Section 92CD

Section 92CD(1): Notwithstanding anything to the contrary contained in section 139, where any person has entered into an advance pricing agreement and before the date of agreeing, he has furnished a return of income for any previous year to which the agreement applies, such person shall furnish a modified return of income for the said last year to the Assessing Officer within three months from the end of the month in which the said agreement was entered into in accordance with and limited to the manner provided in the agreement.

Section 92CD(2): The provisions of this Act shall apply to the modified return furnished under sub-section (1) as they apply to a return furnished under section 139.

Section 92CD(3): If the assessment or reassessment proceedings for an assessment year to which the agreement applies have been completed before the expiry of the period allowed for furnishing of modified return under sub-section (1), the Assessing Officer shall, notwithstanding anything contained in section 154, pass an order modifying the total income of the relevant assessment year in accordance with the advance pricing agreement.

Section 92CD(4): Where the assessment or reassessment proceedings for an assessment year to which the agreement applies are pending on the date of furnishing of modified return under sub-section (1), the Assessing Officer shall proceed to complete the assessment or reassessment proceedings in accordance with the agreement taking into consideration the modified return so furnished.

Section 92CD(5): The Principal Commissioner or Commissioner may, if he considers it necessary, issue directions for the guidance of the Assessing Officer as to the manner in which the assessment or reassessment is to be modified or completed in accordance with the agreement.

Section 92CD(6): For the purposes of this section, the assessment or reassessment proceedings for an assessment year shall be deemed to have been completed where—

• (a) an order of assessment under sub-section (3) of section 143 or section 144 has been passed; or
• (b) an order of reassessment under sub-section (3) of section 147 has been passed.

Purpose and Objective of the Act

The primary objective of Section 92CD is to provide a clear and structured procedure for the assessment or reassessment of income for the years covered by an APA when returns for those years have already been filed. This ensures that the terms of the APA are correctly applied to past assessment years, providing certainty and reducing the risk of disputes between the taxpayer and tax authorities.

Proper Reasoning

The reasoning behind the introduction of Section 92CD includes:

1. Integration of APA Terms: Ensuring that the terms of an APA are correctly integrated into the assessments of past years, even if the returns for those years were already filed.
2. Certainty and Compliance: Providing taxpayers with a clear timeframe and procedure for filing modified returns and ensuring compliance with the APA.
3. Efficient Administration: Enabling tax authorities to efficiently administer and enforce the terms of an APA across multiple tax years.
4. Reduction of Litigation: Minimizing potential disputes and litigation by providing a standardized process for incorporating APA terms into past assessments.

Legal Recourse and Legal Proceedings

The legal recourse and proceedings under Section 92CD are as follows:

1. Filing Modified Return: The taxpayer must file a modified return of income within three months from the end of the month in which the APA was entered into.
2. Application of Provisions: The provisions of the Income Tax Act apply to the modified return as they do to a return filed under Section 139.
3. Modification of Completed Assessments: If assessments for the relevant years have been completed, the AO must modify the total income in accordance with the APA terms.
4. Completion of Pending Assessments: If assessments are pending, the AO will complete them considering the modified return and the APA.
5. Guidance and Directions: The Principal Commissioner or Commissioner may issue directions to the AO for modifying or completing assessments in line with the APA.

Do’s and Don’ts

Do’s:

• Ensure timely filing of the modified return within the specified three-month period.
• Accurately reflect the terms of the APA in the modified return.
• Keep detailed records and documentation supporting the modifications made in the return.
• Cooperate with tax authorities during the assessment or reassessment process.

Don’ts:

• Do not ignore the requirement to file a modified return after entering into an APA.
• Avoid providing incomplete or inaccurate information in the modified return.
• Do not miss the three-month deadline for filing the modified return.
• Avoid non-cooperation with tax authorities during the assessment or reassessment process.

Example

Scenario: XYZ Ltd., an Indian subsidiary of a multinational corporation, enters into an APA with the Indian tax authorities on January 15, 2024. The APA covers the assessment years 2019-20 to 2023-24. XYZ Ltd. had already filed its returns for these years.

Step-by-Step Process:

1. Filing Modified Return: XYZ Ltd. must file modified returns for the assessment years 2019-20 to 2023-24 by April 30, 2024 (within three months from the end of January 2024).
2. Assessment Modification:
   • For assessment years where assessments were completed, the AO will modify the total income as per the APA.
   • For assessment years where assessments are pending, the AO will complete the assessments considering the modified returns.
3. Guidance: The Principal Commissioner or Commissioner may issue directions to the AO on how to incorporate the APA terms into the assessments.

Modified Return Filing Example:

To, The Assessing Officer, [Name of the City], [Address of the AO Office].

Date: April 30, 2024

From, XYZ Ltd., [Address of the Assessee], [Permanent Account Number (PAN)], [Email Address], [Contact Number].

Subject: Filing of Modified Return of Income for AY 2019-20 to AY 2023-24 in accordance with APA dated January 15, 2024

Respected Sir/Madam,

Pursuant to Section 92CD of the Income Tax Act, 1961, we hereby submit the modified returns of income for the assessment years 2019-20 to 2023-24. These returns reflect the terms of the Advance Pricing Agreement entered into on January 15, 2024.

Details of Modified Returns:

1. Assessment Year 2019-20:
   • Original Total Income: INR [Amount]
   • Revised Total Income as per APA: INR [Amount]
2. Assessment Year 2020-21:
   • Original Total Income: INR [Amount]
   • Revised Total Income as per APA: INR [Amount]
3. Assessment Year 2021-22:
   • Original Total Income: INR [Amount]
   • Revised Total Income as per APA: INR [Amount]
4. Assessment Year 2022-23:
   • Original Total Income: INR [Amount]
   • Revised Total Income as per APA: INR [Amount]
5. Assessment Year 2023-24:
   • Original Total Income: INR [Amount]
   • Revised Total Income as per APA: INR [Amount]

Enclosures:

1. Copies of the modified returns for AY 2019-20 to AY 2023-24.
2. Documentation supporting the modifications made in the returns.
3. Copy of the Advance Pricing Agreement dated January 15, 2024.

We request you to kindly take the modified returns on record and modify the assessments for the relevant years accordingly.

Thank you for your consideration.

Yours sincerely,

[Name of the Authorized Signatory]
[Designation]
XYZ Ltd.
[Signature]

Conclusion

Section 92CD of the Income Tax Act, 1961, provides a clear and structured procedure for incorporating the terms of an Advance Pricing Agreement into the assessment or reassessment of past years. This section ensures that the benefits of an APA are extended to previous assessment years, reducing the risk of disputes and providing certainty to taxpayers. By understanding the requirements, objectives, and procedures associated with Section 92CD, taxpayers can effectively navigate the process and ensure compliance with the APA terms. Proper documentation, timely filing of modified returns, and cooperation with tax authorities are essential to successfully implementing an APA across multiple tax years.