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00:00:00in this class we will discuss the safe harbor rules and then secondary adjustment predominant
00:00:28B. Okay, a small point is there, thin capitalization, loan-like, that is what you are going to cover
00:00:36to do, even no need to worry further. Three sections are covered under this 92CB, 92CE,
00:00:4694B. 92CB is all about power of board to make safe harbor rules, 92CE secondary adjustment
00:00:57in certain cases. And interest in you can detect some deductions, limitations. Whenever
00:01:06the interest is paid outside India for an associated enterprises, certain level only you can debit,
00:01:13in the 3 to 4 marks illustration theory questions in the topic, don't miss this. CB, power to
00:01:25make, power of board to make safe harbor rules. One of the safe harbor rules is if you import
00:02:04penalty and penalty as well as late charges, all of them put in place, you can get the
00:02:11argument. If you don't know, sir, that's the argument.
00:02:13In the case of 92CE, this is the arm's length price concept, arm's length price. If we
00:02:19have a method of corrective management, later on, we have to say, sir, if you get the
00:02:26revised income, if you get the tax, you get the tax, you get the tax, you get the tax, you
00:02:30you have to say, if you get the tax, you get the tax, you get the tax, you get the tax, you get the tax
00:02:54is safe harbor rules, you can find the income tax department in which you can find the income tax department, it is safe harbor rules here.
00:03:07So, this safe harbor rules, what is based on the safe harbor rules?
00:03:13Safe harbor rules apply to income under section 9 class 1 sub class 1, that is business connection.
00:03:19Arms enterprise under section 92C and 92CA, in the rent scenario, safe harbor rules, where we have the confusions.
00:03:26Now, submit the safe harbor, correct to accept any notice.
00:03:31Then, guidelines are better.
00:03:35Guidelines are the board authority, boards authority.
00:03:38Income tax board has the power to create rules related to the safe harbor.
00:03:43So, if you submit that, how do you accept that, the rules are followed, it will automatically accept that rules are notified of board authority.
00:03:54So, safe harbor defined, circumstances where the tax authorities accept the transfer price or income declared, 92.
00:04:05C.
00:04:06Income, section 9 class 1, sub class 1, around the business connection.
00:04:12Declared by the Assessee, that is correct.
00:04:14Any questions?
00:04:15Is that clear?
00:04:16Section 94B, limitation on interest deductions.
00:04:18Interest in detect that is called limitations on interest deductions.
00:04:20Scope.
00:04:21Okay.
00:04:22Okay.
00:04:23This is why one of the interest deductions in the interest deductions, in the interest deductions, 794B, it is the claim.
00:04:34Okay.
00:04:35If you are interested in the interest deductions 794B, you can claim the deductions.
00:04:45Indian company or permanent establishment of a foreign companies in India.
00:04:52Only India will have a good company.
00:04:55India will have a good company.
00:04:58India will have a good company.
00:05:08If you are interested in the interest, you will have a good company.
00:05:13Y is a good company.
00:05:18If you are interested in the interest, you will have a good company.
00:05:31Indian company is a good company.
00:05:33The company is a good company.
00:05:35The company is a good company.
00:05:37Deals with interest payments on debts from non-resident associated enterprises.
00:05:42Payments on debt from non-resident.
00:05:44So, this is the deal with non-resident.
00:05:48In the case, in the 94B, the limitations there.
00:05:51Excess interest, which is disallowed.
00:05:55Excess interest, whichever is lower off.
00:06:0030% of EBITDA.
00:06:03Earnings before interest, tax depreciation and amortization.
00:06:09Earnings before interest, tax, depreciation and amortization.
00:06:13Earnings before interest, tax, depreciation and amortization.
00:06:16That is 30 percentage conducting or interest paid to associated enterprises.
00:06:23In the rent level, whichever is lower is excess interest and the excess interest, you can
00:06:28debit and allow.
00:06:29Clear?
00:06:30That is disallowed.
00:06:31And associated enterprises get the loan, which said no matter, loan interest.
00:06:39Loan is deemed associated enterprises debt.
00:06:40Loan is deemed associated enterprises debt from third parties with associated enterprises guarantee.
00:06:46One, associated enterprises is loan, interest is interest, third party loan is loan guarantee.
00:06:52Probably the SBA bank is loan.
00:06:54Probably the SBA bank is loan.
00:06:55SBA bank is loan.
00:06:56It is deemed it.
00:06:57It is deemed it.
00:06:58It is deemed it.
00:06:59Because you can pay off the loan loan.
00:07:00You can pay off the loan loan loan.
00:07:01Loan is the loan loan guarantee of matching deposit.
00:07:06Probably SBA bank loan is the loan loan.
00:07:08A non-dead is not dead, but deemed it.
00:07:22Why you are deemed it?
00:07:25To get a spot and get a spot, no.
00:07:30and third party get on the debt to vonger, and the debt to vonger, holding company are associates on the guarantee, matching FD, which is deemed associated prices date, and this will not be applicable, that excess interest is disallowed in children, it is not applicable, banking, insurance company, international financial services centers, and finance companies, and notified NBFCs,
00:07:57in the conditions, excess interest paper allowed, is that clear? Now, carry forward, if you are disallowed, if you are disallowed, if you are disallowed, if you are disallowed, if you are disallowed, you are disallowed,
00:08:16next year, now, you are disallowed, but why are you allowed? Then, if you are disallowed, you are disallowed, you are disallowed,
00:08:23accessory allowability, if you are disallowed, you are disallowed, you are disallowed, if you are disallowed, if you are disallowed,
00:08:36First, you need to carry forward in the future period,
00:08:40subject to a cap of 30%.
00:08:4230% cap up, ABD is 30%.
00:08:48Definitions are debt, loan, financial instruments, debentures, and long term debt instruments.
00:08:57Arrangements involving deductible finance charge.
00:09:00For this reason, you need to carry out a financial charge.
00:09:05Associate Enterprises, section 92A,
00:09:08Associate Enterprises, Team to be an Associate Enterprises.
00:09:12Permanent Establishment, fixed place of the business through operations are conducted in India.
00:09:17Finance Company that you will know, as per the IFSC regulations,
00:09:21Finance Company defined as per the Special Economic Zones Act 2005.
00:09:30Is that okay?
00:09:31Finance Company, vera, idu vera.
00:09:33For example pakla, we will see an example.
00:09:38Here, Case 1, EBITDA, EBITDA 100, and interest for Associate Enterprises, 35, interest paid to non-associated enterprises.
00:10:03One hundred dollar.
00:10:04Total interest payment being 35.
00:10:08Total interest payment being 35.
00:10:10So, if you have disallowed and said,
00:10:15Okay, whichever is lower of, whichever is lower of,
00:10:1930 percentage of EBITDA.
00:10:22EBITDA.
00:10:23EBITDA, so 100 is 30 percentage put 30, interest paid to outside India or associated interest prices,
00:10:3335, right, okay, 30 percentage interest you can get value, 30 percentage you can get value,
00:10:45okay, if you go to the protocol, Chen Nada change program, one interest paid to associated enterprises,
00:10:5835 and 30 percentage of EBITDA, EBITDA, total interest minus this one, total interest minus
00:11:1035, 30 percentage EBITDA, EBITDA 30, 30 percentage EBITDA, EBITDA 30, 30 you can get value,
00:11:22that 5 is disallowed, you have to see, interest payable to associated enterprises, as well as
00:11:36interest paid in over 30 percent of EBITDA, 5 rupees, whichever is lower, 5 rupees is disallowed,
00:11:43either disallowed, clear, now let us move on to the next one, in the next case EBITDA being
00:11:58100, next case, okay, so EBITDA, EBITDA in this case being 100, interest payable to associated enterprises,
00:12:05interest to associated enterprises, nil, interest to non associated enterprises, nil, interest
00:12:25nil, interest to, non associated enterprises, 35, so associated enterprises, nil, non associated enterprises
00:12:30nil, interest to non associated enterprises nil, here, the total interest being, nil, 35, so deductions claim
00:12:37banam both, whichever is lower off, okay, number one being, interest total interest, okay, this is total interest nil,
00:12:49interest total interest okay this is total interest on check law more than 30 percentage
00:12:55of EBITDA so 30 percent EBITDA calculate okay 30 percent EBITDA being 30 in excess of that
00:13:07interest paid to associated enterprises zero disallowed interest zero nothing is there
00:13:24disallowed here PNLUKKULA YOWLU DEBEAT PANNEEK LAAM PNLUKKULA YOWLU DEBEAT PANNEEK LAAM case 2
00:13:32entire interest can be detected first case entire interest 5 rupees 30 rupees detect PANNEEK LAAM case 3
00:13:42PANNEEK 100 rupees interest payable to the associate enterprises 15 interest payable to the non associate
00:13:51enterprise 20 total interest 35 whichever is lower or both 30 percentage of EBITDA being 30 rupees
00:13:57total interest 35 minus 30 percentage of EBITDA being 30 subtracting 5 rupees interest payable to the
00:14:05associated enterprise 15 rent level whichever is lower 5 rupees is disallowed here
00:14:10APNEEK LAAM KILA YOWLU DEBEAT PANNEEKLA AMUNNA total interest 35 lelul 5 rupees disallowed na PNLUKULA
00:14:15DEBEAT PANNEEKLA Interest on 30 rupees hope you will be able to understand the computation of interest
00:14:20expenses desolated section 94B, 94B. Clear? Now, we will move on to the next and the secondary
00:14:31adjustments in the end of the year, we will try to finish of primary adjustments. Primary
00:14:37adjustments are being written on the, you foreign goods purchase a and foreign entity
00:14:46A's Enterprises or Associated Enterprises of A. If you purchase 100 lakhs price fixed
00:14:54but if you price 80 lakhs, you are paying more for the purchases by 20 lakhs. 20 lakhs
00:15:05should be added to your account as your income. That's how we have seen arms length price
00:15:14adjustments. In the differences, you can add and add and you can add and add and tax cut
00:15:22non-suit. This is the primary adjustment. If you have 100 lakhs, you can pay and pay
00:15:31and pay and pay and pay and you can pay. It's the $50. It's the sale. It's the purchase.
00:15:34If you buy 100 lakhs, it's the total 100 lakhs. You have understown your income by 20 lakhs.
00:15:41normal it is 120 to get out of here, it is sale, it is purchase, it is sale, 103 to get out of here, 100 to get out of here, it is 100 to get out of here, you have under shown your income by 20 lakhs, that is you add back, is that clear, so you have income
00:15:59add back no problem here, that's what you say, the 20th lecture is foreign to you, so you have to repatriate 2 options, one for the delay in repatriation, you have to levy interest, no sir,
00:16:28I will say, no one, this is a plan, you have to get out of here, and now it is 18% tax, you have to get out of here, you have to get out of here, you can simply do no
00:16:35detection in the 20 lakhs, you get out of here, apart from the regular tax, you get out of here, you have to get out of here, and this is the additional interest, you have to get out of here,
00:16:52In the portion here, this is called secondary adjustments, that is all.
00:17:00In the first, in the first adjustment, primary adjustment, in the secondary adjustment.
00:17:05In the first, in the primary adjustment, may be by applying arm's length price, not only
00:17:14arm's length price.
00:17:15So, fifth point, resulting from mutual agreement procedure for avoiding double taxation.
00:17:21So, mutual taxation avoid mutual agreement, like bilateral agreement.
00:17:25That is the first step, if you have a plan, you can add the amount, you can cut off.
00:17:30Primary adjustment to transfer price can occur in the following situation.
00:17:37Number one, we are the one of the situations.
00:17:41By applying APA, you may pay sometimes excess.
00:17:44APA process is extra, India will be able to do the same rules.
00:17:49But the same rules are followed by the excess amount.
00:17:53And sometimes, you can initiate yourself, self-initiated by the Assessee in their tax student.
00:17:58So, this will be extra income, you will be able to do it.
00:18:01But the Assessing Officer, that will add, that the Assessee will accept.
00:18:06That is the five scenarios, your income is adjusted.
00:18:10Self-initiated excess amount, made by the Assessing Officer, accepted by the Assessee.
00:18:15Apart reason, you can cut excess income, then the regular income is shown.
00:18:19And as per the safe harbour rules, that is what you file, you can accept the safe harbour rules.
00:18:25Safe harbour.
00:18:26If you are saying that, if you are saying that, you are saying that, that is the safe harbour rules.
00:18:30That is the reason, you can cut extra, that is the double taxation avoidance rules, excess amount of the primary adjustment.
00:18:38That will be inflating your PGVP income, for that inflated income, you have to pay the tax.
00:18:42It is the first one, primary adjustment.
00:18:44Second, in case of secondary adjustment, the Assessee must make the secondary adjustment, if the primary adjustment exit 1 crore rupees in any previous year.
00:18:55That is why, if you have a cost of income tax department, that is not the income tax department.
00:19:04As per the arms length price, it is 18 crores.
00:19:09If you do not accept, you have to sell a $20, we don't accept.
00:19:14So, the two occasions, you have to correct your sell a $20,
00:19:17and we can correct you 000, and you can correct your debt the dividend.
00:19:19It leads to increase in your profit.
00:19:22Okay, you can have PGVP on your 15, you can have probably 20% of the market,
00:19:26So, within the arms length price adjustment, it is 20% of the market.
00:19:32Suppose the amount of crores is 20 crores and 22 crores are divided.
00:19:38in 22 crores. In the amount of 1 crore, in the amount of repatriate in India, if you
00:19:45go to the same, then automatically two options are paid. So, the primary adjustment exits
00:19:511 crore in any of the previous year. Primary adjustment is for the assessment year starting
00:19:56on or before the date. In the date, it is mean. In the date, primary adjustment is for
00:20:04assessment year starting on or before. So, this is the primary adjustment. Excess
00:20:12money, these two crores. If the primary adjustment increases income or reduces loss, the excess
00:20:19money with the associated enterprises should be repaired to India within a prescribed time.
00:20:24If not, it is considered an advance to the associated enterprises and the interest is computed accordingly.
00:20:29If you want to consider the loan, interest calculate and the interest income, tax pay
00:20:34any of them until it gets repatriated to India. Sir, then you have another option. Option
00:20:41to pay additional income tax. Pay same, the 2 crores tax cut here, 18%. If the excess money
00:20:49is not repatriated in time, the assessi can pay additional income tax on the excess money.
00:20:54In the payment, it is final tax. You can just pay 18%. You never bother about the repatriation.
00:21:02But in that amount, any credit is correct, any of the detections is correct. The 2 crores
00:21:06is the most important tax tax. If you want to pay 18% tax. If you want to pay 18% tax
00:21:10tax cut here in the rent code. Now, the secondary adjustment today impact. The additional income
00:21:18tax paid, no secondary adjustment or interest competition is required. If you want to pay interest
00:21:22thereafter or any other income tax not liviable. Sir, if you want to pay 18% tax. If you want to pay
00:21:35any other income tax not liviable. Sir, if you want to pay 122 crores, if you want to pay
00:21:39extra income tax, you want to pay extra income tax. If you want to pay extra income tax, you want to pay
00:21:45only 18% tax. Is that clear? Hope you will be able to understand the primary adjustment and secondary
00:21:50adjustment. Now, some definitions. Associate Enterprises, Section 92, Yale. Arms Length Price,
00:21:58already we have seen under Section 92, if excess money. The difference between Arms Length Price and Transaction
00:22:04price is $100. This is the next one. The scale tax, then you will need higher price, then you will need
00:22:11same price. Then you will be re-e Ellerز. This is the second gaucherogate limit, which means of
00:22:15the case. with fourth aluminum. So you will need higher price per грани or still in 경우
00:22:28to also to pay you, which will expect that $50 worth in entry. If you want to pay interest within your
00:22:32Under safe harbor rules, seller rules, some rules are there.
00:22:36If sections are income tax act, supportive, procedural aspects are discussed in rules.
00:22:48Safe harbor rules for international transactions.
00:22:52International transactions are specified domestic transactions.
00:22:56Safe harbor rules are guidelines.
00:22:59You can simply follow the safe harbor rules.
00:23:02If you file the rules, you can file the rules.
00:23:05Compliances.
00:23:07Safe harbor rules, you can follow the rules.
00:23:11Simply, you can accept the filing of returns.
00:23:14International transactions and specified domestic transactions.
00:23:19Is that clear?
00:23:21Rule 2.10TA terms are defined.
00:23:25Terms understand.
00:23:27Terminologies.
00:23:29What are the terminologies?
00:23:31Accountants.
00:23:33Safe harbor rules follow up.
00:23:35Entity revenue submit.
00:23:37Work up.
00:23:39Accountants.
00:23:41Includes professional meeting specific revenue and experience criteria.
00:23:45and those recognized for cost certification.
00:23:48Specific revenue certain number.
00:23:51Accountants.
00:23:53Accountants.
00:23:54Accountants.
00:23:55Accountants.
00:23:56Accountants.
00:23:57Accountants.
00:23:58Accountants.
00:23:59Accountants.
00:24:00Accountants.
00:24:01fighters.
00:24:02Contract Kika.
00:24:03Camera.
00:24:04Now.
00:24:05Contract R&D Services.
00:24:06That was software-related services.
00:24:07Contract, R&D research and development services.
00:24:09And used for constructive related services.
00:24:10That includes...
00:24:11Sort of 48 files and integration zarες 및.
00:24:12Contact R&D research and development services.
00:24:13That includes software related research, development upgrades, but excludes Routine debugging.
00:24:18upgrades but excludes routine debugging. So, if you have a bug, you can remove it.
00:24:26You can remove it. That's why you have a virus or a bug.
00:24:32So, usually, in software, you can use back office support.
00:24:38If you have a bug, you can stop and you will proceed.
00:24:42They will come and resorted.
00:24:44That will not fall under contract R&D services.
00:24:50Include software related research, development, upgrade of software.
00:24:54This is contract R&D services.
00:24:58Next, core auto components.
00:25:02Engine, transmission, braking, suspension parts.
00:25:06Core auto components.
00:25:10Next, corporate guarantee.
00:25:12Rent even the amount of guarantee.
00:25:14Explicit guarantee.
00:25:16Implicit guarantee.
00:25:17Rent guarantee.
00:25:18When it is being the corporate guarantee,
00:25:20if it is being the explicit, it is included.
00:25:22In case of implicit, it is not included.
00:25:24So, subsidiary company, holding company, SBA bank.
00:25:30SBA bank, you have a loan.
00:25:32No issues.
00:25:34No issues.
00:25:36And, holding company, you have a guarantee.
00:25:38Sir, in the subsidiary company, you have a loan.
00:25:40You have a loan.
00:25:42You have a loan.
00:25:44You have a guarantee.
00:25:46You have a guarantee.
00:25:48You have a loan.
00:25:50You have a loan.
00:25:52You have a guarantee.
00:25:54You have a guarantee.
00:25:56You have a guarantee.
00:25:58He knows that, holding company, powerful company.
00:26:02Holding company being, powerful company.
00:26:04That's why the subsidy company, it is not available.
00:26:06You have a loan.
00:26:08It is not available.
00:26:10You have a loan.
00:26:12You have a loan.
00:26:13You have a loan.
00:26:14You have a loan.
00:26:15You have a loan.
00:26:16You have a loan.
00:26:17So, explicit guarantee.
00:26:18So explicit guarantees for non-resident subsidiaries okay non-resident subsidiaries are okay that
00:26:29should be subsidiary company should be non-resident are no but excludes any performances made by the
00:26:35holding company implicit guarantees etc okay you are say the actions more mobile your implicit
00:26:41guarantee are go that is corporate guarantee level then employee cost on employee salary bonus provide
00:26:47and fund training expenses recruitment related cost all these things are falling under employee
00:26:51cost is generic pharmaceutical drug you might have heard about the generic pharma's generic
00:27:00medicines in the palaar clip on that she is very famous and very famous that are used
00:27:04so you will get the same thing they need the same thing that you will get to know the
00:27:13company brand for example for example for example for example for example fever or body pain
00:27:18dot dolo the company and dolo the product and dolo the product is the ingredients
00:27:23so then the paracetamol ingredients are manufactured and the doctors will use dolo to help you
00:27:29No matter what you said about the dollar you can buy the dollar shop.
00:27:31You can buy the dollar.
00:27:32So you can buy dollar?
00:27:35We can buy dollar.
00:27:40Well, recently we can buy dollar,
00:27:42we don't buy dollar.
00:27:47We get it a dollar.
00:27:50We buy it a dollar.
00:27:54that is generic. Generic is a ingredient. So, a drug is comparable to approved version of strength, quality, intended use.
00:28:07If you use a dollar, a dot, you can use it. Pharma, especially Paracit Amal, it is a ingredient.
00:28:14It is based on this, it is better, it is better, it is better, you can use it. Not based on the company's image.
00:28:20It is generic pharmaceutical drugs and so on. The next one is all about knowledge process outsourcing.
00:28:27Knowledge process outsourcing. KPO and so on. If you support a company like market research, financial analytics, business analytics.
00:28:38It is called knowledge process outsourcing. If you start a business, you can start a business.
00:28:44You can search for Google. If you want to stay in a restaurant for vacation, search for a business.
00:28:52If you do search for a business, that is when you continue to add one, that is when you add a business,
00:28:57that is when you click on the related location.
00:29:01When you search, they are tracking what is your requirement and based on your requirement, they will start promoting the products.
00:29:09This is analytics, data analytics.
00:29:13So, if you do a business development, you can do knowledge process outsourcing.
00:29:19But it excludes what? R&D exclude.
00:29:25But it excludes R&D, research and development exclude.
00:29:30And low value adding intra-group services.
00:29:35A, B service.
00:29:39So, in the service, A service, B, B, impact is low value adding intra-group services.
00:29:50Support services not essential to core business operations.
00:29:54Low value adding intra-group services.
00:29:57If you say, A, B, and associate enterprises, you can manipulate your profit.
00:30:02You can't make your services.
00:30:04You can't make your services.
00:30:06Service is not a service.
00:30:08Low value added services.
00:30:10Now, it is the same thing that you do.
00:30:12If you do a lot of money, the costs are paid for you.
00:30:13You can buy the significant fees.
00:30:14You can't make your money.
00:30:15You can't make your money.
00:30:16You can't make your money.
00:30:17You can't make your money.
00:30:18You can't make your money.
00:30:19Now, if you want to apply safe harbour, so this is all about the terminology meant for safe harbour rules, right?
00:30:48Clear?
00:30:49Now, if you apply safe harbour rules, you can apply to the right, which is eligible?
00:30:54Eligible assesse.
00:30:55Okay?
00:30:56Now, eligible assesse, he has to apply safe harbour rules and that means that you meet out.
00:31:04And the assesse even the IT services, software development, knowledge process outsourcing, contract R&D, manufacturing auto components in the services involved.
00:31:18Now, if you apply safe harbour rules, you need to apply further.
00:31:24So, you need to apply further.
00:31:25So, you need to apply further.
00:31:26So, you need to apply further.
00:31:27So, you need to engage.
00:31:28So, IT services, contract R&D services, contract R&D services, contract R&D services.
00:31:35So, contract R&D services.
00:31:36Okay?
00:31:37KPO services, contract R&D, additional and manufacturing auto components.
00:31:42Auto components, engine, transmission, braking, suspension parts.
00:31:47Is that clear?
00:31:48Key criteria.
00:31:49Key criteria.
00:31:50Insignificant risk.
00:31:51Insignificant risk.
00:31:52Insignificant risk.
00:31:54Right?
00:31:55And R&D are software development auto components.
00:32:04Okay?
00:32:05Now, insignificant risk assesses factors like the foreign principle performing critical functions
00:32:16and providing capital and supervision.
00:32:18Okay?
00:32:19So, foreign principle, local branch in India.
00:32:25Okay?
00:32:26So, you were, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're, you're,
00:32:56is there for the local branch in India.
00:32:57One risk is not there, local branch is huge profit is not there, manipulate it to go
00:33:02around.
00:33:03That is insignificant risk.
00:33:07Assess whether the factors like foreign principle performing critical functions for the local
00:33:13branch.
00:33:14If you say the operations of capital is not there, if you operate in the US, you will
00:33:18have a supervision.
00:33:19Insignificant risk is there for the local branch in India.
00:33:23R&D software development in India, foreign principle controls significant risk and assess the
00:33:30only executes task.
00:33:32R&D software development in India, full and full I have to pay attention to you.
00:33:39Now, auto components must be engaged in OEM sales.
00:33:44Original product manufacture.
00:33:49Deplicate.
00:33:50Deplicate.
00:33:51Compatible.
00:33:53Original product.
00:33:54Original product.
00:33:55Original product.
00:33:56Compatible.
00:33:57Compatible.
00:33:58But deal with the overall sales, 90% OEM materials.
00:34:02Original components.
00:34:04OEM components.
00:34:06Full form.
00:34:07Original equipment manufacturer.
00:34:09So, even safe harbor rules.
00:34:10Right.
00:34:11So, this is the answer.
00:34:12Clear.
00:34:13Original equipment manufacturer.
00:34:14So, even go on the safe harbor rules.
00:34:16Next.
00:34:1710 TC.
00:34:18Who is eligible assessor involving eligible transaction on satisfaction of the some condition can apply for the safe harbor rules?
00:34:37International transactions.
00:34:38This is international transactions.
00:34:40Specified domestic transactions.
00:34:41Specified domestic transactions.
00:34:42If we thought eligible assessee who are,
00:35:01resident. Rentivary resident are specific domestic transaction. So, residential or resident
00:35:07both transfer pricing applicable except a specific case. So, one resident, one resident,
00:35:14one resident, one resident, rentivary non-resident are in the international transactions.
00:35:19Software development, IT, NWT services, KPO, intragroup loans, corporate guarantee, loans
00:35:27are guaranteed. Up to 100 crores are based on the adequate credit rating based money,
00:35:33corporate guarantee. Contract R&D, manufacture and exports of auto components, core over
00:35:38low value adding, intragroup services, service money on international transactions. So,
00:35:45hopes of eligible SSC RR and eligible transactions, NWR. Now, so, still conditions
00:35:55on, still conditions on, safe harbor. Applicability applies when an eligible SSC enters in eligible
00:36:04international transactions, meets some specified circumstances, our safe harbor rules
00:36:10are going to apply. Clear? And, key circumstances on the operating profit margin or interest rates.
00:36:22Must align with the defined threshold based on transaction type and value. You know,
00:36:28threshold basis and this is another follow up. You know, safe harbor. So,
00:36:32that you can understand here also. Benefit. Benefit. Benefit. Safe harbor
00:36:44would have benefit. No comparability adjustments or allowances for accepted transfer prices under
00:36:50safe harbor. Arm strength price is under you can either, transfer pricing
00:36:54to be done, arms length price. Actual price is under you can either, means you can either increase
00:37:04the PGVP or decrease at which you can add or no adjustment. No adjustment. Decrease
00:37:12adjust button. So, reference in the arms length price. Safe harbor rules, Arm's length price reference
00:37:18reference. Safe harbour rules on a follow-up and is simply other than the income calculate
00:37:23panne irukkari in general. You no need to compare with the transfer price based on the
00:37:28arm strength price. No comparability adjustments. Any other relevance is accepted for accepted
00:37:35transfer prices under safe harbour. Periods cover in the period alame safe harbour rules
00:37:41flexibility as you can choose the most beneficial option under applicable rules.
00:37:45What are the options for safe harbour rules? What are the options for safe harbour rules?
00:37:51And of course, what are the documents maintained for safe harbour rules?
00:37:56Onarum sorry, the price of the arm strength price is maintained.
00:38:01Transfer pricing is calculated in section 92D-92E. Requirements apply regardless of safe harbour rules and accounts.
00:38:10Okay, what are the options for the calculation of arm strength price whenever it is asked by the
00:38:15transfer pricing officer and the documents alone you maintain. Sir, if you go to safe harbour,
00:38:19arms strength price is maintained and you have to maintain your documents here. Is that clear?
00:38:23Safe harbour rules.
00:38:24Now, safe harbour rules.
00:38:39Now, safe harbour rules. One more specific is diamond mine
00:38:44mining mining.
00:39:00the diamond mining foreign company safe harbor rules under 10 TIA. TIA specific safe harbor
00:39:20rules. Is that okay? So eligible associate should be as per 10 TIA
00:39:29. Eligible business raw diamonds of sale
00:39:33. Notified special zones under section 9 class 1. Deemed to accrue or arise in India
00:39:42and the raw diamonds sold in the notified special zones by a foreign company will be considered as
00:39:48deemed to accrue only in India . Is that clear? And even a gross receipt includes all
00:39:56amounts payable received deemed to be received from raw diamond sales . Raw diamond sales
00:40:01. Relevant previous year , the year when the safe harbor is
00:40:07. After you have a safe harbor rules and accept children in the previous year . In the
00:40:11case of raw diamond , raw diamond . Uncut, unpolished, unassorted . Cut
00:40:20, Punation and cut , unpolished , unpolished , unpolished , unpolished , unpolished , unpolished .
00:40:26Unpolished , Unpolished , Unpolished , Uncut . In the words , non conflict diamonds .
00:40:34As per the Kimberley process, Kimberley process in the non-conflict diamonds classified
00:40:38and the diamond.
00:40:40Kimberley process in the non-conflict diamonds, the certificate in the Kimberley process
00:40:47is accompanied by Kimberley process certificate and in the particular diamonds, it is classified
00:40:55under tariff heading, Customs Tariff Act 7102 classified.
00:41:00Is that clear?
00:41:01Hope you will be able to understand safe harbour rules concept for the foreign companies in
00:41:06diamond mining.
00:41:09In the diamond mining, who can add the acceptance of safe harbour options, acceptance of safe
00:41:16harbour options.
00:41:17Allowed if income from eligible business aligns with the specified circumstances unless declared
00:41:24invalid.
00:41:25Okay?
00:41:26And the circumstances, you manage management.
00:41:29That is, raw diamond sales must be 4% or more of the gross taxes.
00:41:34You will be considered as accepted person for applying for safe harbour rules.
00:41:46Okay?
00:41:47So, if you are going to see the tax implications.
00:41:49So, if you are going to see the sales of 100 kod and you are going to see the raw diamond
00:41:53sales of 100 kod and they will be falling under this.
00:41:57It is the receipts.
00:41:58That is, profit is 10 crores.
00:41:59They are falling into this.
00:42:01So, if you are going to see the sales of 100 kod and you are going to see the sales of 100 kod,
00:42:04no.
00:42:05Section 44 A, B, AD, ADA and AE are going to see the presumptive tax sessions.
00:42:15These things are called presumptive taxes.
00:42:17Presumptive taxes, it is a rough number.
00:42:20You can do taxable income.
00:42:22It is taxable income.
00:42:23You can do taxable income.
00:42:24It is not for any amount of taxable income.
00:42:28You cannot claim any deductions.
00:42:32Section 3238, PGPP chapter 30, 32 and 32 are going to be there.
00:42:38No further claims.
00:42:42No further claims.
00:42:43Whatever the income you generated by selling the raw diamond will be directly considered
00:42:47as your profit.
00:42:49Section 32 is all about what?
00:42:51Depreciation.
00:42:52But, if you are a plant and machinery, this block is eligible for 15% depreciation.
00:43:02Depreciation 15% is 150 and 850.
00:43:05So, if you are going to see the safe harbor rules, what is the depreciation for the next year?
00:43:11In the 850, you can do 15% depreciation.
00:43:13Sir, what deductions allowed is not?
00:43:15You can do depreciation allowed, but you can do depreciation deducted.
00:43:19So, if you are going to buy 1000, you can do depreciation.
00:43:21No.
00:43:22You have to find out the depreciation and find out the WDV for the subsequent periods of opening WDV.
00:43:28But, in the amount, you need raw diamond sales profit subtracted.
00:43:34The return down value of the assets calculated considering the depreciation allowed.
00:43:38Allowed depreciation subtracted, return down value contribute.
00:43:41But, if you are going to buy 90% depreciation and creditkäeed, you can do depreciation.
00:43:47The depreciation not allowed related to the deductions mentioned in Section 3238 includes the 32,
00:43:53but you can calculate the WDV and both depreciation subtracted.
00:43:57clear and no set off for unabsorbed depreciation or carried forward losses or intra-distance
00:44:04or head losses. So, in the amount of loss, you carry forward if there is any loss. So,
00:44:12in the moon vision, in case of safe harbor rules related to this one, a raw diamond case.
00:44:20And international transaction, you have no need to study it separately. Is that clear?
00:44:27So, with that acceptance of safe harbor rule, option is over. Now, procedure for safe harbor.
00:44:37Now, safe harbor rules, what is the procedure? Sir, what is the procedure? Sir, and the benefit
00:44:42enjoy it. The first requirement is that you have a safe harbor. You have to file it.
00:44:48Assessing officer in a prescribed form. Okay. Okay. Before the filing of written of income.
00:44:54file file, you choose to file it. Assessing officer, you submit to a prescribed form. Okay.
00:45:01Non-apted cases. Income determined as per act. Okay. Now, you have safe harbor rules.
00:45:07Income determined as per the act without rule number. TIA will be taken. Okay. Suppose invalid, safe harbor. Okay.
00:45:22You apply to the same order. Okay. Okay. Now, if you apply to the same order,
00:45:26invalidate. If you apply to the same order, invalidate. If you apply to the same order,
00:45:30for the same order, incorrect facts are concealed. One fact, they are concealed.
00:45:34you have to pay the regular tax. Is that okay? If you have to pay the regular tax, there may
00:45:46be chances of opportunity may be given further. Hearing the opportunity from the assessor
00:45:52side will be given. Assessor is given a reasonable chance to be heard before invalidation. So
00:45:56post order. Written order served other provisions of the act apply. Suppose you have to get
00:46:07the order, you have to invalidate and tell you, in the safe-arbor rule will not be applicable.
00:46:13Other provisions of the act like Income Tax Act will be hereafter applicable. So, applicable
00:46:17you have to go for the Income Tax Act. Is that clear? Now, in case, mutual agreement procedure,
00:46:33mutual agreement procedure exclusion, MAP. In short, we can call this being MAP. MAP is
00:46:39bilateral agreement. Okay? Bilateral agreement. So, we can call this bilateral agreement
00:46:45about double taxation avoidance agreement. So, assessor cannot use, that is our safe-arbor rules
00:46:53and agreements for avoiding double taxation for eligible business. Right? So, if you add for the DTIA, then you cannot come here. So, you have to
00:46:59forego the DTIA relief and you can enjoy the DTIA relief and you can enjoy the safe-arbor rules. Okay? Conditions for exclusion.
00:47:06Okay? Now, applies if the
00:47:32if the assessor asks for the safe-arbor rules, and then the option remains valued. Once
00:47:37either, if you have done it or not, if you have followed up, income tax rules will not be applicable for this, for you. Okay?
00:47:44Purpose, ensures the finality of safe-arbor provisions without invoking MAP disputes. MAP
00:47:50dispute invoke pannaama, safe-arbor provisions
00:47:54apply pannaama, benefit kudukaratha. In the particular rules,
00:47:58mutual agreement procedure exclusions. Mutual agreement procedure apply pannaamda. Exclude pannai
00:48:05t eek. Exclude pannai t eek. Exclude pannai t eek. Safe-arbor rules
00:48:07pannai t eek. Hope you could not understand. Now, rule no.10 te
00:48:16E. Procedure for Exercising Safe Arbor. So safe arbor rules apply to the rules, what is the procedure?
00:48:24File form. Applicable formula. Validity. Sir, this is the path.
00:48:32Procedure for Safe Arbor. So this is the procedure for Safe Arbor.
00:48:44Raw diamond. Raw diamond.
00:48:50That is the case. This is the other person.
00:48:54Both of them are the same. So the form filing is the same.
00:49:00File in prescribed form before the due data filing of return of income.
00:49:06That is valid for the period or 5 years.
00:49:125 years are the same.
00:49:14If you have 3 years, you can get it.
00:49:16If you have 3 years, you can get it.
00:49:18If you have 8 years, you can get it.
00:49:20If you have 5 years, you can get it.
00:49:22Whichever is lesser.
00:49:24If you have a transaction, you can get it.
00:49:26You can get it.
00:49:28You can get it.
00:49:30If you have a transaction, you can get it.
00:49:32You can get it.
00:49:34If you have a transaction, you have to be intimidated.
00:49:36Required yearly updates with the details of eligible transaction and profits.
00:49:40And the transaction deals.
00:49:42Conditions for invalidate.
00:49:44Invalidity.
00:49:46Invalidate.
00:49:48Invalidate.
00:49:49Invalidate.
00:49:50Invalidate.
00:49:52Invalidate.
00:49:53Invalidate.
00:49:54Invalidate.
00:49:55Invalidate.
00:49:56Invalidate.
00:49:57Invalidate.
00:49:58Invalidate.
00:49:59From the safe rolls.
00:50:00Assessing officer.
00:50:02Invalidate.
00:50:05Invalidate.
00:50:06Invalidate.
00:50:07Invalidate.
00:50:09Invalidate.
00:50:10Invalidate.
00:50:11Invalidate.
00:50:12Just as if you have.
00:50:14Invalidate.
00:50:15When in TPO.
00:50:16Okay.
00:50:17Verify eligibility.
00:50:18You have a doubt.
00:50:19Assessing officer.
00:50:21You only have a doubt.
00:50:23to TPO. TPO, that is what you need to check. Our TPO refer to the timeline limit, strict timelines for assessing officer, TPO and commissioner. In the actions, assessing officer is one time, TPO is one time, for example, date.
00:50:42That date will be done by CMD. Assessing officer is one time, TPO recommends within that stipulated date. TPO is one time, he can verify the documents.
00:50:54In the next step, TPO, assessing officer, and assessing officer is one time, immediately, commissioner will take the remedial actions or take some actions over him, either invalidate his own safe harbor rules or may levy other penalty.
00:51:09In the next step, this is the same time.
00:51:13And now, safe harbor rules invalidate the fallback provision. If the safe harbor rule does not exist, standard transfer pricing rules automatically, TPO's, transfer prices, normal, what are you going to follow?
00:51:27This process ensures regularity complains while offering defined safe harbor benefits.
00:51:32If you have a safe harbor rules, if you have a safe harbor rules, transfer pricing rules will be applicable. Is that clear?
00:51:50Non-applicability of non-applicability of safe harbor rules.
00:51:53Non-applicability of safe harbor rules. Okay. In the safe harbor rules under TAO, TEO applicable, not applicable for transaction.
00:52:04EPP? With the associated enterprises located in countries or territories, notified intersection 94A or no-tax or low-tax jurisdiction.
00:52:15Safe harbor rules under one benefit, if you are importing from foreign. Okay. A, B.
00:52:21So, if you have an associate enterprises, you will import. So, you will import. If you have a safe harbor, you will have a safe harbor.
00:52:28You will be applicable. Arm's length price calculate. Regular income taxes are cut.
00:52:33But it is, this is a relief that you will buy from foreign.
00:52:36Now, when it comes to the safe harbor rules, this is a relief that you will create safe harbor rules.
00:52:39If you have any specific one, using two sins, you will find a double taxation avoidance agreement.
00:52:44But the country is going to be a shared policy. That is a danger in the country.
00:52:49And if you have low tax Fair or no tax Fair, you have a tax advantage.
00:52:54So, if you have a safe harbor will benefit, then you will have a low tax and no tax that
00:53:01you enjoy.
00:53:02I don't give this.
00:53:04So, if you have a safe harbor will not be applicable.
00:53:07Or some countries are territories notified under section 94A.
00:53:11So, if you have a safe harbor provisions are misused in tax-advantaged or high-risk territories.
00:53:23That is a high-risk territories.
00:53:24That is a high-risk territories.
00:53:26So, if you have a safe harbor, then you will have a safe harbor.
00:53:35Right.
00:53:36That is math.
00:53:38Mutual agreement procedure.
00:53:40So, mutual agreement procedure, we will talk about what we will tell.
00:53:45Mutual agreement procedure, we will explain.
00:53:48Okay.
00:53:49Then, mutual agreement procedure restrictions.
00:53:52Eligible international transaction, section 92C, the SSC cannot invoke the mutual agreement
00:53:58procedure.
00:53:59Okay.
00:54:00Okay.
00:54:01So, you are all a map I invoke.
00:54:10Regular phone.
00:54:11Applies agreements for avoidance of double taxation with countries at territories under section
00:54:1590 or 98.
00:54:17This prevents dual remedies for resolving disputes on accepted transfer prices.
00:54:29Okay.
00:54:30Now, so, the simple map map is similar already we have seen.
00:54:36Okay.
00:54:37Okay.
00:54:38So, with that international transfer pricing, international transaction based on the diamond in the R&DLM
00:54:47part 2.
00:54:48Now, we will be moving on to the specified domestic transaction specified domestic transaction.
00:55:00In the specified domestic transaction.
00:55:01In the specified domestic transaction, in the safe harbor rules, in the specified domestic transaction
00:55:07clear on the mentioned it clearly.
00:55:10Okay.
00:55:11Okay.
00:55:12Okay.
00:55:13Now, definitions.
00:55:15One electricity act in old government company.
00:55:27Okay.
00:55:28Rent per the mean.
00:55:29Specified domestic transaction alone may bear with this condition.
00:55:33One electricity act appropriate commission.
00:55:35government company.
00:55:36This property commission state of administration means is taken to approve this transaction.
00:55:41So, most of the rules hereafter what we are going to study will be applicable for these
00:55:52two categories of person.
00:55:54Specific domestic transaction in the rent category of person is applicable either.
00:56:00Eligible assassin says eligible transaction that is specific domestic transaction, electricity
00:56:06company power generation distribution is another form.
00:56:11Now, eligible SSERR, THA government company, especially government company encased in generation,
00:56:22supplying or transmission or distribution of electricity, government company is available.
00:56:27That is the first in the safe harbor rules specific domestic transaction.
00:56:32Corporate society is procuring and marketing of milk and milk products, that is the category
00:56:39which is specific domestic transaction, the safe harbor rules will not be applicable.
00:56:45So, safe harbor provisions are qualified for the conditions in the rent division.
00:56:50Eligible specified domestic transaction, eligible specified domestic transaction, in case of transactions
00:56:58are available supply of electricity, transmission of electricity, wheeling of electricity, it is
00:57:09electricity is attached.
00:57:11Okay, wheeling of electricity is attached to the solar panel.
00:57:15Solar panel is attached to the electricity generated.
00:57:18Generated is attached to the government.
00:57:20Government is attached to the government.
00:57:22So, you don't have any solar panel, you will get the electricity connection from the Tamil Nadu electricity
00:57:29board.
00:57:30Once you get the electricity connected to the power of electricity, you won't have any solar panels.
00:57:45It is not only solar panels, sometimes you may have a windmill.
00:57:48Government may use electricity for electricity.
00:57:50of electricity. This is the first case. This is the co-operative society. The co-operative
00:57:54society is the milk and milk products. Purchase, the milk products is the purchase
00:57:59and the members will distribute the vehicle. Members will be available in the specific
00:58:04domestic transaction list. Safe harbour for specified domestic transactions. Validity
00:58:12of options. Eligible assessor can access the options. This is the rule number. This
00:58:19should align with the specified conditions. Eligible specified domestic transaction
00:58:36You can apply for this, you can apply it.
00:58:38You can apply it to the same hardware.
00:58:40Electricity transactions, milk transactions,
00:58:44eligible and specific domestic transactions,
00:58:46you can apply to the same hardware rules.
00:58:48And no comparability adjustments.
00:58:50You can compare it to the same.
00:58:52That is, Sir, the arm strength price varies.
00:58:54You can compare it to the actual transaction value.
00:58:56We will compare it to the same hardware rules.
00:59:00So, we simply follow the same hardware rules.
00:59:02You don't need to compare it with the arm strength price.
00:59:04And of course, you have to maintain the documents and all.
00:59:06Every international transaction,
00:59:08all the documents maintain whether
00:59:10you go for safe hardware rules or not.
00:59:12But transfer pricing,
00:59:14if there is any error,
00:59:18a doubt, transfer pricing officer may call for the inquiry and
00:59:22ask you to bring all the documents maintained for the calculation of transfer pricing also.
00:59:30Applicable under section 92D and 92E.
00:59:32Now,
00:59:34Procedure.
00:59:36So,
00:59:38Submit the form under prescribed form to the
00:59:42Assessive Minns Guard,
00:59:44Income Tax Department
00:59:46before the due data filing of return.
00:59:48Assessing officer verify
00:59:50He is eligible.
00:59:52He is qualified.
00:59:54He is eligible.
00:59:56He is qualified.
00:59:58He is eligible.
01:00:00He is qualified for this safe hardware rule.
01:00:02And,
01:00:04If there is any objections,
01:00:06If you check him, he can feel the invalid. Invalid means documents, sir. He can simply declare invalid and of course, if you apply safe harbour rules, you can apply applicable to your application, so you have to give the opportunity to get heard from him.
01:00:24And if there is any objections, sir, can appeal to higher authorities within 15 days, if his option is invalid and timely decision will be taken for passing, whether it may be applicable or not, everything will be as per the normal provisions followed, is that clear?
01:00:49So, with that, the safe harbour rules is completely over. So, safe harbour rules, first, three reasons. One diamond, raw diamond, specific domestic transaction, EB and milk. First, general R&D, KPO and loan.
01:01:11If you follow this method, if you follow this method, if you follow the same rules, then you will follow the same rules.
01:01:17If you follow this method, you will have the same rules. If you follow the same rules, then you will have the same rules as well.
01:01:31Income Tax Act, normal income tax act, is that clear? Even though if you follow this method,
01:01:37safe harbor rules follow up and follow up and follow up and follow up and follow up and
01:01:41follow up and follow up and follow up and follow up and follow up and follow up, transfer pricing
01:01:43officer, whenever he has a doubt, he can ask you for submission of those documents, is that clear?
01:01:51So, with that, the safe harbor rule is completely over. Secondary adjustment.