Section 92CE of Income Tax Act 1961: Secondary Adjustment in Certain Cases
Section 92CE deals with a secondary adjustment after specified transfer-pricing primary adjustments. Its purpose is to align the actual allocation of funds between an assessee and its associated enterprise with the arm's length transfer price determined for tax purposes.
What is a secondary adjustment under Section 92CE?
A transfer-pricing primary adjustment changes the transfer price to the arm's length price and results in an increase in total income or a reduction of loss. A secondary adjustment is the corresponding adjustment in the books of the assessee and its associated enterprise so that the actual allocation of profits reflects the transfer price determined after the primary adjustment.
In practical terms, if a primary adjustment shows that money which should economically belong to the Indian assessee remains with a non-resident associated enterprise, Section 92CE may require the excess money to be repatriated to India. If it is not repatriated within the prescribed period, the statutory consequences described below can follow.
When does Section 92CE apply?
Under Section 92CE(1), a secondary adjustment is required where the primary adjustment to the transfer price falls within one of the specified categories:
- the assessee makes the primary adjustment suo motu in its return of income;
- a primary adjustment made by the Assessing Officer is accepted by the assessee;
- the adjustment is determined by an advance pricing agreement under Section 92CC entered into on or after 1 April 2017;
- the adjustment is made under the safe harbour rules framed under Section 92CB; or
- the adjustment arises from resolution under the mutual agreement procedure under an agreement referred to in Section 90 or Section 90A.
Repatriation of excess money and Rule 10CB
Section 92CE(2) provides that where the primary adjustment increases total income or reduces loss, the excess money or part of it available with the associated enterprise must be repatriated to India within the prescribed time. Rule 10CB of the Income-tax Rules, 1962 prescribes the time framework and the manner of computing interest. The prescribed repatriation period is generally 90 days, with the starting point depending on the category of primary adjustment.
If the excess money is not repatriated within the prescribed time, it is deemed to be an advance made by the assessee to the associated enterprise, and interest is computed in the prescribed manner. The Explanation to Section 92CE(2) clarifies that the excess money or part thereof may be repatriated from any non-resident associated enterprise of the assessee.
Option to pay additional income-tax under Section 92CE(2A)
If excess money is not repatriated within the prescribed time, Section 92CE(2A) gives the assessee an option to pay additional income-tax at 18% on the unrepatriated excess money or part thereof. Applicable surcharge and health and education cess are added in accordance with the relevant law.
Under Sections 92CE(2B) to 92CE(2D), the payment is treated as final in respect of the relevant unrepatriated amount; no credit can be claimed for that tax; no deduction is allowed for the amount on which the additional tax is paid; and, from the date of payment, the assessee is not required to make the secondary adjustment or continue computing interest under Section 92CE(2) for that amount.
Key definitions in Section 92CE(3)
| Term | Meaning for Section 92CE |
|---|---|
| Associated enterprise | Has the meaning assigned by Section 92A(1) and Section 92A(2). |
| Arm's length price | Has the meaning assigned by Section 92F. |
| Excess money | The difference between the arm's length price determined in the primary adjustment and the price at which the international transaction was actually undertaken. |
| Primary adjustment | Determination of the transfer price in accordance with the arm's length principle resulting in an increase in total income or reduction in loss. |
| Secondary adjustment | An adjustment in the books of the assessee and its associated enterprise so that the actual allocation of profits is consistent with the transfer price determined after the primary adjustment, removing the imbalance between cash account and actual profit. |
Section 92CE and Section 170 of the Income-tax Act 2025
For tax year 2026-27 onward, the corresponding secondary-adjustment provision is Section 170 of the Income-tax Act, 2025. The Income Tax Department's current challan guidance likewise identifies secondary adjustment tax under Section 92CE for the Income-tax Act, 1961 regime and under Section 170 for the Income-tax Act, 2025 regime.
Accordingly, the relevant year and governing enactment should be checked before a taxpayer applies a section number, form, rule or payment code. For legacy proceedings under the 1961 Act, Section 92CE and Rule 10CB remain important references.
Related transfer-pricing provisions
Section 92CE operates within the transfer-pricing framework. Relevant connected provisions include Section 92A on associated enterprises, Section 92C on computation of arm's length price, Sections 92CB and 92CC on safe harbour rules and advance pricing agreements, and Section 92F containing transfer-pricing definitions.
Official references
For authoritative verification and current compliance, see the Income Tax Department Acts resource, the Income-tax Rules resource, the Income Tax Department transfer-pricing guidance, and the Income Tax e-Filing portal.
This article is a general explanation of the statutory framework. For a live transfer-pricing matter, the applicable tax year, primary-adjustment route, relevant rule, treaty procedure and current notifications should be checked on the facts.