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CA Final · Direct Tax Laws & International Taxation · Transfer Pricing

During proceedings on a reference concerning Delta Steels Ltd's loan to its foreign subsidiary, the TPO notices another international transaction, a guarantee fee, which was not referred to him and was not included in the report under section 172. What is the position under section 166?

The TPO can deal with it as if it had been referred under section 166(1). Section 166(5) applies the Chapter's provisions to unreferred transactions, or those omitted from the section 172 report, that come to the TPO's notice during the proceedings, so no fresh reference is needed.

  1. AThe TPO cannot examine it without a fresh AO reference
  2. BThe TPO may examine it only after CBDT sanction
  3. CThe guarantee fee is automatically deemed to be at arm's length
  4. DThe provisions apply as if the transaction was referred to the TPO under section 166(1)Correct

Explanation

Section 166(5) states that where an international transaction not referred, or not included in the report under section 172, comes to the TPO's notice during proceedings, the provisions of the Chapter apply as if it were a transaction referred under sub-section (1). So no fresh reference is needed.

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