CBDT Notifies Rule 10CB- Computation of Interest Income for Secondary Adjustments of IT Act, 1961 (Download PDF)

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Central Board of Direct Taxes has notified the Rule 10CB for operates the provisions of secondary. It decides interest rate which will apply for computing the income in case of failure to repatriate the excess money within the prescribed time limit for repatriation of excess money.

  • For international transactions denominated in Indian currency and in foreign currency the interest rates will be different and the interest rates are applicable on an annual basis.
  • When the primary adjustments of more than Rupees One Crore made in respect of Assessment Year 2017 - 18 or later then and then only time limit of 90 days for repatriation of excess money shall begin, attains finality.
  • The transfer pricing order is applicable for taxpayer and the time limit for repatriation shall commence only after the appeal is finalised by the appellate authority.

Rules

  • The rules may be called the Income-tax (15th Amendment) Rules, 2017 and they will come into force from date of their publication in the Official Gazette.
  • In the Income-tax Rules, 1962, after rule 10CA, the following rule shall be inserted, namely: -

’10CB. Computation of interest income pursuant to secondary adjustments.

(1) 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:

i. 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;

ii. 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;

iii. 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;

iv. 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

v. 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;

(2) 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:

i. 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

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

  • The Finance Act, 2017 include section 92CE in the Income-tax Act, 1961 with effect from 1st April, 2018 which provides secondary adjustment by attributing income to the excess money which given to the associated enterprise to make the actual allocation of funds reliable with the primary transfer pricing adjustment.
  • The provision will apply to primary adjustments on more than One Crore Rupees made in respect of Assessment from Year 2017 - 18.

- Published/Last Modified on: June 24, 2017

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