CA Final · Direct Tax Laws & International Taxation · Transfer Pricing
During proceedings on a reference concerning Brahma Textiles Ltd's loan to its foreign subsidiary, the TPO notices another international transaction, a royalty payment, which was not referred to him and was not included in the report under section 172. Which statement is correct under section 166(5)?
The royalty transaction is deemed to be referred to the TPO under sub-section (1), and the transfer pricing provisions apply to it as if referred. Section 166(5) covers transactions coming to notice during proceedings, so no fresh reference or Commissioner approval is needed.
- AThe TPO may deal with it only after a fresh reference with approval from the Commissioner
- BThe TPO cannot deal with it, since it was not referred
- CThe royalty transaction is treated as a transaction referred to him under sub-section (1), and the Chapter applies accordinglyCorrect
- DThe TPO must send it to the Board for directions
Explanation
Section 166(5) covers a transaction other than the referred one, or one not included in the report under section 172, that comes to the TPO's notice during proceedings. The Chapter applies as if it were referred under sub-section (1). No fresh reference or approval is needed, so the first option is wrong.
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