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

Zenith Auto Components Ltd, an Indian company, entered into an international transaction with its Singapore parent in the tax year. The Assessing Officer considers it necessary to have the arm's length price determined by the Transfer Pricing Officer. Under section 166 of the Income-tax Act, 2025, what is the condition for making this reference?

The Assessing Officer can refer the international transaction to the Transfer Pricing Officer when he considers it necessary or expedient, but only with the previous approval of the Principal Commissioner or Commissioner. No Board approval or request from the assessee is needed.

  1. AThe AO may refer it with the previous approval of the Principal Commissioner or CommissionerCorrect
  2. BThe AO may refer it on his own, without any approval
  3. CThe AO may refer it only with the approval of the Board
  4. DThe AO may refer it only if the assessee requests the reference

Explanation

Section 166(1) lets the Assessing Officer refer the determination of arm's length price to the TPO if he considers it necessary or expedient, with the previous approval of the Principal Commissioner or Commissioner. Board approval or the assessee's request is not required, and the AO cannot refer without approval.

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