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CMA Final · Direct Tax Laws and International Taxation · Transfer Pricing

The TPO determined the arm's length price for an international transaction of Kaveri Auto Ltd for tax year 2026-27. Kaveri validly exercises the option under section 166(9) for similar transactions. For which tax years does the 2026-27 ARM's length price then apply, subject to the TPO declaring the option valid?

The price applies to the next two consecutive tax years, 2027-28 and 2028-29. Section 166(9) extends the ARM's length price determined by the TPO to similar transactions for the two years immediately following, provided the assessee exercises the option as prescribed and the TPO declares it valid.

  1. AThe next two consecutive tax years, 2027-28 and 2028-29Correct
  2. BOnly the next tax year, 2027-28
  3. CThe next three consecutive tax years
  4. DThe next five consecutive tax years

Explanation

Section 166(9) lets the ARM's length price determined under sub-section (6) apply to similar transactions for the two consecutive tax years immediately following, if the assessee exercises the option as prescribed and the TPO declares it valid. So 2027-28 and 2028-29 are covered.

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