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Under section 170(9) of the Income-tax Act, 2025, what is a ‘secondary adjustment’?

Question and options

Under section 170(9) of the Income-tax Act, 2025, what is a ‘secondary adjustment’?

  1. Re-determining the transfer price by the arm’s length principle

  2. Recomputing the associated enterprise’s income in its own country

  3. Entries in both enterprises’ books aligning profits with the revised price

  4. Increasing the assessee’s total income to the arm’s length price

Answer and explanation

Correct answer: C - Entries in both enterprises’ books aligning profits with the revised price

Section 170(9)(d) of the Income-tax Act, 2025 defines a secondary adjustment as an adjustment in the books of the assessee and its associated enterprise so that the actual allocation of profits matches the transfer price set by the primary adjustment, removing the imbalance between cash and profit. Re-determining the price and increasing income by it is the primary adjustment defined in section 170(9)(c).

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