India has notified Cyprus as Jurisdictional Area Under Section 94a of the Income-Tax Act,1961 making any transaction with a Person in Cyprus to be Treated as an International Transaction Resulting in Application of Transfer-Pricing Regulations Including Maintenance of Documentations.
Section 94A was introduced in the Income-tax Act, 1961, through the Finance Act, 2011, in respect of transactions with persons located in notified jurisdictional area as an anti-avoidance measure.
As per section 94A, the Central Government may, having regard to the lack of effective exchange of information with any country or territory outside India, specify the said country or territory as a notified jurisdictional area in relation to transactions entered into by any assesse. The rules under section 94A were notified as Income-tax (8th Amendment) Rule, 2013, through S.O. 1856 (E) dated 26th June, 2013, by inserting Rule 21AC and Form 10FC in the Income-tax Rule, 1962.
India and Cyprus have entered into an agreement for avoidance of double taxation of income and prevention of fiscal evasion which is in force since 21st December, 1994. Both the Contracting States under this agreement have a legal obligation to exchange such information as is necessary for carrying out the provisions of the agreement or of domestic laws of the Contracting States, in particular for the prevention of fraud or evasion of taxes.
Since Cyprus has not been providing the information requested by the Indian tax authorities under the exchange of information provisions of the agreement, it has been decided to notify Cyprus as a notified jurisdictional area under the section, said the government in a statement.