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

Under the Income-tax Act, 2025, an assessee must make a secondary adjustment only where the primary adjustment to the transfer price is at least a stated amount. Which of the following cases attracts the secondary adjustment obligation?

The Rs 1.5 crore primary adjustment determined by an advance pricing agreement attracts a secondary adjustment. Section 170 applies only where the primary adjustment is Rs 1 crore or more and arises through listed routes, including an agreement under section 168. The other cases fall below the threshold.

  1. AA primary adjustment of Rs 80 lakh made by the Assessing Officer and accepted by the assessee
  2. BA primary adjustment of Rs 1.5 crore determined by an advance pricing agreement entered into under section 168Correct
  3. CA primary adjustment of Rs 90 lakh made by the assessee in his return of income
  4. DA primary adjustment of Rs 75 lakh arising from resolution under a mutual agreement procedure

Explanation

Section 170(1) requires a secondary adjustment where the primary adjustment is Rs 1 crore or more and arises in one of the listed ways, including determination by an advance pricing agreement under section 168. Rs 1.5 crore meets the threshold, while the other amounts are below Rs 1 crore.

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