Section 170 — Secondary adjustment in certain cases

(1) An assessee shall make a secondary adjustment in every case where
primary adjustment of one crore rupees or more to the transfer price—
( a) has been made by the assessee on his own in his return of income;
( b) made by the Assessing Officer has been accepted by him;
( c) is determined by an advance pricing agreement entered into by him
under section 168;
( d) is made as per the safe harbour rules made under section 167; or
( e) is arising as a result of resolution of an assessment by way of the mutual
agreement procedure under an agreement entered into under section 159
for avoidance of double taxation.
(2) The excess money or part thereof available with its associated enterprise shall
be deemed to be an advance made by the assessee to such associated enterprise if—
( a) as a result of primary adjustment to the transfer price, there is an increase
in the total income or reduction in the loss, as the case may be, of the
assessee; and
( b) such excess money or part thereof is not repatriated to India within the
time as may be prescribed.
(3) The excess money or part thereof referred to in sub-section (2) may be repatriated
from any of the associated enterprises of the assessee which is not a resident in India.
(4) The interest on advance as referred to in sub-section (2) shall be computed in
such manner as may be prescribed.
(5) Without prejudice to the provisions of sub-section (2), where the excess money or
part thereof has not been repatriated within the prescribed time, the assessee may,
at his option, pay additional income-tax at the rate of 18% on such excess money
or part thereof, as the case may be.
(6) The tax on the excess money or part thereof so paid by the assessee under
sub-section (5) shall be treated as the final payment of tax in respect of the excess
money or part thereof not repatriated and no further credit thereof shall be claimed
by the assessee or by any other person in respect of tax so paid.
(7) Deduction under any other provision of this Act shall not be allowed to the
assessee in respect of the amount on which tax has been paid as per sub-section (5).
(8) In a case where the additional income-tax referred to in sub-section (5) is
paid by the assessee, he shall not be required to make secondary adjustment under
sub-section (1) and compute interest under sub-section (4) from the date of pay -
ment of such tax.
(9) For the purposes of this section,—
( a) “arm’s length price” shall have the meaning assigned to it in section
173(a)83;
( b) “excess money” means the difference between the arm’s length price
determined in primary adjustment and the price at which the inter-
national transaction has actually been undertaken;
( c) “primary adjustment” to a transfer price, means the determination of
transfer price as per the arm’s length principle resulting in an increase
in the total income or reduction in the loss, as the case may be, of the
assessee;
( d) “secondary adjustment” means an adjustment in the books of account
of the assessee and its associated enterprise to reflect that the actual
allocation of profits between the assessee and its associated enterprise
are consistent with the transfer price determined as a result of primary
adjustment, thereby removing the imbalance between cash account and
actual profit of the assessee.