WHAT YOU HAVE TO LOOK INTO RELATED PARTY NOTE OF A COMPANY WHICH HAS CROSS BORDER TRANSACTIONS WITH ITS RELATED PARTY

 WHAT YOU HAVE TO LOOK INTO RELATED PARTY NOTE OF A COMPANY WHICH HAS CROSS BORDER TRANSACTIONS WITH ITS RELATED PARTY

FORM 48 UNDER THE NEW INCOME TAX ACT

Every company having international transactions with a related party must report them in its Transfer Pricing Documentation (TPD) and file Form 3CEB (which has now been renamed to Form 48 under the new Income-tax Act).

Clause 13 in the above form deals with the availment or provision of services.

HIDDEN FREEBIES

In Transfer Pricing, we scan the RPT note to spot "hidden freebies" like a parent company can give its Indian subsidiary an interest-free loan or a free corporate guarantee so we can calculate what the Arm’s Length Price (fair market value) should have been these freebies.

RPT FILTER

If a company has more than 25% transactions with its Associated Enterprises (AEs), it fails the filter.

One single note buried at the back of the financials drives our entire compliance, benchmarking, and litigation.

WHAT SHOULD A COMPANY SECRETARY OR COMPLIANCE PROFESSIONAL CHECK?

For a company with cross-border related-party transactions, review:

1. The related-party disclosures in the financial statements.

2. The list of associated enterprises and the nature of their relationships.

3. Transactions involving services, royalties, loans, guarantees, imports and exports.

4. Agreements, invoices, supporting evidence and actual receipt of services.

5. The transfer pricing study and the basis for determining the arm’s length price.

6. Consistency between the books of account, transfer pricing documentation and Form 48.

#R V SEKAR FCS, LLB 79047 19295,