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Basic Components of TP
WHAT ?
- International Transaction
WHO ?
- Associated Enterprise
HOW ?
INTERNATIONAL TRANSACTION
A CROSS BORDER TRANSACTION between ASSOCIATED ENTERPRISES. At least one of the parties to the transaction must be a non-resident Transactions: (a) Purchase, sale or lease of Tangible or Intangible Property. (b) Provision of services. (c) Lending or borrowing of money. (d) Mutual agreement between AEs (e) Any transaction having a bearing on profits, income, losses or assets.
ASSOCIATED ENTERPRISE
Which participates, directly or indirectly, or through one or more intermediaries, in the management or control or capital of such company; The entity holds, directly or indirectly, shares carrying not less than 26% of the voting power ; or Loan advanced by the entity to the company constitutes not less than 51% of the book value of the total assets of the company; or The entity guarantees not less than 10% of the total borrowings of the company; or 90% or more of the raw materials and consumables required for the manufacture or processing of goods by the entity, are supplied by the company, or by persons specified by the company.
The price, which is applied in a transaction between persons other than associated enterprises in uncontrolled and comparable conditions.
PENALTIES
(a) Penalty for Concealment of Income - 100 to 300 % on tax evaded (b) Failure to Maintain/Furnish Prescribed Documentation 2% of the value of each international transaction (c) Penalty for non-furnishing of accountants report - INR 100,000 (fixed)
- SARVESHWAR LAHOTY