20. Clauses 42 to 44 Information Reporting, CbC Compliance & GST Expenditure Break-up

Clauses 42 to 44 form the final disclosure and data-verification layer of Form 3CD. These clauses do not affect taxable income directly, but they play a critical role in risk profiling, inter-departmental data matching, and international tax monitoring.
In practice, these clauses are frequently relied upon by the department for non-intrusive scrutiny selection and analytics-based notices.

1. Introduction

At this stage, the tax audit focuses on:
  • statutory information reporting obligations,
  • international group reporting compliance, and
  • GST-linked expenditure transparency.
These clauses validate whether the assessee’s data footprint across laws is consistent and complete.
Errors here often lead to scrutiny even when computation is otherwise correct.

2. Objective of Clauses 42 to 44

The objectives are to:
  • ensure mandatory reporting statements are filed correctly,
  • capture Country-by-Country reporting obligations where applicable, and
  • provide visibility into expenditure incurred with GST-registered and unregistered vendors.
These clauses support data integrity and cross-law reconciliation, not income computation.

3. Clause 42 — Statement in Form 61 / 61A / 61B

What the clause requires
Clause 42 requires the auditor to report whether the assessee was required to furnish:
  • Form 61, or
  • Form 61A, or
  • Form 61B.
If the answer is No, the reporting ends there.
If the answer is Yes, detailed disclosures must be furnished.
Details to be furnished where applicable
Where applicable, the following particulars are required:
  • Income-tax Department Reporting Entity Identification Number
  • Type of Form (61 / 61A / 61B)
  • Due date for furnishing the statement
  • Date on which the statement was furnished
  • Whether the statement contains information about all reportable transactions
  • If not, details of transactions not reported
Practical audit focus
Auditors should:
  • independently evaluate applicability based on assessee profile and transactions,
  • verify filing acknowledgements and dates, and
  • document reasons for any incomplete reporting.
Clause 42 is about disclosure discipline, not accounting accuracy.

4. Clause 43 — Country-by-Country Report (Section 286)

Applicability check
Clause 43 requires confirmation whether:
  • the assessee, or
  • its parent entity, or
  • its alternate reporting entity
is required to furnish a Country-by-Country Report under section 286(2).
Disclosures required where applicable
If applicable, the following must be reported:
  • Whether the report has been furnished
  • Name of the parent entity
  • Name of the alternate reporting entity (if any)
  • Date of furnishing the report
Practical audit focus
This clause requires:
  • clarity on group structure,
  • identification of the correct reporting entity, and
  • preservation of filing evidence.
Clause 43 has international tax sensitivity—errors here escalate beyond routine assessments.

5. Clause 44 — Break-up of Total Expenditure (GST Registered vs Not Registered)

Scope of the clause
Clause 44 requires a break-up of total expenditure incurred during the previous year between:
  • expenditure relating to entities registered under GST, and
  • expenditure relating to entities not registered under GST.
Reporting structure
The clause requires reporting of:
  • total expenditure for the year,
  • expenditure relating to registered persons (with further classification as applicable), and
  • expenditure relating to unregistered persons.
The totals must reconcile exactly with the Profit & Loss Account.
Practical audit focus
Auditors should:
  • map vendor masters with GSTIN details,
  • classify expenditure ledger-wise,
  • handle missing or invalid GSTINs carefully, and
  • ensure reconciliation with audited financials.
Clause 44 converts vendor data quality into a tax audit risk parameter.

6. Common Errors Observed in Clauses 42–44

Frequently observed issues include:
  • mechanical “Not Applicable” reporting without evaluation,
  • incorrect or missing reporting entity identification numbers,
  • incomplete Country-by-Country disclosures,
  • Clause 44 totals not matching audited expenditure, and
  • vendor GST status assumed without verification.
These errors often trigger system-based notices.

7. Practical Guidance for Auditors and Assessees

Best practices include:
  • maintaining an annual applicability checklist for reporting statements,
  • retaining filing proofs and group reporting documentation,
  • ensuring vendor masters are GST-validated, and
  • finalising Clause 44 only after ledger closure and reconciliation.
These clauses should be finalised at the very end of the tax audit.

8. CABTA Insight

“Clauses 42 to 44 don’t compute income — they test data credibility.”

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