THE Finance Bill 2011 has expanded the scope of powers of the Transfer Pricing
Officer with effect from June 2011.
Under the current
provisions, section 92CA (1) and (2)mandates that the TPO shall determine
the arms length price of an international transaction only when it is referred
to him by the Assessing Officer with the previous approval of the Commissioner.
Accordingly under section 92CA(2), the TPO is required
to serve a notice on the assessee to produce the documentation to support the
price of the international transaction.
This is a legal precedent established by various decisions of the courts that
the TPO will not examine an international transaction which is not specifically
referred to him by the Assessing Officer.
The Finance Bill 2011 proposes to introduce sub-section 2A under section 92CA
which shall give the TPO, the power to compute the arms length price of any
international transaction that comes to his notice or one that he may identify
other than those referred to him by the Assessing Officer.
This means that this proposal allows the TPO with effect from June 2011, to
suo moto identify any international transaction for computation of arms length
price even those that are not specifically referred to him by the AO.
The Finance Bill
further empowers the TPO by granting him the power under section 133A to
enter the assessee’s place of business to conduct a survey.
The new Finance Bill amends sub-section (7) of section 92CA by adding to the
TPO’s powers, the power of survey under 133A for the purpose of determining
the arms length price.
This proposal in the Finance Bill overcomes and inherent administrative weakness
by enhancing the powers of the TPO.
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