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CA Final · Direct Tax Laws & International Taxation · Transfer Pricing

Under Section 166(5) of the Income-tax Act, 2025, during reference proceedings the TPO notices an international transaction of Kaveri Pharma Ltd that was not referred to him and was not included in the assessee's report under section 172. What is the legal position?

The TPO can deal with such a transaction as if it had been referred to him under Section 166(1). Section 166(5) covers both unreferred transactions and those omitted from the section 172 report, so no fresh reference, approval or assessee consent is required.

  1. AThe TPO must return the matter to the AO to obtain a fresh reference with approval
  2. BThe TPO may apply the Chapter as if the transaction had been referred to him under sub-section (1)Correct
  3. CThe transaction is outside TPO jurisdiction and only penalty can be levied
  4. DThe TPO can act only after the assessee consents

Explanation

Section 166(5) provides that a transaction coming to the TPO's notice during proceedings, whether not referred or not reported under section 172, is dealt with as if it were referred under sub-section (1). No fresh reference or consent is needed.

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