CA Final · Direct Tax Laws & International Taxation · Transfer Pricing
Meridian Textiles Ltd's tax-year transaction with its Dubai associate was referred to the TPO under section 166(1). During the proceedings, the TPO notices another international transaction of Meridian with an associate in Sri Lanka. That transaction was not referred to him and was not included in the report under section 172. Which statement is correct under section 166?
The TPO can treat the Sri Lanka transaction as if it had been referred to him under section 166(1) and determine its arm's length price. Section 166(5) covers transactions that come to his notice during proceedings, whether unreferred or omitted from the section 172 report.
- AThe TPO can treat the Sri Lanka transaction as if it were referred to him under sub-section (1) and determine its ALPCorrect
- BThe TPO cannot examine it unless the AO makes a fresh reference with approval
- CThe TPO can examine it only if the assessee consents in writing
- DThe TPO can examine it only if it was included in the report under section 172
Explanation
Section 166(5) provides that a transaction not referred, or one not included in the section 172 report, that comes to the TPO's notice during proceedings is treated as if referred under sub-section (1). The Sri Lanka transaction fits both limbs, so no fresh reference or consent is required. The option requiring inclusion in the report reverses the rule.
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