controlled by an individual, the other
enterprise is also controlled by such individual or his relative or jointly
by such individual and relative of such individual.
[Section 92A(2)(j)]
This clause deals with a situation where one enterprise is controlled by an
individual and the other enterprise is also controlled by –
(i) such individuals; or
(ii) his relative; or
(iii) jointly by such individual and his relative then both the enterprises
shall be deemed as associated enterprises.
The word ‘control’ can be interpreted to mean that the individual along with
his relatives has the power to make crucial decisions regarding the
management and running of the two enterprises.
The word ‘relative’ is defined under section 2(41) of the Act as follows:
“ “ relative”, in relation to an individual, means the husband, wife, brother or
sister or any lineal ascendant or descendant of that individual”
3.14 Where one enterprise is controlled by a Hindu undivided family,
the other enterprise is controlled by a member of such Hindu undivided Associate Enterprises
23
family, or by a relative of a member of such Hindu undivided family, or
jointly by such member and his relative.
[Section 92A(2)(k)]
This clause envisages control of the two enterprises by the same Hindu
undivided family and includes control by -
(i) a member of the Hindu undivided family, or
(ii) by a relative of a member of such Hindu undivided family, or
(iii) jointly by such member and his relatives.
3.15 Where one enterprise is a firm, association of persons or body of
individuals, the other enterprise holds not less than ten per cent
interest in such firm, association or body of individuals
[Section 92A(2)(l)]
This clause seeks to cover non-corporate bodies like partnership firms,
association of persons and body of individuals. Sub-clause (v) of clause (31)
of section 2 of the Act defines the term ‘person’ to include these entities.
In case of partnership firm or association of persons or body of individuals,
the other enterprise must hold not less than 10% interest in such firm,
association of persons or body of individuals to be regarded as an associated
enterprise.
3.16 There exists between the two enterprises, any relationship of
mutual interest, as may be prescribed.
[Section 92A(2)(m)]
This residuary clause enables the CBDT to widen the scope by adding any
relationship of mutual interest from time to time that will make any two
enterprises as associated enterprises. However, no such relationship of
mutual interest has yet been prescribed.
3.17 It requires mention that the term ‘enterprise’ is defined under clause
(iii) of section 92F of the Act. Accordingly, “enterprise” means a person
(including a permanent establishment of such person) who is, or has been, or
is proposed to be, engaged in any activity, relating to the production, storage,
supply, distribution, acquisition or control of articles or goods, or know-how,
patents, copyrights, trade-marks, licences, franchises or any other business
or commercial rights of similar nature, or any data, documentation, drawing
or specification relating to any patent, invention, model, design, secret
less than twenty-six per cent of the voting power in the other
enterprise.
[Section 92A(2)(a)]
Two enterprises shall be associated enterprises based on the shareholding
of one enterprise in the other if the investing enterprise holds shares carrying
not less than twenty-six per cent of the voting power in the other enterprise.
Holding for this purpose includes indirect holding too.
As the terms used are “shares” and “voting power”, it is apparent that this
clause applies only to those cases where the investee enterprise is a
company. This is further supported by the fact that clause (j) refers to
individuals, clause (k) to Hindu undivided families and clause (l) to firms,
association of persons and body of individuals.
3.5 Any person or enterprise holds, directly or indirectly, shares
carrying not less than twenty-six per cent of the voting power in each of
such enterprises.
[Section 92A(2)(b)]
Under this clause, two enterprises are deemed associated enterprises, even
though one enterprise may not hold any shares in the other enterprise. This Associate Enterprises
19
clause comes into play when one person or enterprise simultaneously holds
shares carrying not less than twenty-six per cent voting power in each such
enterprise. For example, if AA of UK holds 26% voting power in BB of
Germany and also in CC of India, then BB and CC shall be deemed to be
associated enterprises. Even for this clause, shareholding may be direct or
indirect holding.
3.6 A loan advanced by one enterprise to the other enterprise
constitutes not less than fifty-one per cent of the book value of the total
assets of the other enterprise.
[Section 92A(2)(c)]
Where the lender enterprise’s loans to the borrower enterprise constitute
more than 51% of the ‘book value’ of the total assets of the borrowing
enterprise, then both the lender and the borrower enterprises would be
treated as ‘associated enterprises’.
3.7 One enterprise guarantees not less than ten per cent of the total
borrowings of the other enterprise.
[Section 92A(2)(d)]
Where the guarantor enterprise guarantees 10% or more of the total
borrowing of the enterprise seeking guarantee, then they would become
‘associated enterprises’.
3.8 More than half of the board of directors or members of the
governing board, or one or more executive directors or executive
members of the governing board of one enterprise, are appointed by the
other enterprise.
[Section 92A(2)(e)]
Where one enterprise has appointed
(a) more than one-half of the board of directors or members of the
governing board; or
(b) one or more executive directors or executive members of that board
in another enterprise the two enterprises shall be deemed to be
associated enterprises.
This clause refers to “board of directors” and “governing board”. As per
section 2(6) of the Companies Act, 1956, the term “board of directors” would
refer to the board of directors of a company. The term “governing board”, Guidance Note – Transfer Pricing
20
correspondingly, would refer to a body or council that has the executive
authority to manage the affairs of the enterprise to which it relates. These
enterprises could be artificial juridical non-corporate bodies.
For the purposes of this clause, the appointment of even one person to the
post of executive director or executive member would make the enterprises
associated enterprises.
3.9 More than half of the directors or members of the governing
board, or one or more executive directors or executive members of the
governing board of each of the two enterprises are appointed by the
same person or persons.
[Section 92A(2)(f)]
Clause (f) is an extension of the principle laid down in clause (e). This clause
is applicable where the same person has
(a) appointed more than one-half of the board of directors or members of
the governing board; or
(b) appointed one or more executive directors or executive members of
the governing board of two or more enterprises
For example, the appointment of seven out of twelve members of board of
directors of B Ltd. and six out of ten members of the board of directors of C
Ltd. is controlled and has been made by A Ltd. By virtue of clause (f), B Ltd.
and C Ltd. are associated enterprises.
Further, if the appointment of the executive director of B Ltd. and six out of
ten members of the board of directors of C Ltd. have been made by A Ltd.,
then B Ltd. and C Ltd. shall be regarded as associated enterprises.
8.10 The manufacture or processing of goods or articles or business
carried out by one enterprise is wholly dependent on the use of knowhow,
patents, copyrights, trade-marks, licences, franchises or any other
business or commercial rights of similar nature, or any data,
documentation, drawing or specification relating to any patent,
invention, model, design, secret formula or process, of which the other
enterprise is the owner or in respect of which the other enterprise has
exclusive rights.
[Section 92A(2)(g)]
Two enterprises are deemed to be associated, if one is wholly dependent on
the other for the use of know-how, patents, copyrights etc. for the Associate Enterprises
21
manufacture or processing of goods or articles or business carried on by
such enterprise. It should be noted that such know-how, patents, copyrights
etc. must be either owned by the other enterprise or the exclusive rights
thereto must vest with the other enterprise. If an Indian enterprise is wholly
dependent on the licence granted by a non-resident enterprise for
manufacture or processing of goods or articles or business carried out by the
Indian enterprise both enterprises shall be deemed to be associated
enterprises.
3.11 Ninety per cent or more of the raw materials and consumables
required for the manufacture or processing of goods or articles carried
out by one enterprise, are supplied by the other enterprise or by
persons specified by the other enterprise, and the prices and other
conditions relating to the supply are influenced by such other
enterprise.
[Section 92A(2)(h)]
There are two situations dealt with in this clause and they are as follows:
(i) 90% or more of the raw materials and consumables required for
manufacturing or processing of goods or articles are supplied by the
other enterprise,
or
(ii) 90% or more of the raw materials and consumables required for
manufacturing or processing of goods or articles are supplied by
persons specified by the other enterprise,
and
the prices and other conditions relating to supply (by the specified
person) are influenced by the other enterprise.
Since this clause relates to manufacture or processing of goods, it is
important to note that the 90% criteria should be applied exclusively to raw
materials and consumables used for manufacturing and processing only.
3.12 The goods or articles manufactured or processed by one
enterprise, are sold to the other enterprise or to persons specified by
the other enterprise, and the prices and other conditions relating
thereto are influenced by such other enterprise.
[Section 92A(2)(i)]Guidance Note – Transfer Pricing
22
Where the goods or articles manufactured and processed by one enterprise,
(say, enterprise A) are sold
(i) to another enterprise (say, enterprise B)
or
(ii) sold to another enterprise (say, enterprise C) specified by enterprise
B,
and
the prices and other conditions relating thereto are influenced by
enterprise B, then enterprises A and B shall be associated
enterprises.
While in clause (h), a minimum criteria of 90% has been mentioned, no such
quantification has been done in clause (i). This clause covers only sale of
goods manufactured or processed and not the sale of traded goods.
3.13 Where one enterprise is controlled by an individual, the other
enterprise is also controlled by such individual or his relative or jointly
by such individual and relative of such individual.
[Section 92A(2)(j)]
This clause deals with a situation where one enterprise is controlled by an
individual and the other enterprise is also controlled by –
(i) such individuals; or
(ii) his relative; or
(iii) jointly by such individual and his relative then both the enterprises
shall be deemed as associated enterprises.
The word ‘control’ can be interpreted to mean that the individual along with
his relatives has the power to make crucial decisions regarding the
management and running of the two enterprises.
The word ‘relative’ is defined under section 2(41) of the Act as follows:
“ “ relative”, in relation to an individual, means the husband, wife, brother or
sister or any lineal ascendant or descendant of that individual”
3.14 Where one enterprise is controlled by a Hindu undivided family,
the other enterprise is controlled by a member of such Hindu undivided Associate Enterprises
23
family, or by a relative of a member of such Hindu undivided family, or
jointly by such member and his relative.
[Section 92A(2)(k)]
This clause envisages control of the two enterprises by the same Hindu
undivided family and includes control by -
(i) a member of the Hindu undivided family, or
(ii) by a relative of a member of such Hindu undivided family, or
(iii) jointly by such member and his relatives.
3.15 Where one enterprise is a firm, association of persons or body of
individuals, the other enterprise holds not less than ten per cent
interest in such firm, association or body of individuals
[Section 92A(2)(l)]
This clause seeks to cover non-corporate bodies like partnership firms,
association of persons and body of individuals. Sub-clause (v) of clause (31)
of section 2 of the Act defines the term ‘person’ to include these entities.
In case of partnership firm or association of persons or body of individuals,
the other enterprise must hold not less than 10% interest in such firm,
association of persons or body of individuals to be regarded as an associated
enterprise.
3.16 There exists between the two enterprises, any relationship of
mutual interest, as may be prescribed.
[Section 92A(2)(m)]
This residuary clause enables the CBDT to widen the scope by adding any
relationship of mutual interest from time to time that will make any two
enterprises as associated enterprises. However, no such relationship of
mutual interest has yet been prescribed.
3.17 It requires mention that the term ‘enterprise’ is defined under clause
(iii) of section 92F of the Act. Accordingly, “enterprise” means a person
(including a permanent establishment of such person) who is, or has been, or
is proposed to be, engaged in any activity, relating to the production, storage,
supply, distribution, acquisition or control of articles or goods, or know-how,
patents, copyrights, trade-marks, licences, franchises or any other business
or commercial rights of similar nature, or any data, documentation, drawing
or specification relating to any patent, invention, model, design, secret
Querist : Anonymous
Querist :
Anonymous
(Querist)
03 January 2015
i have seen dis in the book their is an transaction and consists of 50% share does it liable to file form 3 ceb?
03 January 2015
yes that is right
AE......Associated Enterprise
another is PE (Permanent Establishment)
next is ALP (Arm's Length Price)
urs is AE...go ahead
AE......Associated Enterprise
another is PE (Permanent Establishment)
next is ALP (Arm's Length Price)
urs is AE...go ahead
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