Skip to content

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

The TPO determined the arm's length price of a transaction for tax year 2026-27 under section 166(6). The assessee wants to apply the same price to similar transactions in following years. Which statement is correct under section 166(9)?

The determined arm's length price can extend to similar transactions of the two consecutive following tax years, provided the assessee exercises the option in the prescribed form, manner and period and the TPO declares the option valid by a written order within one month from the end of the month of exercise.

  1. AThe price can apply to the two consecutive following tax years if the assessee exercises the option in the prescribed form, manner and time and the TPO declares it valid by written orderCorrect
  2. BThe price automatically applies to the next five tax years without any option
  3. CThe price applies to the next two years only if the Assessing Officer approves the option
  4. DThe price applies to one following year if the Board issues a guideline

Explanation

Section 166(9) allows the price to apply to the two consecutive immediately following tax years on the assessee exercising an option as prescribed and the TPO declaring the option valid by written order within one month from the end of the month of exercise. It is not automatic and the period is two years.

Did you get it right without looking?

One question tells you little. A timed set on Transfer Pricing shows your real accuracy, how long you take and where you lose marks.

Practise Transfer PricingFree diagnostic mock

More Transfer Pricing questions