The Central Board of Direct Taxes (CBDT), vide Notification No. 27/2024 dated 5 March 2024, has notified the amendments to Forms 3CD, 3CEB and 65. These changes are to align and update these Forms, amongst others, with the amendments to section 115BAE and section 92BA of the Income Tax Act, 1961 (ITA), vide Finance Act 2023.

  • The Government of India, vide Finance Act 2023, has extended the benefit of concessional rate of 15% tax under section 115BAE of the ITA, to certain newly set-up manufacturing cooperative societies. Further, the transactions of these cooperative societies with any closely connected entities have also been covered under specified domestic transactions under transfer pricing, to curb any tax base erosion.
  • Accordingly, the relevant Forms for annual reporting, such as Tax Audit Report (Form 3CD), Transfer Pricing Report (Form 3CEB) and IFSC Form (Form 65) required a change to incorporate reporting for such cooperative societies under section 115BAE of the ITA.
  • CBDT has issued a notification to amend/add new clauses to the Forms 3CD, 3CEB and 65, amongst others, to align them with the amendment. These Forms stand amended from the date of publication in the official gazette i.e., 5 March 2024

Background:

Finance Act, 2023 introduced a new section 115BAE to the Income Tax Act, 1961 (ITA), that allows concessional tax rate of 15% to a newly manufacturing cooperative society under specified conditions. Further, section 92BA of the ITA was also amended to cover any transaction between such manufacturing cooperative society and the closely connected person.

In view of the above amendments to the ITA, the Central Board of Direct Taxes (CBDT), vide Notification No. 27/20241 dated 5 March 2024 [‘Notification’], has notified amendments to following Forms, amongst others, to align reporting by these manufacturing cooperative societies availing concessional tax rates under section 115BAE of the ITA:

  • Form 3CEB i.e., report from an accountant to be furnished under section 92E of the ITA relating to international transactions and specified domestic transactions
  • Form 3CD i.e., statement of particulars required to be furnished under section 44AB of the ITA [relating to audit of accounts of certain persons carrying on business or profession] and
  • Form 65 i.e., application for exercising/renewing option for the tonnage tax scheme (under section 115VP(1) or section 115VR(1) of the ITA).

Highlights of the Notification:

Form 3CEB – Report from an accountant to be furnished under section 92E of the ITA relating to international transactions and specified domestic transaction

The CBDT has revised Form 3CEB and renumbered existing serial number 25 as 26 in Part C of Form 3CEB, to accommodate new serial number 25 which covers reporting requirements for transactions with persons claiming the benefit of concessional rate of tax under section 115BAE of the ITA.

This revision mandates the taxpayer claiming benefit under section 115BAE and the certifying accountant to report any specified domestic transaction which has resulted in more than ordinary profits expected to arise in such business.

The clause requires reporting of the name of the person, description of transaction, transaction value, arm’s length price and the method used for determining the arm’s length price.

Form 3CD – Statement of particulars required to be furnished under section 44AB of the ITA

The Notification has now amended Form 3CD (relating to audit report required to be furnished under section 44AB of the ITA) to incorporate following changes:

i) Section 115BAE of the ITA:
― Clause 8a – Question on opting for taxation under concessional regime under section 115BAE has been added

― Clause 32(a) – Details relating to brought forward losses or depreciation, need to be provided

ii) Clause 12 – Whether presumptive taxation under section 44ADA of the ITA [relating to provision for computing profits and gains of profession on presumptive basis] has been opted and the amount thereof required to be disclosed

iii) Clause 18(ca) – Adjustment to written down value in relation to depreciation allowance as provided under the proviso to section 115BAA(3) (for AY 2021-22 only) and second proviso to section 115BAC(3) (for AY 2024-25 only) required to be disclosed

iv) Clause 19 – Details of amounts debited to Profit and Loss account and amounts admissible under section 35ABA of the ITA [relating to amortization of expenditure for obtaining right to use spectrum for telecommunication services] and any other relevant section, required to be disclosed

v) Clause 21 – Following details of amounts debited to Profit and Loss account and required to be disclosed have been aligned with amendment to Explanation 3 of section 37 of the ITA vide FA 2022:
― Expenditure for any purpose which is an offence or is prohibited by law or expenditure by way of penalty or fine for violation of any law (enacted in India or outside India)
― Expenditure incurred to compound an offence under any law for the time being in force, in India or outside India, and
― Expenditure incurred to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person.

vi) Clause 26 – Details with respect to sum payable to micro or small enterprise (MSE) beyond the time limit under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, required to be disclosed in line with amendment under section 43B(h) of the ITA [relating to deduction on actual payment basis for payments to be made to MSEs] vide FA 2023.

Form 65 – Application for exercising/renewing option for the tonnage tax scheme

  • Form 65 has been updated to include the following details in case the applicant company is a unit of an International Financial Services Centre (IFSC):
    ― Verification section to include the following: “I certify that the applicant company is a unit of an International Financial Services Centre and has filed the application within three months from the date on which the deduction under section 80LA of the Income- tax Act, 1961 is no longer applicable.”
    ― Details of deduction claimed under section 80LA of the ITA [relating to deductions in respect of certain incomes of Offshore Banking Units and IFSC] and if yes, date on which such deduction is no longer applicable.

The Notification has been issued timely to ensure appropriate reporting under the annual return filing compliance by taxpayers for AY 2024-25.