Section 92CE of ITA, 1961 : Section 92Ce: Secondary Adjustment In Certain Cases

Explanation using Example

Imagine a company, IndiaTech Pvt. Ltd., which is based in India and has a subsidiary, EuroTech GmbH, in Germany. IndiaTech sells software services to EuroTech at a price lower than what it charges to unrelated parties. The Indian tax authorities, upon reviewing the transaction, determine that the price charged to EuroTech is not at arm's length and make a primary adjustment to the transfer price, increasing IndiaTech's taxable income.

As per Section 92CE of the Income-tax Act, 1961:

IndiaTech Pvt. Ltd. now needs to make a secondary adjustment because:

1. The primary adjustment was made by the Assessing Officer and has been accepted by IndiaTech.
2. The primary adjustment amount exceeds one crore rupees.
3. The assessment year for which the adjustment is made is after April 1, 2016.

Since the primary adjustment resulted in additional income for IndiaTech, there is excess money with EuroTech GmbH. If this excess money is not repatriated to India within the prescribed time, it will be deemed to be an advance made by IndiaTech to EuroTech. Consequently, IndiaTech will have to compute and report interest income on this deemed advance in its books of account and tax returns.