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:
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.