Before delving into the relevance of Form 3CEAC, let us understand what it signifies and why it was made mandatory in the first place.
Earlier, a major limitation in measuring the fiscal and economic effects of tax avoidance has been the lack of qualitative data with special reference to corporate taxation. Such lacunae made it extremely difficult for authorities to evaluate transfer pricing assessments on transactions between related organizations. In fact, the authorities found it even more difficult to complete audits in such a scenario.
To address this major issue, Action Plan 13 was devised. Under this Action Plan, every multinational group is mandated to file a detailed report, titled “country by country report” (CbCr), on its economic activities with the concerned tax authorities.
Based on Action Plan 13, a parent entity of a multinational group needs to file CbCr to the concerned tax authorities of the country in which such a parent entity is a resident. It is imperative to note here that the CbCr that is filed with a particular country shall be shared with other tax jurisdictions by the country with which the CbCr is filed. CbCr, in essence, reflects (a) global allocation of income, (b) profit, (c) taxes paid, and (d) economic activity among various tax jurisdictions in which it operates.
Further, Action Plan 13 requires a multinational group to file a master file (MF). An MF is required to be filed by every constituent entity of an international group to tax authorities of a country in which such an entity is a resident. MF essentially holds data relating to each entity’s economic activity in a multinational group.
Let us now understand the significance of the following terms to have better clarity with special reference to the particulars to be filled in Form 3CEAC:
Parent entity
By parent entity, we mean any entity (“first-mentioned entity”) that either holds any interest in other entities and is hence required to prepare consolidated financial statements or would have prepared a consolidated financial statement in case shares were listed on a recognized stock exchange and there is no other entity including a “second-mentioned entity,” which is holding any interest in the first-mentioned entity and thereby such entity (the “second-mentioned entity”) is required to prepare a consolidated financial statement.
International Group
The expression “international group” signifies any group that includes two or more enterprises that are residents of different jurisdictions or one enterprise that carries on any business in another jurisdiction through a permanent establishment.
Constituent entity
A constituent entity signifies any separate entity that is included in a consolidated financial statement. Further, it also includes any entity that is principally excluded from a consolidated financial statement in terms of size and materiality.
Form 3CEAC
Income tax form 3CEAC is basically intimation by a constituent entity, who is a resident in India, of an international group (IG), the parent entity of which is not resident in India, for the purpose of subsection (1) of section 286(1) of the Income Tax Act, 1961 read with Rule 10DB of Income Tax Rules, 1962.
As per Section 286(1), every constituent entity resident in India shall, if it is a constituent of an international group, the parent entity of which is not resident, notify prescribed income tax return filing online in the form and manner on or before such date as may be prescribed (i.e., Rule 10DB).
To whom does form 3CEAC have to be furnished?
Form 3CEAC has to be furnished to the Director-General of Income Tax (Risk Assessment) (DGIT[RA]).
The objective of Form 3CEAC
It is mandatory that every constituted entity resident in India shall inform the DGIT of the following at the time of filing Form 3CEAC:
- Whether the constituting entity is the sole alternate reporting entity of an international group and
- The detail of the parent entity or the alternate reporting entity of the international group.
Applicability of Form 3CEAC
Form 3CEAC is applicable only to such specific entities whose international group turnover exceeds ₹55,000 million.
Due date for Filing of Form 3CEAC to DGIT (RA)
The due date for filing a corporate income tax (CIT) return is 30th November, and the due date for filing form 3CEAC is two months prior to the date of filing of the CIT return, i.e., 30th September.
What type of information is required in Form 3CEAC at the time of filing?
A typical pro forma of Form 3CEAC is provided hereunder for the benefit of readers.
FORM NO. 3CEAC
[See rule 10DB]
Intimation by a constituent entity, resident in India, of an international group, the parent entity of which is not resident in India, for the purposes of sub-section (1) of section 286 of the Income-tax Act, 1961
- Name of the constituent entity –
- Address of the constituent entity –
- Permanent account number of the constituent entity –
- Name of the international group –
- Name of the parent entity of the international group –
- Address of the parent entity of the international group –
- The country of residence of the parent entity –
- Whether the international group has designated an alternate reporting entity in place of the parent entity to furnish the report referred to in sub-section (2) of section 286 – Yes/No
- If yes, name and address of the alternate reporting entity of the international group –
(i) Name of alternate reporting entity
(ii) Address
- The country of residence of the alternate reporting entity –
- Reportable Accounting Year –
I, ………………………………………………, son/daughter/wife* of Shri ……………………………… hereby declare that I am furnishing the information in my capacity as …………………………… (designation) of ……………………………… (name of the assessee) and I am competent to furnish the said information and verify it.
Place: …………… Signature**
Date: …………… Address of the declarant
PAN of the declarant
Note: *Strike off whichever is not applicable.
**This form has to be signed by the person competent to verify the return of income under Section 140.
