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

Kaveri Auto Ltd. had the arm's length price of a transaction determined by the TPO under section 166(6) for a tax year. The company wants that price applied to similar transactions in later years. Which statement is correct under section 166(9)?

The determined arm's length price can apply to similar transactions for the two consecutive following tax years only if the assessee exercises the option in the prescribed form, manner and time and the Transfer Pricing Officer declares it valid by written order. It is not automatic and does not run longer.

1. AThe price applies automatically to the next five tax years without any option
2. BThe price applies to the next two consecutive tax years if the assessee exercises the option in the prescribed manner and the TPO declares it validCorrect
3. CThe price applies to the next three tax years if the AO approves
4. DThe price applies to the next two tax years only if the assessee has filed an appeal