Form 3CEB Share Capital Transaction

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Clarification on Reporting of Share Capital
Transaction in FORM 3CEB

• ENTERSLICE VALUE ADVISORS LLP
• E-57, SECTOR-63, NOIDA, UP 201301 (INDIA)

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Deriving Laws of
Audit Report to be issued by Chartered Accountant
for Transfer Pricing u/s 92E of Income Tax Act,
1961
Section 92E read as Every person who has entered
into an international transaction or specified
domestic transaction during a previous year shall
obtain a report from an accountant and furnish
such report on or before the specified date in
the prescribed form duly signed and verified in
the prescribed manner by such accountant and
setting forth such particulars as may be
prescribed
Submission of Form 3CEB is under section 92E of
Income Tax Act, 1961 read with Rule 10E and it
can be filed electronically under proviso to Rule
12(2).
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Continued
Rule 10E read as The report from an accountant
required to be furnished under section 92E by
every person who has entered into an
international transaction or a specified
domestic transaction during a previous year
shall be in Form No. 3CEB and be verified in the
manner indicated therein.
Inserted by IT sixth Amendment Rules 2013
w.e.f. 01-04-2013
Hence as the FORM 3CEB dont have Share Capital
Transaction clause to be reported under Specified
Domestic Transaction and it is guided under
principle of Transfer Pricing reporting under
section 92E of Income Tax Act, 1961
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(No Transcript)
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Form 3CEB java utility showing only Clause 16 of
Part B where Share Capital Transaction to be
reported
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Explanation of Form 3CEB Clause 16 Only

• The form is designed under Questionnaire format
  where has the assesse entered into any
  international transaction(s) in respect of
  purchase or sale of marketable securities or
  issue of equity shares including transaction
  specified in explanation (i) (c) under section
  92B(2) is asked, if answer is affirmative then
  assesse is required to provide details of-
• Name and address of the associated enterprise
  with whom the international transaction has been
  entered into.
• Nature of Transaction
• Currency in which the transaction was undertaken
• Consideration charged/paid in respect of the
  transaction
• Method used for determining the arms length
  price as given u/s 92C (1) of Income Tax Act,
  1961.
• If the answer of above given question is Negative
  or No, then no need to fill the Clause 16 of Form
  3CEB.
• Further, in and above irrespective of capital
  transaction the transaction stated in Section 92B
  (2) explanation (i) (c) need to reported. Section
  92B (2) (i) (c) read as capital financing,
  including any type of long-term or short-term
  borrowing, lending or guarantee, purchase or sale
  of marketable securities or any type of advance,
  payments or deferred payment or receivable or any
  other debt arising during the course of business

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Important Definition
Income Tax Act, 1961
Person Section 2(31) includes an Individual,
Hindu Undivided Family (HUF), Company, Firm,
Association of Person (AOP)/Body of Individuals
(BOI) whether incorporated or not, Local
Authority and Every Artificial Juridical Person,
not falling within any of the above.
International Transaction Section 92B means
transaction between two or more associated
enterprises, either or both of whom are
non-residents, in the nature of purchase, sale or
lease of tangible or intangible property, or
provision of services, or lending or borrowing
money, or any other transaction having a bearing
on the profits, income, losses or assets of such
enterprises, and shall include a mutual agreement
or arrangement between two or more associated
enterprises for the allocation or apportionment
of , or any contribution to, any cost or expenses
incurred or to be incurred in connection with a
benefit, service or facility provided or to be
provided to any one or more of such enterprises.
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Continued .
Section 2 (81) defines Securities as mention in
Section 2 (h) of Securities Contracts
(Regulation) Act, 1956 which read as, shares,
scrips, stocks, bond, debentures stock or other
marketable securities of a like nature in or of
any incorporated company or other body corporate
derivative units or any other instrument issued
by any collective investment scheme to the
investors in such schemes security receipt as
defined in clause (zg) of Section 2 of the
Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act,
2002 in short SARFAESI units or any other such
instrument issued to the investors under any
mutual fund scheme Government Securities such
other instrument as may be declared by the
Central Government to be securities and right or
interest in securities.
Debenture Section 2 (30) includes debenture
stock, bonds or any other instrument of a company
evidencing a debt, whether constituting a charge
on the assets of the company or not provided
instruments referred to in Chapter III-D of the
Reserve Bank of India Act, 1934 and Such other
instrument as may be prescribed by Central
Government in consultation with Reserve Bank of
India, issued by company shall not be treated as
Debenture.
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After going through definition of Securities
Debenture, here it can be observed contradictory
views in two governing Act, in the case of
Debenture where definition of Debenture read with
Chapter III-D of Reserve Bank Act, 1934 (given in
Section 2(30) of companies act, 2013) exclude the
Derivative transaction whereas the same was
included in definition of Securities (given in
companies act derived from Section 2(h) of SCRA
1956). Here debenture is not defined in Income
Tax Act, 1961 and hence best judgment is required
to take as per nature of company to report such
transaction in FORM 3CEB. Hence it can be
concluded those companies under which RBI is
regulatory then no need to report derivative on
debenture whereas in all other cases it is to
justify the proper reporting structure assigned
by Act, the concerned is required to report all
kinds of capital transaction in respect of
international transaction in clause 16 of Form
3CEB under given parameters of Form.
The Form 3CEB on which Section 92 Transfer
Pricing related transaction is reported to
Department of Central Board of Direct Tax by 30th
November of following year on which Financial
Year end. More or less strictly speaking in
reporting of Share Capital Transaction of any
person specified Income tax Act, prescribes all
types of shares, bond, debenture and capital
financing explanation (i) (c) of Section 92B (2)
of Income Tax Act, 1961.
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Contact Enterslice Value Advisors, LLP E-57,
Sector-63, Noida Mail at info_at_enterslice.com