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

An Indian company's advance pricing agreement covers tax years 2028-29 to 2030-31 (three years). Under the Income-tax Act, 2025, and subject to prescribed conditions, procedure and manner, the agreement may also provide for determining the arm's length price of the transaction for earlier years. What is the maximum number of preceding tax years that can be covered by this rollback?

The rollback under section 168(9) can cover a period not exceeding four tax years preceding the first tax year of the agreement period, subject to prescribed conditions. The limit is fixed at four and does not depend on the length of the agreement.

  1. AFour tax years preceding the first tax year covered by the agreementCorrect
  2. BThree tax years, equal to the length of the agreement
  3. CFive tax years preceding the agreement
  4. DTwo tax years preceding the application

Explanation

Section 168(9) permits determination for any period not exceeding four tax years preceding the first of the tax years in the agreement period. The limit is fixed and is not linked to the agreement's own length. Hence three and five are wrong, and the limit is not counted from the application date.

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