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

The Transfer Pricing Officer determined the arm's length price of a transaction for a tax year under section 166(6). Under section 166(9), when can that price apply to similar transactions of the following two consecutive tax years?

The price carries forward to the next two consecutive tax years only if the assessee exercises the option in the prescribed form, manner and time, and the Transfer Pricing Officer then declares it valid by written order within one month from the end of the month of exercise.

  1. AAutomatically, without any action by the assessee
  2. BOnly if the assessee exercises the option in the prescribed form, manner and time and the Transfer Pricing Officer declares it valid by order within one month from the end of the month of exerciseCorrect
  3. COnly if the Assessing Officer exercises the option with Commissioner approval
  4. DOnly if the assessee exercises the option, and then it applies without any order of the Transfer Pricing Officer

Explanation

Section 166(9) requires three conditions: the assessee exercises the option for the two years, it is exercised in prescribed form, manner and period, and the Transfer Pricing Officer declares it valid by written order within one month from the end of the month of exercise. The last option omits the declaration, which is a required condition.

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