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

For tax year 2027-28, the TPO declared valid an assessee's option under section 166(9) for a transaction. The Assessing Officer had also referred that same transaction for 2027-28 under section 166(1), before the declaration. What is the effect under the Act?

The reference is treated as if it had never been made. Under section 166(3), where the TPO has declared the assessee's option valid for that tax year, any reference for that transaction made before or after the declaration has no effect.

  1. AThe reference is treated as if no reference had been made for that transactionCorrect
  2. BThe reference prevails and the option is void
  3. CThe TPO must determine the price twice and the lower applies
  4. DThe reference stays valid but limitation is extended by sixty days

Explanation

Section 166(3) states that where a reference was made before or after the TPO's declaration of validity of the option for that year, the reference has effect as if no reference was made. Section 166(2) also bars any reference after the declaration.

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