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CS Professional · Advanced Direct Tax Laws and Practice · Transfer Pricing and General Anti Avoidance Rules (GAAR)

Under section 167 of the Income-tax Act, 2025, 'safe harbour' means circumstances in which the income-tax authorities shall:

Safe harbour means circumstances, set by rules the Board makes, in which the tax authorities accept the transfer price or the section 9(2) deemed income declared by the assessee. It is not a price reduction, automatic referral or blanket exemption.

  1. AAccept the transfer price, or the income deemed to accrue or arise under section 9(2), declared by the assesseeCorrect
  2. BReduce the arm's length price by a fixed percentage
  3. CRefer every declared price to the Transfer Pricing Officer for review
  4. DExempt the transaction from all documentation and tax

Explanation

Section 167(3) defines safe harbour as circumstances in which the authorities accept the transfer price, or the income deemed to accrue or arise under section 9(2), declared by the assessee. The other options describe a reduction, mandatory referral or exemption, none of which appears in the definition.

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