CMA Final · Direct Tax Laws and International Taxation · Transfer Pricing
Under section 166, the TPO has declared valid the option exercised by Sundaram Auto Ltd for a similar transaction for the next two tax years. If the Assessing Officer had made a reference for the transaction for one of those years, what is the effect?
The reference is treated as if it had never been made for that transaction. Where the TPO has declared the option valid, a reference for that year, whether made before or after the declaration, has no effect, and a fresh reference is also barred.
- AThe reference stands and the TPO must decide it separately
- BThe reference is treated as if no reference had been made for that transactionCorrect
- CThe reference is valid only if the Commissioner later confirms it
- DThe option is cancelled automatically
Explanation
Section 166(3) says that if a reference is made, before or after the declaration, for a year whose option is declared valid, sub-section (1) operates as if no reference was made. Section 166(2) also bars such a reference. The option is not cancelled.
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