CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)
Harbinder Textiles Ltd has excess money of Rs 2 crore lying with its associated enterprise, not repatriated within the prescribed time. It opts to pay additional income-tax at 18% under section 170(5) of the Income-tax Act, 2025. Which statement is correct?
The additional tax is 18% of Rs 2 crore, which is Rs 36 lakh. It is a final payment with no credit or deduction available, and after paying it the assessee need not make the secondary adjustment or compute interest from the payment date.
- AThe additional tax is Rs 36 lakh, and the company can claim credit of it against its other tax liabilities
- BThe additional tax is Rs 36 lakh, treated as final payment, and no secondary adjustment or interest computation is required from the date of paymentCorrect
- CThe additional tax is Rs 18 lakh, and interest on the deemed advance continues to accrue
- DThe additional tax is Rs 36 lakh, and the company may still claim a deduction for the amount taxed under other provisions
Explanation
18% of Rs 2 crore is Rs 36 lakh. Section 170(6) makes it the final payment with no credit to anyone, section 170(7) bars any deduction on that amount, and section 170(8) removes the need for secondary adjustment and interest from the date of payment. The Rs 18 lakh option miscalculates, and the credit and deduction options contradict sub-sections (6) and (7).
Did you get it right without looking?
One question tells you little. A timed set on Transfer Pricing and General Anti Avoidance Rules (GAAR) shows your real accuracy, how long you take and where you lose marks.
More Transfer Pricing and General Anti Avoidance Rules (GAAR) questions
- Under the Income-tax Act, 2025 (applicable from the June 2027 session), an advance pricing agreement entered into under section 168 can be v…
- An Indian company's advance pricing agreement covers tax years 2028-29 to 2030-31 (three years). Under the Income-tax Act, 2025, and subject…
- Under the Income-tax Act, 2025 (applicable from the June 2027 session), which statement correctly describes the scope of the GAAR provisions…
- Under the Income-tax Act, 2025 (applicable from the June 2027 session), which feature is essential for a transaction between two or more ass…
- Under the Income-tax Act, 2025, an assessee must make a secondary adjustment only where the primary adjustment to the transfer price is at l…
- Under section 170 of the Income-tax Act, 2025, an assessee must make a secondary adjustment only where the primary adjustment to the transfe…