The Central Board of Direct Taxes (CBDT) has notified Income Tax (19th Amendment) rules, 2016 concerning determination of Fair Market value of Assets in certain cases such as indirect transfer of shares as prescribed under section 9 of the Income Tax Act, 1961. The notification also covers the rules for the determination of Income attributable to assets in India.
Earlier, the CBDT on 23rd May had issued draft rules for determining FMV of assets, computing income attributable to assets in India as well as the reporting requirements and document maintenance obligations. After due consideration of the comments received on the draft rules, the Rules are notified vide S.O. No. 2226(E) dated 28.06.2016.
Some of the major parts of the notification are below.
In the Income Tax rules, 1962 in Part II, CBDT has inserted clause ‘I’ after part ‘H’.
The notification addresses the manner of computation of FMV of both Indian and global assets owned by the Foreign company or entity.
As per thethe notification determination of FMVof Assets is, The FMV of asset, tangible or intangible, as on the specified date, held directly or indirectly by a company or an entity registered or incorporated outside India for the purposes of clause (i) of sub-section (1) of section 9, shall be computed in accordance with the provisions of this rule.
Where the asset is a share of an Indian company listed on a recognised stock exchange on the specified date, the FMV of the share shall be the observable price of such share on the stock exchange: Provided that where the share is held as part of the shareholding which confers, directly or indirectly, any right of management or control in relation to the aforesaid company, the FMV of the share shall be determined in accordance with the rule prescribed in the notification.
Under the relevant provisions of the notification, all the necessary information or documents required to be maintained and furnished by the Indian concern under section 285 of the Act.
In the Income Tax (19th Amendment) rules 2016, after rule 114DA, CBDT has also inserted rule 114DB.
The rule 114DB related Information or documents to be furnished under section 285A of the Income Tax Act.
The amended rule also prescribed new form no. 3CT and form no.49D for Income attributable to assets located in India under section9 of the Income-tax Act, 1961 and Information and documents to be furnished by an Indian concern under section 285A of the Income Tax act.
Read the full text of the notification below.