CMA Final · Direct Tax Laws and International Taxation · Transfer Pricing
Pune Auto Ltd's transaction with its foreign associate was referred to the TPO for tax year 2026-27, and the TPO's order fixed the arm's length price. The assessee validly opted under section 166(9) for the two following years, and the TPO declared the option valid. Which statement is correct as per section 166?
Where the TPO has declared the option valid, no reference can be made for those years, and any reference made before or after the declaration is treated as if it were never made for that transaction, under section 166(2) and (3).
- AThe AO may still refer the similar transaction of those years to the TPO under section 166(1)
- BA reference already made for those years is treated as if no reference was made for that transactionCorrect
- CThe option applies equally to proceedings under Chapter XVI-B
- DThe TPO must recompute using only the rate of the first year without examining the transactions
Explanation
Section 166(2) bars a reference once the option is declared valid, and section 166(3) says a reference made before or after the declaration is treated as if not made. Section 166(10) excludes Chapter XVI-B proceedings from the option. Under section 166(12) the TPO still examines and determines the price for those years, so the last option is wrong.
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