s.92CA — Reference to the Transfer Pricing Officer

Currently operative

Sub-section (3AA) was inserted by the Finance Act 2026 with retrospective effect from 1 June 2007 and fixes how the sixty-day period is counted, notwithstanding any judgment. Sub-sections (3B), (4A), (11) and (12), which carry the three-year option, were inserted by the Finance Act 2025 with effect from 1 April 2026.

Income-tax Act, 1961

s.92CA

Income-tax Act, 2025

s.166

In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.

In short

Section 92CA of the Income-tax Act, 1961 permits the Assessing Officer, with the previous approval of the Principal Commissioner or Commissioner, to refer the computation of the arm's length price in relation to an international transaction or specified domestic transaction to the Transfer Pricing Officer. The reference is of a transaction, not of a file. Sub-section (3) confines the officer to determining that price by order in writing, and sub-section (4) then binds the Assessing Officer to compute total income in conformity with it. Nothing in the section empowers the officer to determine total income, to decide whether a permanent establishment exists, or to apply a double taxation avoidance agreement. The corresponding provision in the Income-tax Act, 2025 is section 166, which reproduces the same architecture and adds a bar on making a reference at all in relation to a transaction covered by a valid multi-year option.

What the provision does

Creates the reference and conditions it on the Commissioner's approval, confines the Transfer Pricing Officer to the price of what was referred, fixes when his order must be made, and makes that price binding on the Assessing Officer. It says nothing about hearing the assessee before the reference, which is supplied by the CBDT instructions and by the High Courts.

Threshold questions

Does the reference letter identify the transaction whose price is sought, or does it only assert that an Indian entity is carrying on the non-resident's business
Was the previous approval of the Principal Commissioner or Commissioner obtained, and is it on the record
Where no accountant's report under section 92E was filed, was the satisfaction required by paragraph 3.4 of Instruction No. 3/2016 recorded, and was the assessee heard before it was recorded
Did the Transfer Pricing Officer confine himself to the transaction referred, or did he decide association, residence, permanent establishment or treaty taxability
Was the order made within the period in sub-section (3A), as now computed by sub-section (3AA)
In set-aside proceedings, is the question referred one the appellate authority had restored to the Assessing Officer himself

The recurring disputes.

A reference that names no transaction

Sub-section (1) speaks of the price in relation to the said international transaction, and paragraph 3.6 of Instruction No. 3/2016 requires the reference letter to list the transactions referred. A reference recording only that an Indian company appears to be carrying on a non-resident's business identifies nothing to price, and leaves the officer to choose his own subject matter, which is the one thing the statute reserves to the Assessing Officer acting with approval.

Satisfaction and a hearing before the reference

Where the assessee disputes that there is an international transaction at all, the Bombay High Court read a personal hearing into sub-section (1) in Vodafone India Services, and the Delhi High Court agreed in Indorama Synthetics. The Gujarat High Court had held otherwise in Veer Gems in 2011, but declined to follow its own decision in Hitachi Hi Rel in 2021. Note the paragraph number: the requirement is paragraph 3.4 of Instruction No. 3/2016, and was paragraph 3.2 of the superseded Instruction No. 15/2015.

The officer deciding liability rather than price

Whether a permanent establishment exists under Article 5, and what profits are attributable under Article 7, go to liability and belong to the Assessing Officer. Veer Gems holds that the officer cannot even decide whether an international transaction exists. The extension of that reasoning to the treaty question currently rests on Tribunal authority, in Sava Healthcare and in Ingram Micro, and no decision of a High Court on it has been traced.

Limitation flowing from an invalid reference

Section 153(4) extends the time for completing an assessment by twelve months because a reference was made. If the reference was no reference at all, the extension never operated and the order falls outside time. The Finance Act 2026 amendments do not touch that chain, and it was the pleaded basis of the ground allowed in Ingram Micro, where the Tribunal accepted the jurisdictional premise without going on to the limitation conclusion.

Frequently asked.

Must the reference identify the particular international transaction?

Yes. Sub-section (1) contemplates a reference of the computation of the arm's length price in relation to the said international transaction, and paragraph 3.6 of CBDT Instruction No. 3/2016 requires the reference letter to list the transactions referred. A general reference naming no transaction is not a valid reference, as the Mumbai Bench held in Ingram Micro on 15 September 2026.

Is the Transfer Pricing Officer's order binding on the Assessing Officer?

On the arm's length price, yes. Sub-section (4) requires the Assessing Officer to compute total income in conformity with it, and section 166(11) of the Income-tax Act, 2025 is to the same effect. On anything else, no, because nothing outside the price was referred and nothing outside the price is made binding.

What happens if a reference that should have been made was not made?

The Supreme Court held in PCIT v. S.G. Asia Holding (I) Pvt Ltd that where the Board's instruction made a reference mandatory, the failure to refer made the transfer pricing adjustment bad in law while the assessment itself survived, and the matter was restored to the Assessing Officer.