Specified-Domestic-Transactions

Specified Domestic Transactions – Form 3CEB Format

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 of transactions that are classified as specified domestic transactions and form 3CEB format.

Specified Domestic Transactions

Specified domestic transactions are transactions connected with transfer pricing. They do not include an international transaction. The Income Tax Act defines specified domestic 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:

  1. In case of an individual assessee, any relative of the assessee.
  2. 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:

FORM-3CEB-INCOME-TAX-ACT

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