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Budget Effect: Secondary adjustments to become a reality under Indian transfer pricing regime

The move, which aligns the country's transfer pricing.
India has been consistently moving towards a non-adversarial tax regime. Efforts taken in this regard include measures to curb litigation on controversial matters such as transfer pricing treatment of issuing securities at premium and applicability of a minimum alternate tax levy to foreign companies. India has taken the next big step in its transfer pricing framework with the budget ushering in the concept of ‘secondary adjustments’. The move, which aligns the country’s transfer pricing.
Transfer Pricing
A new Section 92CE has been introduced to provide for secondary adjustments in certain cases to align TP provisions to OECD TP Guidelines and international best practices. Under new provisions, ‘secondary adjustment' is defined as an adjustment in the books of accounts of the assessee and its associated enterprise ("AE") to reflect that the actual allocation of profits between the assessee and its AE are consistent with TP determined because of primary adjustment, thereby removing the imbalance between cash account and actual profit of the assessee.

This section also requires that in the event of the primary adjustment to the TP results in increase in income or reduction of losses, the excess money that is made available to the AE, if not repatriated to India within a specified time, shall deemed to be an advance made by the assessee to such AE. Interest on such deemed advance should be treated as an income in the hands of taxpayer and shall be computed as per the prescribed manner.

Many countries in the world today permit secondary adjustment, namely, Canada, South Korea, South Africa and certain other European countries, by treating the difference between ALP and transfer prince as either deemed dividend or deemed loan or advance.

The 4th Transfer Pricing India Summit, to be held in Holiday Inn Mumbai International Airport, Mumbai, India on the 22nd and 23rd August will be focused on discussing the Budget Effect - A quick update on Transfer Pricing Proposals – OECD Pronouncements, the continued impact of BEPS on TP risk management and policy implementation strategies - Getting ready for post- BEPS world in India, Exploring various possible techniques of tax planning adopted by the multinational enterprises & Illustrating the key elements of country thin capitalization legislation.

In its 4th year, it has received an over whelming response and has been attended by over 350+ decision makers and influencers from the industry.

Some of the participating companies this year are Volkswagen Group India, Piramal Enterprises Ltd., Citigroup Inc., Aditya Birla Group, Lupin Limited among various others.Delegates will gain a comprehensive understanding on key elements of country thin capitalization legislation, multilateral instrument for BEPS tax treaty measures, the continued impact of BEPS on TP risk management and policy implementation strategies - Getting ready for post- BEPS world in India, to list a few.

The iUeMagazine team is delighted to work with 4th Transfer pricing India Summit 2017 as Online Media Partners & is expected to bring Unlimited Inspiration for all readers from the proceedings of this event. Staying tuned to the enriching updates from this event is recommended.

For more information on the summit visit: http://transferpricingindiasummit.com/Home.aspx 

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Any facts, figures or references stated here are made by the author & don't reflect the endorsement of iU at all times unless otherwise drafted by official staff at iU. This article was first published here on 24th July 2017.

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