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

While examining a referred transaction of Rudra Components Ltd., the TPO notices another international transaction that the assessee did not include in the report under section 172 and that was not referred to him. What does section 166(5) provide?

The TPO can deal with it directly. Under section 166(5), a transaction that was not referred, or was omitted from the section 172 report, and comes to his notice during proceedings is treated as if it had been referred under section 166(1), so no fresh reference is required.

  1. AThe TPO cannot examine it without a fresh reference by the Assessing Officer
  2. BThe provisions of the Chapter apply as if that transaction had been referred to the TPO under section 166(1)Correct
  3. CThe transaction is exempt from arm's length price determination
  4. DThe TPO must send it to the Principal Commissioner for a fresh approval before acting

Explanation

Section 166(5) states that where an international or specified domestic transaction not referred, or not included in the report under section 172, comes to the TPO's notice during the proceedings, the Chapter applies as if the transaction had been referred under section 166(1). No fresh reference or approval is needed.

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