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In a significant move, government has amended all the relevant provisions mandating filing of audit reports along with the income tax return or by the due date of filing income tax return. Now the said audit reports would be required to be furnished at least one month prior to the due date of filing of such return of income. This amendment is also applicable to the transfer pricing audit report. This amendment is made applicable retroactively from financial year 19-20. Thus, now the due date for filing transfer pricing audit report for the financial year 19-20 is 31 October 2020 instead of erstwhile due date of 30 November 2020.
Finance Act, 2020 as assented by the President of India has brought some significant changes in the transfer pricing regime pertaining to attribution of profit to the permanent establishment (‘PE’). Notably, section 92CB has been amended to include determination of profit to PE under the ambit of Safe Harbour regime. This amendment will be applicable from assessment year 2020-21 and onwards. However, the detailed modalities are yet to be notified by the Central Board of Direct Taxes (‘CBDT’), a premier income tax body in India.
Similarly, section 92CC has been amended to expand its scope and to remove uncertainty stating that attribution of profit to PE will also be within the scope of Advance Pricing Agreements(‘APA’s). This will be applicable to the APA entered on or after 01 April 2020.
Further, Section 94B has been amended to provide that interest limitation would not apply to interest paid in respect of a debt issued by a lender which is a PE of a non-resident, being a person engaged in the business of banking in India. This amendment will be effective from assessment year 2021-22.
Martin Wörlein
Partner, Head of India practice
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