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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Hind Auto Ltd accepts a primary transfer pricing adjustment of Rs 3 crore. The excess money is not repatriated within the prescribed time, and the company opts to pay additional income-tax under section 170 of the Income-tax Act, 2025. How much additional tax is payable, and what is its effect?

The additional tax is 18% of Rs 3 crore, which is Rs 54 lakh. It is treated as final tax with no credit available, and once paid the company need not make the secondary adjustment or compute interest on the advance from the payment date.

  1. ARs 54 lakh; it is final tax and Hind Auto need not make the secondary adjustment or compute interest from the date of paymentCorrect
  2. BRs 54 lakh; Hind Auto must still make the secondary adjustment and compute interest on the deemed advance
  3. CRs 90 lakh; it is final tax and no further credit can be claimed
  4. DRs 54 lakh; it is creditable against Hind Auto's other tax liability

Explanation

Additional tax is 18% of Rs 3 crore = Rs 54 lakh. Under section 170(6) it is final payment with no credit, and under section 170(8) the assessee need not make the secondary adjustment or compute interest from the date of payment. Rs 90 lakh uses 30%, which is wrong.

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