The Safe Harbour Rules for Transfer Pricing were introduced by the Finance Act, 2009 to reduce the transfer pricing disputes, provide certainty to taxpayers, align safe harbour margins with industry standards, and expand the scope of safe harbour transactions. These rules were amended by the CBDT in 2017 through Notification 46/2017 to introduce a new safe harbour regime.
The CBDT vide Notification No. 58/2023 dated 09-08-2023 has extended the validity of provisions of Rule 10TD(1) & Rule 10(2A) till Assessment Year 2023-24. Rule 10TD(1) and Rule 10TD(2A) prescribe a list of eligible international transactions like
- Provision of software development services referred to in item (i) of rule 10TC;
- Provision of information technology enabled services referred to in item (ii) of rule 10TC;
- Provision of knowledge process outsourcing services referred to in item (iii) of rule 10TC;
- Advancing of intra-group loans referred to in item (iv) of rule 10TC where the amount of loan does not exceed fifty crore rupees;
- Advancing of intra-group loans referred to in item (iv) of rule 10TC where the amount of loan exceeds fifty crore rupees;
- Providing corporate guarantee referred to in sub-item (a) of item (v) of rule 10TC; Providing corporate guarantee referred to in sub-item (b) of item (v) of rule 10TC;
- Provision of contract research and development services wholly or partly relating to software development referred to in item (vi) of rule 10TC;
- Provision of contract research and development services wholly or partly relating to generic pharmaceutical drugs referred to in item (vii) of rule 10TC;
- Manufacture and export of core auto components referred to in item (viii) of rule 10TC;
- Manufacture and export of non- core auto components referred to in item (ix) of rule 10TC) where the transfer price declared by the assessee shall be required to be accepted by the Income-tax Authorities.
Rule 10TD(3A) sets the time limit for the application of the provision of sub-rules (1) and (2A). It provides that provisions shall apply for the Assessment Year 2017-18 to 2019-20. Later the Board inserted a new sub-rule 3B to Rule 10TD(3A) to extend the applicability of provisions of sub-rules (1) and (2A) till Assessment Year 2022-23.
The Board has now amended Rule 10TD(3B) to further extend the applicability of Safe Harbour Rules until Assessment Year 2023- 24.
The concept of safe harbour rates to monitor the arm's length pricing of a company's transactions with its overseas divisions/units was Initially notified for a block of four years under IT Rule 10TD(3) for AY 2013-14 to 2016-17.
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