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CMA Final · Direct Tax Laws and International Taxation · Transfer Pricing

During proceedings on a reference, the TPO finds an international transaction that the assessee did not include in the report under section 172 and that was not referred to him. Which statement follows from section 166(5)?

The Chapter's provisions apply as if the transaction had been referred to the TPO under section 166(1). The TPO can therefore examine and determine its arm's length price without a fresh reference, even though it was unreferred or omitted from the section 172 report.

  1. AThe TPO must ignore it as it was not referred
  2. BThe TPO must return it to the AO for a fresh reference with approval
  3. CThe provisions apply as if the transaction had been referred to the TPO under section 166(1)Correct
  4. DThe transaction is accepted at the price shown by the assessee

Explanation

Section 166(5) states that a transaction coming to the TPO's notice during proceedings, whether unreferred or omitted from the report, is treated as if referred under section 166(1). So no fresh reference or approval is needed, and ignoring it is wrong.

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