CA Final · Direct Tax Laws & International Taxation · Transfer Pricing
Bharat Textiles Ltd had a valid option declared by the TPO under section 166(9) for a transaction for tax year 2027-28, based on the ALP determined for 2026-27. Before the declaration, the AO had referred the same transaction for 2027-28 to the TPO. What is the effect?
The reference is treated as if it had never been made for that transaction. Section 166(3) says that where an option is declared valid for the tax year, a reference made before or after the declaration has no effect, so the TPO does not determine the ALP afresh.
- AThe reference stands and the TPO must determine the ALP afresh for 2027-28
- BThe reference is treated as if it had not been made for that transactionCorrect
- CThe option becomes invalid because of the earlier reference
- DThe reference converts into a reference for the following year
Explanation
Section 166(3) provides that if a reference is made for a transaction in a tax year for which the option is declared valid, whether before or after the declaration, section 166(1) has effect as if no reference is made for that transaction. Option A is wrong for that reason, and the section does not invalidate the option or shift the reference.
Did you get it right without looking?
One question tells you little. A timed set on Transfer Pricing shows your real accuracy, how long you take and where you lose marks.
More Transfer Pricing questions
- After the TPO passes an order under section 166(6) for Ganga Steel Ltd, which of the following correctly describes what the Assessing Office…
- Zenith Auto Components Ltd, an Indian company, entered into an international transaction with its Singapore parent in the tax year. The Asse…
- An assessment for a tax year in which a reference was made to the TPO would normally become time-barred on 31 March. Applying section 166(7)…
- Meridian Textiles Ltd's TPO has declared valid an option exercised by the assessee under section 166(9) for a similar transaction for a part…
- Ganga Steels Ltd had the ALP of a transaction determined by the TPO for tax year X. The TPO validly declared Ganga's options under section 1…
- Kaveri Auto Ltd had its arm's length price for a component supply to its Thai associate determined by the TPO under section 166(6) for tax y…