Income-tax (12th Amendment) Rules, 2017

G.S.R. 557(E).- In exercise of the powers conferred by section 295 read with sub-section (2) of section 92CB of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (12th Amendment) Rules, 2017.

(2) They shall come into force and shall be deemed to have come into force from the 1st day of April, 2017.

2. In the Income-tax Rules, 1962, -

(I) in rule 10TA, -

(i) for clause (a), following clause shall be substituted, namely:-

"(a) "accountant" means an accountant referred to in the Explanation below sub-section (2) of section 288 of the Act and includes any person recognised for undertaking cost certification by the Government of the country where the associated enterprise is registered or incorporated or any of its agencies, who fulfills the following conditions, namely:-

(I) if he is a member or partner in any entity engaged in rendering accountancy or valuation services then,-

(i) the entity or its affiliates have presence in more than two countries; and

(ii) the annual receipt of the entity in the year preceding the year in which cost certification is undertaken exceeds ten crore rupees;

(II) if he is pursuing the profession of accountancy individually or is a valuer then,-

(i) his annual receipt in the year preceding the year in which cost certification is undertaken, from the exercise of profession, exceeds one crore rupees; and

(ii) he has professional experience of not less than ten years."

(ii) the existing clause (a) shall be read as clause (aa);

(iii) in clause (aa) so amended, in sub-clause (viii), after the word "principal" the words ", except where the source code has been made available to carry out routine functions like debugging of the software" shall be inserted;

(iv) after clause (c), the following clause shall be inserted, namely:-

''(ca) "employee cost" includes,-

(i) salaries and wages;

(ii) gratuities;

(iii) contribution to Provident Fund and other funds;

(iv) the value of perquisites as specified in clause (2) of section 17 of the Act;

(v) employment related allowances, like medical allowance, dearness allowance, travel allowance and any other allowance;

(vi) bonus or commission by whatever name called;

(vii) lumpsum payments received at the time of termination of service or superannuation or voluntary retirement, such as gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments;

(viii) expenses incurred on contractual employment of persons performing tasks similar to those performed by the regular employees;

(ix) outsourcing expenses, to the extent of employee cost, wherever ascertainable, embedded in the total outsourcing expenses:

Provided that where the extent of employee cost embedded in the total outsourcing expenses is not ascertainable, eighty per cent. of the total outsourcing expenses shall be deemed to be the employee cost embedded in the total outsourcing expenses;

(x) recruitment expenses;

(xi) relocation expenses;

(xii) training expenses;

(xiii) staff welfare expenses; and

(xiv) any other expenses related to employees or the employment;'';

(v) after clause (g), the following clause shall be inserted, namely:-

"(ga) "low value-adding intra-group services" means services that are performed by one or more members of a multinational enterprise group on behalf of one or more other members of the same multinational enterprise group and which,-

(i) are in the nature of support services;

(ii) are not part of the core business of the multinational enterprise group, i.e., such services neither constitute the profit-earning activities nor contribute to the economically significant activities of the multinational enterprise group;

(iii) are not in the nature of shareholder services or duplicate services;

(iv) neither require the use of unique and valuable intangibles nor lead to the creation of unique and valuable intangibles;

(v) neither involve the assumption or control of significant risk by the service provider nor give rise to the creation of significant risk for the service provider; and

(vi) do not have reliable external comparable services that can be used for determining their arm''s length price, but does not include the following services, namely:-

(i) research and development services;

(ii) manufacturing and production services;

(iii) information technology (software development) services;

(iv) knowledge process outsourcing services;

(v) business process...

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