Form 3CEAB: Intimation by Designated Constituent Entity

Form 3CEAB:
Intimation by Designated Constituent Entity

Introduction

Income tax form 3CEAB is an intimation by a designated constituent entity, resident in India, of an international group, for the purposes of sub-section (4) of section 92D of the Income-tax Act, 1961.

Section 92D(1): Every person who has entered into international transactions or specified domestic transactions is required to keep and maintain such information and documents in respect thereof, as specified in Rule 10(D).

Section 92D(4): The person referred to in clause (ii) of sub-section (1) shall furnish the information and document referred therein to the authority prescribed under sub-section (1) of section-286, in such manner, on or before such date, as may be prescribed.

The designated entity as referred to in subsection 4 of section 92D is required to inform joint commissioner via Form 3CEAB at least 30 days before due date of filing Form 3CEAA.

Rule 10DA(1): Every person, being a constituent entity of an international group shall,

If the consolidated group revenue of the international group, of which such person is a constituent entity, as reflected in the consolidated financial statement of the international group for the accounting year, exceeds Rs. 500 crore; and
Aggregate value of international transactions,
- During the accounting year, as per the books of accounts, exceeds Rs. 50 crore, or
- In respect of purchase, sale, transfer, lease or use of intangible property during the accounting year, as per the books of accounts, exceeds Rs. 10 crore.

Keep and maintain the following information and documents of the international group, namely:

List of all entities of the international group along with their addresses;
A chart depicting the legal status of the constituent entity and ownership structure of the entire international group;
A description of the business of international group during the accounting year including,
- Nature of the business or businesses;
- Important drivers of profits of such business or businesses;
- A description of the supply chain for the five largest products or services of the international group in terms of revenue and any other products including services amounting to more than five per cent. of consolidated group revenue;
- A list and brief description of important service arrangements made among members of the international group, other than those for research and development services;
- A description of the capabilities of the main service providers within the international group;
- Details about the transfer pricing policies for allocating service costs and determining prices to be paid for intra- group services;
- A list and description of the major geographical markets for the products and services offered by the international group;
- A description of the functions performed, assets employed and risks assumed by the constituent entities of the international group that contribute at least 10% of the revenues or assets or profits of such group; and
- a description of the important business restructuring transactions, acquisitions and divestments

The report of the information referred to in sub-rule (1) shall be in Form No. 3CEAA and it shall be furnished to the Director General of Income-tax (Risk Assessment) on or before the due date for furnishing the return of income as specified in sub-section (1) of section 139.

Constituent Entity means:

Any separate entity of an international group that is either included in the group’s consolidated financial statement for reporting purposes or could be included if the equity shares of the international group were listed on a stock exchange.
Any such entity that is excluded from the consolidated financial statement of the international group solely on the basis of size or materiality.
Any permanent establishment of any separate business entity of the international group included in (a) or (b) if that business unit creates its own financial statement for reporting, following rules, tax purposes, or internal management control.

International Group:

“International group” means a parent company and all the entities controlled by it and includes:

Two or more enterprises which are resident of different countries or territories;
An enterprise residing in one country or territory that conducts business activities through permanent establishments situated in other countries or territories.

Penalty for non-filing of Form 3CEAB: According to Section 271GB of the Act, the applicable penalties include:

If failure to furnish form continues for one month: Rs. 5,000 per day of default
If failure to furnish form continues beyond a period of one month: Rs.15,000 per day of default

Not furnishing form even after levy of penalty, based on either (i) or (ii) above (i.e., for delay beyond the date of service of penalty order based on either of (i) or (ii) above): Rs. 50,000 per day of default.

Section 271AA(2) specifies penalty up to Rs. 5,00,000 which may be prescribed by the concerned authority.

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