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

Kaveri Pharma Ltd had its arm's length price for an international transaction determined by the TPO under section 166(6) for a tax year. Kaveri exercised an option under section 166(9) for the two following tax years in the prescribed manner. The TPO's order declaring the options valid is to be passed within a fixed time. Within what time must the TPO declare the options valid?

The TPO must declare the option valid by written order within one month from the end of the month in which the assessee exercised the option. The time is counted from month-end, not the exact date of exercise, and is not sixty days.

  1. AWithin one month from the end of the month in which the options are exercisedCorrect
  2. BWithin sixty days from the date of exercise of the options
  3. CWithin one month from the date of the options being exercised
  4. DWithin three months from the end of the month of exercise

Explanation

Section 166(9)(c) requires the TPO, by written order, to declare the option valid within one month from the end of the month in which the option is exercised. The 'date of exercise' and 'sixty days' alternatives use the wrong base or period.

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