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Secondary Adjustment 92CE added in IT Act - Game On

Dongre Arun 
on 20 June 2017


Finance Act, 2017 inserted Section 92CE in the Income-tax Act, 1961 to provide for Secondary Adjustment mechanism in the Transfer Pricing. As a result of Primary Adjustment, if there is an upward adjustment, such disallowance shall be construed as an Advance or Loan to AE and accordingly a Secondary Adjustment is proposed on the same.

CBDT now has notified new Rule 10CB which prescribes computation of Interest income pursuant to the Secondary Adjustment and the Time Limit for repatriation of so deemed Advance or Loan.

Rules of the Game - Rule 10CB

Time limit for Repatriation:

The time limit for repatriation of the excess money shall be 90 days. Such time limit shall be counted from;

  1. Due date of filing of RoI u/s 139(1) - If primary adjustment has been made suo-moto by assessee
  2. Date of order of AO or Appellate Authority - If the primary adjustment determined in the Order and the same has been accepted by Assessee
  3. Due date of filing of RoI u/s 139(1) - If assessee had entered into Advance Pricing Agreement (APA) u/s 92CD
  4. Due date of filing of RoI u/s 139(1) - If Assessee opted for Safe Harbor rules provisions u/s 92CB
  5. Due date of filing of RoI u/s 139(1) - An agreement entered into under Mutual Agreement Procedure (MAP) under DTAA

Rate of Interest on Non-compliance:

If the repatriation is not made as per the time limit mentioned as above, imputed per-annum Interest shall be computed as;

  • One-year Marginal Cost of fund lending rate of SBI as on 1st of April of previous year plus 325 bps (basis points) - In case of International transaction denominated in INR
  • Six Month LIBOR as on 30th September of previous year plus 300 bps - In case of International transaction denominated in Foreign Currency

#IT-Notification GSR 590(E) 52/201

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Category Income Tax
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