Rule 82 — Exercise of option for determination of arm’s length price for multiple years in a single proceeding. Made under s.166 of the Income-tax Act, 2025.
Rule 82 gives effect to Section 166 of the Income-tax Act, 2025. A rule cannot go beyond the section it serves: where the two seem to differ, the section governs.
Sub-rule (1) sets out the option itself. Where a reference has been made under section 166 in respect of one tax year (the first tax year), the assessee may exercise the option or options under section 166(9)(a) for determination of arm's length price for multiple years in a single proceeding, by furnishing Form No. 46 for the two consecutive tax years immediately following the first tax year — the second tax year and the third tax year. Sub-rule (2) fixes the filing window for international transactions or specified domestic transactions: beginning from the end of the third tax year and ending on the 30th June succeeding the third tax year. Sub-rule (3) requires every such Form No. 46 to be accompanied by a certificate from the accountant, as defined in section 515(3)(b), in Form No. 47.
Sub-rule (4) requires the Transfer Pricing Officer, where the conditions in sub-rule (5) are fulfilled, to pass a written order within one month from the end of the month in which the option is exercised, declaring the option or options valid or invalid. Sub-rule (5) lists those conditions. The relevant transactions in the second and third tax years must be similar to those of the first tax year, and clause (b) defines similarity: no change in the method to determine the arm's length price; functions performed, taking into account assets employed and risks assumed, materially consistent; business activities, the relevant financial, tax and accounting methods, and the classification of the assessee in the case of a company, materially the same; the option applies even where there is a change in the business result or holding structure of the associated enterprise, or a change in the associated enterprise, provided there is no material change in the relevant transaction or in the functions performed; and no change in the contractual terms, whether or not formal or in writing, laying down how responsibilities, risks and benefits are divided. The assessee must have furnished, for the first and second tax years, the accountant's report under section 172 on or before the specified date and the return of income on or before the section 263(1) due date, and must undertake to furnish both for the third tax year. The case must not be covered under Chapter XVI-B for any of the three years, and none of the associated enterprises relevant to the transactions may be a resident of a jurisdiction notified under section 176.
Sub-rules (6) and (7) give a route against an adverse order: the assessee may file objections with the Commissioner to whom the Transfer Pricing Officer is subordinate within fifteen days of receipt of the order, and the Commissioner, after an opportunity of being heard, passes orders on the validity of the option and serves them on the assessee and the Transfer Pricing Officer. Sub-rules (8) and (9) provide for cancellation: where, during proceedings under section 166, the information in Form No. 46 is found inaccurate or not bona fide, or the accountant certifies to that effect in Form No. 47, or the sub-rule (5) conditions are not met, the sub-rule (4) order is cancelled, but only after a reasonable opportunity of being heard and with the approval of the Commissioner. Sub-rule (10) states the consequence of invalidity or cancellation: the Transfer Pricing Officer proceeds to determine the arm's length price for the first tax year, for which the reference was received under section 166(1).
Section 166(9)(a) allows an arm's length price determined in one proceeding to govern more than one year, but a single determination can only be safely stretched across years where the transactions really are the same across those years. The section does not say how the option is exercised, who tests it, or what "similar" means. Rule 82 supplies the form and the window, makes the accountant certify, and puts the similarity test in writing at clause (5)(b) so that the Transfer Pricing Officer's validity order rests on stated criteria. Sub-rules (6) to (9) then keep the decision contestable and revocable.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Years the option can cover beyond the year of reference | Two consecutive tax years | The second and third tax years immediately following the first tax year, being the year in respect of which the reference under section 166 was made | Rule 82(1) |
| Window for furnishing Form No. 46 | From the end of the third tax year to the 30th June succeeding the third tax year | For international transactions or specified domestic transactions | Rule 82(2) |
| Time for the Transfer Pricing Officer's validity order | Within one month from the end of the month in which the option is exercised | Where the transactions fulfil the conditions in rule 82(5) | Rule 82(4) |
| Time to object to an order declaring the option invalid | Within fifteen days of receipt of the order | Objections filed with the Commissioner to whom the Transfer Pricing Officer is subordinate | Rule 82(6) |
The option is exercised late, not early: sub-rule (2) opens the window only at the end of the third tax year, so by the time the Form No. 46 is filed the assessee already knows how all three years actually ran, and clause (5)(c) requires the returns and section 172 reports for the first and second years to be already in, on time. Compliance history is therefore a gate, not a formality — a late return for the second tax year defeats the option however similar the transactions. Similarity is judged on function, method and contractual terms, and clause (5)(b)(iv) makes clear that a change in the associated enterprise, or in its business result or holding structure, does not by itself break similarity where the transaction and the functions, assets and risks have not materially changed. Validity is provisional: sub-rules (8) and (9) allow cancellation during the section 166 proceedings, and where the option fails or is cancelled, sub-rule (10) leaves the Transfer Pricing Officer determining the arm's length price for the first tax year only, so the other two years fall back to their own proceedings.
A reference under section 166 is made in a company's case for a first tax year. Its transactions with the same associated enterprise continue on identical terms and methods for the next two years. After the third tax year ends, and before the following 30th June, the company files Form No. 46 with the accountant's Form No. 47 certificate. Because its section 172 reports and returns for the first and second years were all furnished on time, and no associated enterprise is resident in a section 176 notified jurisdiction, the Transfer Pricing Officer passes an order within one month from the end of the month of exercise declaring the option valid. Had that order gone the other way, the company would have had fifteen days from receipt to object to the Commissioner.
You meet it in transfer pricing proceedings after a section 166 reference: as Form No. 46 and Form No. 47, as the Transfer Pricing Officer's validity order, and as the objection filed with the Commissioner against an order holding the option invalid.
within the period, beginning from the end of the third tax year and ending on the 30th June succeeding the third tax year
there is no change in the method to determine the arm's length price for the relevant transactions
the Transfer Pricing Officer shall proceed to determine the arm's length price for the first tax year, for which reference has been received under section 166(1)