CBDT Notifies Rule 10CB for Secondary Adjustments under Section 92CE of IT Act, 1961 [Read Notification]

The Central Board of Direct Taxes has notified Rule 10CB for operationalising the provisions of secondary adjustment under Section 92CE of IT Act, 1961.

It prescribes the time limit for repatriation of excess money and the rate of interest to be applied for computing the income in case of failure to repatriate the excess money within the prescribed time limit.

Separate rates of interest have been provided for international transactions denominated in Indian currency and in foreign currency. The rates of interest are applicable on an annual basis.

The time limit of 90 days for repatriation of excess money shall begin only when the primary adjustments exceeding Rs. 1 crore made in respect of Assessment Year 2017-18 or later, attains finality.

Where the transfer pricing order is appealed against by the taxpayer, the time limit for repatriation shall commence only after the appeal is finalised by the appellate authority. The Rule reads as follows:

Rule 10CB: Computation of interest income pursuant to secondary adjustments:

• For the purposes of sub- section (2) of section 92CE of the Act, the time limit for repatriation of excess money shall be on or before ninety days


• from the due date of filing of return under sub-section (1) of section 139 of the Act where primary adjustments to transfer price has been made suo-moto by the assessee in his return of income;


• from the date of the order of Assessing Officer or the appellate authority, as the case may be, if the primary adjustments to transfer price as determined in the aforesaid order has been accepted by the assessee;


• from the due date of filing of return under sub-section (1) of section 139 of the Act in the case of agreement for advance pricing entered into by the assessee under section 92CD;


• from the due date of filing of return under sub-section (1) section 139 of the Act in the case of option exercised by the assessee as per the safe harbour rules under section 92CB; or


• from the due date of filing of return under sub-section (1) section 139 of the Act in the case of an agreement made under the mutual agreement procedure under a Double Taxation Avoidance Agreement entered into under section 90 or 90A;


• The imputed per annum interest income on excess money, which is not repatriated within the time limit as per sub-section (1) of section 92CE of the Act, shall be computed:


• at the one-year marginal cost of fund lending rate of State Bank of India as on 1st of April of the relevant previous year, plus three hundred twenty five basis points in the cases where the international transaction is denominated in Indian rupee; or


• at six-month London Interbank Offered Rate as on Sept. 30 of the relevant previous year plus three hundred basis points in the cases where the international transaction is denominated in foreign currency.

Explanation- For the purposes of this rule, “international transaction” shall have the meaning assigned to it in Section 92B of the Act.

The Finance Act, 2017, inserted Section 92CE in the Income Tax Act, 1961, with effect from April 1, 2018, to provide for secondary adjustment by attributing income to the excess money lying in the hands of the associated enterprise, in order to make the actual allocation of funds consistent with that of the primary transfer pricing adjustment.

The provision shall apply to primary adjustments exceeding Rs. 1 crore made in respect of Assessment Year 2017-18 onwards.