In order to make the actual allocation of funds consistent with that of the primary adjustment, section 92CE was inserted in the Income-tax Act, 1961 (‘the Act’) vide Finance Act, 2017 with effect from 1^st April, 2018, to provide for secondary adjustment by attributing income to the excess money lying in the hands of the associated enterprise (AE).

The time within which the excess money, which is available with the associated enterprise of an assessee as a result of primary adjustment to the transfer price, which leads to an increase in the total income or reduction in the loss of the assessee, shall be repatriated to India, was prescribed in accordance with the provisions of section 92CE(2) by inserting Rule 10CB of the Income-tax Rules, 1962 (‘the Rules’) vide Notification No. GSR 590(E) dated 15th June, 2017.

Under Rule 10CB(1), a uniform time limit of 90 days, starting from different dates, is prescribed for repatriation of excess money. This is done in order to provide for uniform treatment in respect of the different types/situations of primary adjustments specified under sub-section (1) of section 92CE.

Certain difficulties have been noted in implementing the provisions of Rule 10CB(1) in respect of primary adjustment that arises on account of Agreement for Advance Pricing (APA) entered into by the assessee, or on account of an agreement reached under the Mutual Agreement Procedure (MAP). In order to remove these difficulties, it is proposed to amend Rule 10CB.

In this regard, draft notification providing for said modification has been framed and uploaded on the website of the Income Tax Department www.incometaxindia.gov.in for comments from stakeholders and general public.

Comments and suggestions on the draft rules may be sent by 9^th July, 2018 electronically at the email address ustpl3@nic.in.

MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 15th June, 2017

G.S.R. 590(E).— In exercise of the powers conferred by sub-section (2) to section 92CE and
section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes, hereby, makes the
following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (15th Amendment) Rules, 2017.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. 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.

Explanation- For the purposes of this rule “International transaction” shall have the meaning assigned to it in
section 92B of the Act.’

[Notification No. 52/2017, F.No.370142/12/2017 -TPL]
PITAMBAR DAS, Director (Tax Policy And Legislation)

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section
(ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and last amended by the Income-tax
(14th Amendment) Rules, 2017, vide notification number G.S.R 569(E), dated the 9th June, 2017.

Explanatory Memorandum
Notification No. 52/2017, dated 15th June, ,2017

In order to make the actual allocation of funds consistent with that of the primary transfer pricing
adjustment, Finance Act, 2017 inserted Section 92CE in the Income-tax Act, 1961 with effect from 1st day of
April, 2018 to provide for secondary adjustment by attributing income to the excess money lying in the hands
of the associated enterprise. The provision shall be applicable to primary adjustments exceeding one crore
rupees made in respect of the assessment year 2017-18 and on wards.

The said rule prescribes the time limit of repatriation of excess money and the rate at which the
interest income shall be computed in the case of failure to repatriate the excess money within the prescribed
time limit. In order to provide for an uniform treatment in respect of various types /situations of primary
adjustments as referred to in sub-section(1) of section 92CE, it prescribes for a time limit of 90 days for
repatriation of excess money .

With regard to the rate of interest to be computed in the case of failure to repatriate the excess money
within the prescribed time limit, it provides for separate interest rates for international transactions
denominated in Indian rupee and those denominated in foreign currency. The rate of interest is applicable on
annual basis.

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