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

Under section 170 of the Income-tax Act, 2025, an assessee must make a secondary adjustment only where the primary adjustment to the transfer price is of at least a specified amount. In which of the following situations does the mandatory secondary adjustment arise?

A secondary adjustment is mandatory only where the primary adjustment is Rs 1 crore or more and arises through a listed route. A Rs 1 crore adjustment determined by an advance pricing agreement qualifies, while the other options are below the threshold.

  1. AA primary adjustment of Rs 60 lakh made by the Assessing Officer and accepted by the assessee
  2. BA primary adjustment of Rs 1 crore determined by an advance pricing agreementCorrect
  3. CA primary adjustment of Rs 99 lakh made by the assessee in its own return
  4. DA primary adjustment of Rs 50 lakh under safe harbour rules

Explanation

Section 170(1) applies to primary adjustments of one crore rupees or more, including those determined by an advance pricing agreement under section 168. Rs 1 crore meets the threshold. The Rs 60 lakh, Rs 99 lakh and Rs 50 lakh adjustments all fall below it, even though the route (AO, own return, safe harbour) is a listed one.

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