Section 92CD of ITA, 1961 : Section 92Cd: Effect To Advance Pricing Agreement

Explanation using Example

Imagine a company, XYZ Corp, that has entered into an Advance Pricing Agreement (APA) with the tax authorities under section 92CC of the Income Tax Act, 1961, to determine the pricing of its international transactions with associated enterprises. The APA is finalized on April 10, 2023, and applies to financial years starting from April 1, 2021.

XYZ Corp had already filed its tax return for the financial year 2021-2022 (Assessment Year 2022-2023) on July 31, 2022, following the regular provisions without the guidance of the APA, as it was not in place at that time.

Following the finalization of the APA, XYZ Corp is required to furnish a modified return to align with the terms of the APA. As per Section 92CD(1), the company must file this modified return by July 31, 2023, which is within three months from the end of the month in which the APA was entered into (April 2023).

If the tax authorities had already completed the assessment for XYZ Corp for the Assessment Year 2022-2023 before the company filed its modified return, they would reassess the income considering the APA as per Section 92CD(3).

In case the assessment for that year was still pending when the modified return was filed, the Assessing Officer would take the modified return into account and proceed with the assessment as per Section 92CD(4).

Furthermore, the time limit for the tax authorities to pass an order of assessment, reassessment, or recomputation of total income is extended to one year from the end of the financial year in which the modified return is furnished, as per Section 92CD(5)(a).