Transfer Pricing Audit & Form 3CEB Filing | Savlana Init

Transfer Pricing · Audit & Form 3CEB

Transfer Pricing Audit — Form 3CEB, Filed and Consistent.

The accountant’s report under Section 92E is the department’s first view of your intra-group transactions. Everything disclosed in it becomes the starting point for any assessment.

Section 92E requires every person who has entered into an international transaction or a specified domestic transaction during a previous year to obtain a report from an accountant and furnish it by the specified date in Form 3CEB. The report is not a certificate that the pricing is right. It is a structured disclosure — the associated enterprises, the nature and value of each class of transaction, the method applied to each, and the accountant’s statement on whether the prescribed information and documents have been maintained and whether the particulars are true and correct.

Its practical significance is that it frames the assessment. Form 3CEB is the first document a Transfer Pricing Officer reads, and everything in it becomes the reference point: the transaction values he will test, the method he will hold you to, and the associated enterprises he will look at. A transaction omitted from the report but visible in the financial statements, an intercompany balance not reported as a lending transaction, a guarantee given but not disclosed, a method stated in the report but not the one actually applied in the study — each of these produces questions that are far harder to answer than the underlying pricing itself.

The report is due by 31 October following the financial year, one month before the extended return due date of 30 November applicable to taxpayers with international transactions. Failure to furnish it attracts penalty under Section 271BA independently of whether any adjustment is ever made. Failure to maintain the documentation the report certifies, failure to report a transaction, or reporting incorrect particulars attracts penalty under Section 271AA, computed on the value of the transaction. Because both penalties bite regardless of pricing outcome, the audit is the part of the transfer pricing cycle least worth economising on.

Our TP Audit Services

Form 3CEB Preparation and Filing

Complete preparation and electronic filing of the accountant’s report under Section 92E, with every clause supported by the underlying working.

Transaction Identification and Scoping

A systematic sweep of ledgers, agreements and group schedules to capture every reportable transaction, including balances, guarantees and cost recharges.

Rule 10D Documentation Verification

Verification that the prescribed documentation exists and is contemporaneous, since the report certifies its maintenance.

Method Consistency Review

Reconciliation of the method disclosed in the report with the method applied in the benchmarking study and in the intercompany agreements.

Specified Domestic Transactions

Identification and reporting of specified domestic transactions under Section 92BA where the aggregate threshold is crossed.

Group Reporting Alignment

Reconciliation of Form 3CEB disclosures with the Master File, the Country-by-Country report and the group’s consolidated figures.

Prior Year Review

Review of earlier years’ reports for omissions or inconsistencies that will surface when a current year is examined.

Penalty Exposure Assessment

Assessment of exposure under Sections 271AA, 271BA and 271G, and remediation where a past failure can still be addressed.

Our Process

Scoping Sweep

We review the trial balance, agreements, board minutes and group schedules to identify every associated enterprise and every reportable transaction.

Documentation Verification

The Rule 10D documentation set is checked for existence, completeness and contemporaneity, since the report certifies these matters.

Clause-by-Clause Preparation

Each clause of Form 3CEB is prepared from the underlying records, with the working paper cross-referenced to the disclosure.

Consistency Check

Disclosures are reconciled against the benchmarking study, the intercompany agreements and the group’s Master File and CbCR data.

Certification and Filing

The report is certified and filed by the due date, and the complete working file is retained for the assessment that may follow.

Why It Matters

✓Every reportable transaction captured, including guarantees and balances

✓Method in the report matched to the method in the study

✓Documentation verified as contemporaneous before it is certified

✓Form 3CEB filed by 31 October, avoiding Section 271BA penalty

✓Specified domestic transactions caught where the threshold is crossed

✓Disclosures reconciled with Master File and CbCR data

✓Prior year inconsistencies found before the department finds them

✓A working file that supports every clause if the year is examined

Frequently Asked Questions

Every person who has entered into an international transaction or a specified domestic transaction during the previous year. There is no monetary threshold for international transactions — a single transaction of any value triggers the obligation. Specified domestic transactions under Section 92BA are covered only where the aggregate value crosses the prescribed threshold for the year.

The report is due by 31 October following the end of the financial year. Failure to furnish it attracts penalty under Section 271BA of one lakh rupees, and the penalty applies whether or not the pricing was at arm’s length and whether or not any adjustment is ultimately made. Late filing also weakens the contemporaneous documentation position in any subsequent assessment.

No. The accountant reports on whether the prescribed documents and information have been kept and maintained, and whether the particulars in the annexure are true and correct in his opinion, based on examination of the records. He is not certifying that the transactions were at arm’s length. The pricing determination remains the taxpayer’s responsibility and is tested separately by the Transfer Pricing Officer.

Intercompany receivables and payables not reported as separate lending or deemed loan transactions, corporate guarantees given to group companies, cost allocations and management recharges booked as expenses without being identified as transactions, reimbursements treated as pass-through without disclosure, and share issues or transfers to associated enterprises. All of these are visible in the accounts and are routinely picked up on examination.

A prescribed set including ownership and group structure, business and industry description, the nature and terms of each international transaction, functional analysis, economic analysis and method selection, the comparables and adjustments applied, and the supporting agreements, price lists and financial statements. It must be contemporaneous — in existence by the due date — and retained for eight years from the end of the relevant assessment year.

Filing is mandatory, so this is not a choice. What affects outcome is the quality of the disclosure: a complete, internally consistent report matched to a proper study attracts far fewer questions than a thin report that omits transactions visible in the financial statements. Cases are also selected on value and on risk parameters, so accuracy is the only variable actually within your control.

Form 3CEB due this year?

Send us your trial balance, intercompany agreements and group schedules. We will scope every reportable transaction, verify the documentation and certify the report on time.