Pursuant to the Safe Harbour Rules in Rules 10TA to 10TG, the CBDT has issued a letter dated 20.12.2013 in which it has laid down important directives and clarifications on the manner in which the Safe Harbour Rules are meant to be implemented. The directives and clarifications are as follows:
(i) AOs should carefully verify and provide to the CBDT in writing the details of all Form 3CEFA received by them relating to Safe Harbour Options;
(ii) There should be no confusion between Safe Harbour Option filed in paper format in Form 3CEFA and the Form 3CEB (detailing international transactions) which is filed electronically. The AO has to examine the form and decide within 2 months of the end of the month in which the option is filed as to whether to accept the Safe Harbour option or to make a reference to the TPO. If no action is action, the Safe Harbour option will be considered as having been accepted and it will remain valid for 5 years;
(iii) If there are minor defects in Form 3CEFA, the AO has to provide an opportunity to the taxpayer to rectify the same. However, the statutory time limit of 2 months provided in Rule 10TE (14)(i) cannot be exceeded;
(iv) The AO has to verify the eligibility of the assessee and the international transactions. Under Rule 10TF, the Safe Harbour Rules will not apply to a country notified in s. 94A (e.g. Cyprus);
(v) If the taxpayer has opted for Safe Harbour but has reported rates or margins less than the Safe Harbour rates or margins, the income has to be computed on the basis of the Safe Harbour rates or margins;
(vi) The Safe Harbour rates or margins are not a benchmark for cases not covered by the Safe Harbour Rules. In such cases, a regular transfer pricing audit should be carried out without regard to the Safe Harbour rates or margins.
CBDT letter dt. 20.12.2013 issuing clarifications & directives on Safe Harbour Rules (1.1 MiB, 2,177 hits)
The CBDT is very very fond of always issuing new circulars and notifications and new rules.Its officers are sitting in the air conditioned chambers and keep them busy in issuing the new circulars etc and they take a great pain to see that the law are made confusing and they take care to see that should never be settled down.The assessees and the tax consultants should remain occupied in scratching their head about the interpretation and waste their productive talents in the destructive matters.There should be a law where under CBDT should be prohibited from issuing the circulars , notifications and rules in the midst of the year and they should be directed to keep the circulars etc ready for issuing them only in the month of Feb and they should be made effective from the next financial year. The habit of issuing circulars etc during the year should be totally prohibited.Honestly speaking the most of the clarifications are creating the confusions and majority of them are against the assessees.The CBDT has lost its credibility and this authority which is expected to have administered the law in quasi-judicial manner has utterly failed in its duties.