Specified Domestic Transactions - Form 3CEB

Entities that undertake specified domestic transactions are required to obtain a report from a Chartered Accountant in Form 3CEB while

filing income tax returns. In this article, we look at a list that are classified as specified domestic transactions and form 3CEB format.

Specified Domestic Transactions

Specified domestic transactions are connected with transfer pricing. They do not include an international transaction. The Income Tax Act defines this transactions in the following manner:

92BA. Meaning of specified domestic transaction.—For the purposes of this section and sections 92, 92C, 92D and 92E, "specified domestic transaction" in case of an assessee means any of the following transactions, not being an international transaction, namely:— 

(i) any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A; 27

(ii) any transaction referred to in section 80A; 

(iii) any transfer of goods or services referred to in sub-section (8) of section 80-IA; 

(iv) any business transacted between the assessee and other person as referred to in subsection (10) of section 80-IA; 

(v) any transaction, referred to in any other section under Chapter Vl-A or section 10AA, to which provisions of sub-section (8) or sub-section (10) of section 80-IA are applicable; or 

(vi) any other transaction as may be prescribed.

Whenever a taxpayer has entered into specified domestic transactions, Form 3CEB must be filed with the income tax return.

Payments Made to Related Parties

Any expenditure for which payment has been made or is to be made to a related person referred to in section 40A(2)(b) will be classified as a specified domestic transaction. Under section 40A(2)(b), a related person would be:

In case of an individual assessee, any relative of the assessee.
In case of a company, Partnership Firm, LLP or Association of Persons, the following shall be considered to be relatives:

Any director of the company, partners of a firm or LLP, members, family or any relative of such director, partner or member.
An individual who has substantial interest in the business or profession of the assessee, or any relative of such individual.
Any company, firm or association that has a substantial interest in the business or profession of the assessee, or any director, partner or member of such company.

Section 80A: Deduction for Transfer of Goods or Services to Related Entities

If any goods or services held by an assessee are transferred to any other business carried on by the assessee, the deductions must be computed as if the transfer had been made at the market value of such transaction. Hence, if an entity enters into such a transaction with a related enterprise, it would be classified as a specified domestic transaction.

Form 3CEB Format

Whenever an entity undertakes a specified domestic transaction or international transaction, Form 3CEB must be filed along with the income tax return. The following is a format of

Form 3CEB report to be provided by a Chartered Accountant:

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Frequently Asked Questions

Common questions about Specified Domestic Transactions.

A specified domestic transaction is a transaction between related parties within India that does not involve an international transaction. It is defined under Section 92BA of the Income Tax Act and includes expenditures made to related parties, transfer of goods or services between related entities, and other prescribed transactions.

Any taxpayer who has undertaken specified domestic transactions during the financial year is required to obtain a report from a Chartered Accountant in Form 3CEB and file it along with their income tax return.

As per the article, specified domestic transactions include payments made to related parties (as defined under Section 40A(2)(b)), transfer of goods or services to related entities (covered under Section 80A), transactions covered under specific sections of Chapter VI-A or Section 10AA, and any other transaction prescribed by the Income Tax Act.

Reporting specified domestic transactions through Form 3CEB is essential for transfer pricing purposes. It ensures that transactions between related parties are conducted at arm's length prices, preventing potential tax avoidance or base erosion.

The Income Tax Act defines related parties differently for individual assessees and companies/firms/LLPs/AOPs. For individuals, it includes relatives. For companies/firms/LLPs/AOPs, it includes directors, partners, members, their relatives, individuals or entities with substantial interest, and their relatives or associates.

Form 3CEB is a report prepared by a Chartered Accountant that provides details of the specified domestic transactions undertaken by the taxpayer, including the nature and value of transactions, parties involved, and an analysis of the arm's length pricing determination.

No, Form 3CEB is specifically for reporting specified domestic transactions. For international transactions, taxpayers are required to file Form 3CEB or other applicable forms as per the transfer pricing regulations.

The article does not mention any specific threshold limit for reporting specified domestic transactions. It seems that any taxpayer who has undertaken such transactions is required to obtain and file Form 3CEB, regardless of the transaction value.

Failure to report specified domestic transactions or provide accurate information in Form 3CEB can lead to penalties and potential transfer pricing adjustments by the tax authorities, resulting in increased tax liabilities for the taxpayer.

Form 3CEB must be filed along with the income tax return for the relevant financial year in which the specified domestic transactions were undertaken by the taxpayer.