Notification dated: 18.09.2013
Insertion of rule 10TA to 10TG to the Income Tax Rules, 1962
Section 92CB of the Income Tax Act, 1961
Rule: 10TB - Eligible Assessee
Sub-rule (1) Subject to the provisions of sub-rules (2) and (3), the 'eligible assessee' means a person who has exercised a valid option for application of safe harbour rules in accordance with rule 10TE, and -
(i) Is engaged in providing software development services or information technology enabled services or knowledge process outsourcing services, with insignificant risk, to a non-resident associated enterprise (hereinafter referred as foreign principal); Refer: 10TB(2)
(ii) has made any intra-group loan;
(iii) has provided a corporate guarantee;
(iv) is engaged in providing contract research and development services wholly or partly relating to software development, with insignificant risk, to a foreign principal; Refer: 10TB(3)
(v) is engaged in providing contract research and development services wholly or partly relating to generic pharmaceutical drugs, with insignificant risk, to a foreign principal; or Refer: 10TB(3)
(vi) is engaged in the manufacture and export of core or non-core auto components and where ninety(90) per cent. or more of total turnover during the relevant previous year is in nature of original equipment manufacturer sales.
Rule: 10TC - Eligible International Transaction
It means an international transaction between the eligible assessee and its associated enterprise, either or both of whom are non-resident, and which comprises of below list of activities provided by the eligible assessee:
(i) provision of software development services;
(ii) provision of information enabled services;
(iii) provision of knowledge process outsourcing services;
(iv) advance of intra-group loan;
(v) provision of corporate guarantee, where the amount guaranteed,
(a) does not exceed one hundred crore rupees ( 1 Billion ); or
(b) exceeds one hundred crore rupees( 1 Billion ), 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,
Rule: 10p - Safe Harbour
Sub-rule (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 shall be accepted by the income-tax authorities, if it is in accordance with the circumstances as specified in sub-rule (2) of Rule 10p.
Sub-rule (2) The circumstances referred to in sle-rule(1) to Rule 10p in respect of eligible international transaction specified as under:
10TC(i) provision of software development services;
- If aggregate value of such transaction entered into during the previous year < 500 Crore - Operating profit margin declared should not be less than 20%
- If aggregate value of such transaction entered into during the previous year > 500 Crore - Operating profit margin declared should not be less than 22%
10TC(ii) provision of information enabled services;
- If aggregate value of such transaction entered into during the previous year < 500 Crore - Operating profit margin declared should not be less than 20%
- If aggregate value of such transaction entered into during the previous year > 500 Crore - Operating profit margin declared should not be less than 22%
10TC(iii) provision of knowledge process outsourcing services;
- Operating profit margin declared should not be less than 25%
10TC(iv) advance of intra-group loan;
- If the amount of loan < 50 Crore - Interest rate declared shall not be less than the base rate of SBI as on 30th June of the relevant previous year plus 150 basis point.
- If the amount of loan > 50 Crore - Interest rate declared shall not be less than the base rate of SBI as on 30th June of the relevant previous year plus 300 basis point.
10TC(v) provision of corporate guarantee, where the amount guaranteed,
(a) does not exceed one hundred crore rupees ( 1 Billion ); or
- Commission or Fee declared in relation to the eligible international transaction is at the rate not less than 2 per cent. pa on the amount guaranteed.
(b) exceeds one hundred crore rupees( 1 Billion ), 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;
- Commission or Fee declared in relation to the eligible international transaction is at the rate not less than 1.75 per cent. pa on the amount guaranteed.
10TC(vi) provision of contract research and development services wholly or partly relating to software development;
- Operating profit margin declared should not be less than 30%
10TC(vii) provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs;
- Operating profit margin declared should not be less than 29%
10TC(viii) manufacture and export of core auto components; or
- Operating profit margin declared should not be less than 12%
10TC(ix) manufacture and export of non-core auto components,
- Operating profit margin declared should not be less than 8.5%
Sub-rule (3) The provisions of sub-rules (1) and (2) shall apply for the AY-2013-14 and four assessment years immediately following that assessment year.
Sub-rule (4) No comparability adjustment and allowance under the second proviso to sub-section (2) of Section 92C shall be made to the transfer price declared by the eligible assessee and accepted under sub-rules (1) and (2) of Rule 10p.
Sub-rule (5) The provisions of sections 92D and 92E in respect of an International transaction shall apply irrespective of the fact that the assessee exercises his option for safe harbour in respect of such transaction.
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