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

Mahalakshmi Auto Ltd entered into an international transaction with its associated enterprise in a tax year. The Assessing Officer considers it necessary to have the arm's length price determined by the Transfer Pricing Officer. As per Section 166 of the Income-tax Act, 2025, what must the Assessing Officer obtain before making the reference?

The Assessing Officer must obtain the previous approval of the Principal Commissioner or Commissioner before referring the arm's length price determination to the Transfer Pricing Officer. The assessee's consent, CBDT approval or a DRP order is not required under Section 166(1).

  1. APrevious approval of the Principal Commissioner or CommissionerCorrect
  2. BPrior consent of the assessee in writing
  3. CApproval of the Central Board of Direct Taxes
  4. DPrior order of the Dispute Resolution Panel

Explanation

Section 166(1) allows the Assessing Officer to refer the determination of the arm's length price to the TPO when he considers it necessary or expedient, but only with the previous approval of the Principal Commissioner or Commissioner. Assessee consent, CBDT approval or a DRP order is not a condition.

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