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

For tax year 2026-27 the TPO determined an arm's length price under section 166(6) and the assessee validly exercised the option under section 166(9) for the next two years, which the TPO declared valid. Which statement is correct?

A reference for the covered tax year made before or after the TPO's valid declaration is treated as if no reference was made. The option does not apply to Chapter XVI-B proceedings, and the declaration is due within one month from the end of the month of exercise.

  1. AThe AO may still refer a similar transaction for 2027-28 to the TPO, and the reference stands
  2. BA reference for 2027-28 made before or after the declaration is treated as if no reference was madeCorrect
  3. CThe option applies even in proceedings under Chapter XVI-B
  4. DThe TPO must declare validity within three months of the option

Explanation

Section 166(2) bars such reference and 166(3) treats any reference made before or after the declaration as not made. Section 166(10) excludes Chapter XVI-B proceedings, and the declaration time is one month from the end of the month of option, not three months.

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