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CA Final · Direct Tax Laws & International Taxation · Profits and Gains of Business or Profession

Under rule 100 of the Income-tax Rules, 2026, an eligible assessee carrying on an eligible business with a valid safe harbour option enters into an international transaction in that business. What is the position on transfer pricing provisions?

Sections 171 and 172 continue to apply. The rule expressly provides that they apply to any international transaction or specified domestic transaction the eligible assessee enters into while carrying on the eligible business, so the safe harbour option does not switch off transfer pricing provisions.

  1. ASections 171 and 172 do not apply because safe harbour overrides them
  2. BSections 171 and 172 continue to apply to the international transactionCorrect
  3. COnly section 171 applies, not section 172
  4. DThey apply only if profit is below the prescribed percentage

Explanation

Rule 100(4) states that the provisions of sections 171 and 172 apply to an international transaction or specified domestic transaction entered into while carrying on the eligible business. Safe harbour therefore does not exclude them.

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