Co-operative Societies procuring and marketing milk eligible to opt for Safe Harbour Rules [Notification No 90/2015, dated 8-12-2015]

Under section 92CB(2), the CBDT is empowered to make rules for safe harbour. Further, section 92D empowers the CBDT to make rules regarding keeping and maintenance of specified information and document for assessees entering into an international transaction or specified domestic transaction as well as to prescribe the period for which information and documents shall be kept and maintained. Accordingly, in exercise of the powers conferred under such sections, the CBDT has amended Rules 10D, 10THA, 10THB, 10THC and 10THD.

(1) Eligible assessee to include a co-operative society engaged in the business of procuring and marketing milk and milk products [Rule 10THA]: The scope of eligible assessee under Rule 10THA has been extended and it now also includes a person who has exercised a valid option for application of safe harbor rules in accordance with the provisions of Rule 10THC and is a co-operative society engaged in the business of procuring and marketing milk and milk products.

(2) Eligible specified domestic transaction to include purchase of milk or milk products by a co-operative society from its members [Rule 10THB]: Accordingly, Rule 10THB now includes purchase of milk or milk products by a cooperative society from its members as an eligible specified domestic transaction.

(3) Specified circumstance in which transfer price declared by the co-operative society can be accepted by the income-tax authorities [Rule 10THC]: In effect, where a co-operative society engaged in the business of procuring and marketing milk and milk products has entered into an eligible transaction of purchase of milk or milk products from its members in any previous year relevant to an assessment year and the option exercised by the co-operative society is treated to be validly exercised under Rule 10THD, the transfer price declared by the co-operative society will be accepted by the income-tax authorities, if it is in accordance with the specified circumstance [as per Rule 10THC] given below:

The price of milk or milk products is determined at a rate which is fixed on the basis of the quality of milk, namely, fat content and Solid Not Fat (SNF) content of milk; and –

(a) the said rate is irrespective of,-

(i) the quantity of milk procured;

(ii) the percentage of shares held by the members in the co-operative society;

(iii) the voting power held by the members in the society; and

(b) such prices are routinely declared by the co-operative society in a transparent manner and are available in public domain.”

(4) Information and documents to be kept and maintained under section 92D in case of an eligible assessee referred to in Rule 10THA [Rule 10D(2A)]:

Rule	Eligible Assessee	Information and documents to be kept and maintained
10THA(i)	A government company engaged in the business of generation, supply, transmission or distribution of electricity	(i) a description of the ownership structure of the assessee enterprise with details of shares or other ownership interest held therein by other enterprises;   (ii) a broad description of the business of the assessee and the industry in which the assessee operates, and of the business of the associated enterprises with whom the assessee has transacted;   (iii) the nature and terms (including prices) of specified domestic transactions entered into with each associated enterprise and the quantum and value of each such transaction or class of such transaction;   (iv) a record of proceedings, if any, before the regulatory commission and orders of such commission relating to the specified domestic transaction;   (v) a record of the actual working carried out for determining the transfer price of the specified domestic transaction;   (vi) the assumptions, policies and price negotiations, if any, which have critically affected the determination of the transfer price; and   (vii) any other information, data or document, including information or data relating to the associated enterprise, which may be relevant for determination of the transfer price.
10THA(ii)	A co-operative society engaged in the business of procuring and marketing milk and milk products	(i) a description of the ownership structure of the assessee co-operative society with details of shares or other ownership interest held therein by the members;   (ii) description of members including their addresses and period of membership;   (iii) the nature and terms (including prices) of specified domestic transactions entered into with each member and the quantum and value of each such transaction or class of such transaction;   (iv) a record of the actual working carried out for determining the transfer price of the specified domestic transaction;   (v) the assumptions, policies and price negotiations, if any, which have critically affected the determination of the transfer price;   (vi) the documentation regarding price being routinely declared in transparent manner and being available in public domain; and   (vii) any other information, data or document which may be relevant for determination of the transfer price.