Euphoric Ltd. having its registered office in Chennai is engaged in multiple businesses. It buys mobile phones from its parent company, Apex Inc. of…

20. Euphoric Ltd., an Indian company, and Apex Inc. a Country Z based company are associated enterprises, since Apex Inc. is a parent company of Euphoric Ltd. Thus, the transaction of purchase of mobile phones would be an international transaction. Apex Inc. is selling mobile phones to unrelated customers, which would be the comparable uncontrolled transaction in this case. The purchase price for unrelated customers has to be adjusted by taking into consideration the functional differences existing between the transactions of Apex Inc. with associated enterprise and other unrelated parties. Accordingly, the arm's length price for purchase of mobile phones has to be computed for working out the impact on assessable value as per CUP method. It is called Primary Adjustment. Computation of Arm's Length Price In crores Purchase price of mobile phones by unrelated parties from Apex Inc. 2,280.00 Add: Adjustment for credit period which is more than what given to unrelated party (11% x ₹ 2,280 crore/12 x 1.5 months) 31.35 Arm's length price of 10 lakh mobile phones 2,311.35 Purchase price of mobile phones by Happy Ltd. from Apex Inc. 2,500.00 Amount to be added to its Total Income (Primary adjustment) 188.65 Since amount of primary adjustment exceeds ₹ 1 crore, there is need of secondary adjustment as follows: It has to repatriate the excess money of ₹ 188.65 crores on or before 90 days from the due date of filing of return u/s 139(1) for A.Y. 2026-27 as adjustments are made suo moto by Euphoric Ltd. If the excess money is not repatriated to India within 90 days from the due date of filing of return u/s 139(1) for A.Y. 2026 27, the same shall be deemed to be an advance made by Happy Ltd to Apex Inc. and the interest on such advance shall be computed at the one year marginal cost of fund lending rate of SB1 as on 1st April of the relevant previous year + 3.25%. In a case where the excess money of ₹ 188.65 crores has not been repatriated within 90 days from the due date of filing of return u/s 139(1) for A.Y. 2026-27, Euphoric Ltd. has the option to pay additional income-tax @ 20.9664% (i.e., tax@18% plus surcharge@12% plus cess@4%) on ₹ 188.65 crores. Where additional income-tax is so paid by Euphoric Ltd., it will not be required to make secondary adjustment and compute interest from the date of payment of such tax.