Skip to content

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

Ganga Steels Ltd had the ALP of a transaction determined by the TPO for tax year X. The TPO validly declared Ganga's options under section 166(9) for years X+1 and X+2. For year X+1, the AO had already made a reference under section 166(1) for a similar transaction before the declaration. What is the effect under section 166?

The reference is treated as if it had never been made for that transaction. Section 166(3) provides that where the option has been declared valid for the tax year, a reference made before or after the declaration has no effect, and the earlier ALP applies.

  1. AThe reference is treated as if no reference had been made for that transactionCorrect
  2. BThe reference continues and the TPO must determine a fresh ALP
  3. CThe reference is valid but the TPO's order has to be passed in 30 days
  4. DThe reference is void only if the assessee withdraws the option

Explanation

Section 166(3) says that if a reference is made for a year for which the option has been declared valid, before or after the declaration, section 166(1) has effect as if no reference is made. Section 166(2) similarly bars reference after such declaration. The assessee's withdrawal and the 30-day rule are not in the section.

Did you get it right without looking?

One question tells you little. A timed set on Transfer Pricing shows your real accuracy, how long you take and where you lose marks.

Practise Transfer PricingFree diagnostic mock

More Transfer Pricing questions