Transfer pricing regulations in India ensure that international and specified domestic transactions between associated enterprises adhere to the arm’s length principle (ALP). A key provision governing transfer pricing is Section 92CA, which outlines the powers and functions of the Transfer Pricing Officer (TPO) in determining ALP.
Reference to the Transfer Pricing Officer
Under Section 92CA(1), the Assessing Officer (AO) may refer the computation of ALP for an international or specified domestic transaction to the TPO, with prior approval from the Principal Commissioner or Commissioner.
| Key Aspects | Details |
|---|---|
| Who can refer? | Assessing Officer (AO) |
| Approval required? | Yes, from the Principal Commissioner or Commissioner |
| Purpose | To determine Arm’s Length Price (ALP) |
Role and Responsibilities of the Transfer Pricing Officer
Once a reference is made, the TPO initiates proceedings by issuing a notice to the assessee, requesting necessary documents to support their ALP computation (Section 92CA(2)). The TPO then evaluates the transaction and determines the ALP.
Additional Provisions:
If an unreported international transaction is discovered, it will be treated as if it were originally referred (Section 92CA(2A)).
If an assessee fails to submit the required transfer pricing report under Section 92E, and the transaction is detected, it will also be treated as referred (Section 92CA(2B)).
Amendments to Section 92CA (Effective April 1, 2026)
Introduction of Sub-section (3B)
A significant change is the introduction of Section 92CA(3B), allowing the ALP determined for a previous year to apply for two consecutive years, provided the following conditions are met:
| Conditions | Details |
| Assessee Option | The assessee must opt for the same ALP for the next two years. |
| Manner & Period | The option must be exercised as prescribed. |
| TPO Approval | The TPO must declare the option valid within one month. |
| Exclusion | Does not apply to proceedings under Chapter XIV-B. |
Impact: Once validated, no fresh reference to the TPO is needed for those two years.
Sub-section (4A) – Automatic ALP Determination for Similar Transactions
If the TPO validates the option under 92CA(3B), they will determine the ALP for two consecutive years in their order under Section 92CA(3). The AO must then recompute the total income for those years as per Section 155(21).
Removal of the Proviso in Section 92CA(9)
The existing proviso in Section 92CA(9), which restricted modifications, has been removed.
Introduction of Sub-sections (11) & (12) – Addressing Implementation Challenges
Sub-section (11): If difficulties arise in implementing 92CA(3B) and 92CA(4A), the CBDT (Board) may issue guidelines with Central Government approval. However, no such guidelines can be issued beyond April 1, 2028.
Sub-section (12): Any guidelines issued must be laid before Parliament for review and approval.
| New Sub-sections | Purpose |
| 92CA(11) | Allows CBDT to issue implementation guidelines. |
| 92CA(12) | Guidelines must be presented before Parliament. |
Determination and Implementation of Arm’s Length Price
After reviewing all evidence, the TPO determines the ALP through a written order (Section 92CA(3)). This order is sent to both the AO and the assessee. The AO must compute the total income based on the ALP determined by the TPO (Section 92CA(4)).
Amendment and Rectification of Orders
If the TPO identifies any mistake, they can rectify it under Section 92CA(5), applying Section 154. The AO must then amend the assessment accordingly (Section 92CA(6)).
Powers of the Transfer Pricing Officer
The TPO can summon documents, conduct surveys, and examine individuals under: Section 131, Section 133(6), and Section 133A (Section 92CA(7)).
Introduction of Technology-driven ALP Determination
The Central Government may implement a scheme for ALP determination to improve:
Efficiency – Reducing delays in ALP assessment. Transparency – Reducing direct interaction between the TPO and assessee. Accountability – Implementing team-based decision-making.
Legislative Oversight
All notifications under Sections 92CA(8) and 92CA(9) must be reviewed by both Houses of Parliament (Section 92CA(10)).
Definition of Transfer Pricing Officer
A Transfer Pricing Officer refers to a Joint Commissioner, Deputy Commissioner, or Assistant Commissioner authorized by the CBDT for transfer pricing matters.
Conclusion
Section 92CA remains a cornerstone of India’s transfer pricing framework. The 2026 amendments bring:
- Greater certainty through a two-year ALP application option.
- Automation & technology-driven compliance.
- More efficient dispute resolution.
Businesses engaged in cross-border and specified domestic transactions must stay informed about these changes to ensure compliance and avoid tax disputes.
About the Author
CA Bhuvnesh Kumar Goyal
Fellow Chartered Accountant, LLB, B.com, Forensic Accountant and Fraud Detection Professional
CA Bhunvesh Kumar Goyal, a seasoned Chartered Accountant with 15+ years of experience, specializes in Income Tax, GST, MSME advisory, startups, audits, company registration, and business structuring. He also provides expert guidance on ESG, BRSR, the Companies Act, crypto transactions, and transfer pricing. With a practical approach, he helps businesses stay compliant while optimizing financial and operational efficiency.
Legal text of Section 92CA of Income Tax Act : Reference to Transfer Pricing Officer
(1) Where any person, being the assessee, has entered into an international transaction or specified domestic transaction in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Principal Commissioner or Commissioner, refer the computation of the arm’s length price in relation to the said international transaction or specified domestic transaction under section 92C to the Transfer Pricing Officer.
(2) Where a reference is made under sub-section (1), the Transfer Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be specified therein, any evidence on which the assessee may rely in support of the computation made by him of the arm’s length price in relation to the international transaction or specified domestic transaction referred to in sub-section (1).
(2A) Where any other international transaction [other than an international transaction referred under sub-section (1)], comes to the notice of the Transfer Pricing Officer during the course of the proceedings before him, the provisions of this Chapter shall apply as if such other international transaction is an international transaction referred to him under sub-section (1).
(2B) Where in respect of an international transaction, the assessee has not furnished the report under section 92E and such transaction comes to the notice of the Transfer Pricing Officer during the course of the proceeding before him, the provisions of this Chapter shall apply as if such transaction is an international transaction referred to him under sub-section (1).
(2C) Nothing contained in sub-section (2B) shall empower the Assessing Officer either to assess or reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year, proceedings for which have been completed before the 1st day of July, 2012.
(3) On the date specified in the notice under sub-section (2), or as soon thereafter as may be, after hearing such evidence as the assessee may produce, including any information or documents referred to in sub-section (3) of section 92D and after considering such evidence as the Transfer Pricing Officer may require on any specified points and after taking into account all relevant materials which he has gathered, the Transfer Pricing Officer shall, by order in writing, determine the arm’s length price in relation to the international transaction or specified domestic transaction in accordance with sub-section (3) of section 92C and send a copy of his order to the Assessing Officer and to the assessee.
(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires:
Provided that in the circumstances referred to in clause (ii) or clause (x) of Explanation 1 to section 153, if the period of limitation available to the Transfer Pricing Officer for making an order is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to have been extended accordingly.
(4) On receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the arm’s length price as so determined by the Transfer Pricing Officer.
(5) With a view to rectifying any mistake apparent from the record, the Transfer Pricing Officer may amend any order passed by him under sub-section (3), and the provisions of section 154 shall, so far as may be, apply accordingly.
(6) Where any amendment is made by the Transfer Pricing Officer under sub-section (5), he shall send a copy of his order to the Assessing Officer who shall thereafter proceed to amend the order of assessment in conformity with such order of the Transfer Pricing Officer.
(7) The Transfer Pricing Officer may, for the purposes of determining the arm’s length price under this section, exercise all or any of the powers specified in clauses (a) to (d) of sub-section (1) of section 131 or sub-section (6) of section 133 or section 133A.
(8) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of determination of the arm’s length price under sub-section (3), so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Transfer Pricing Officer and the assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based determination of arm’s length price with dynamic jurisdiction.
(9) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (8), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 38-39[2024].
(10) Every notification issued under sub-section (8) and sub-section (9) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Explanation.—For the purposes of this section, “Transfer Pricing Officer” means a Joint Commissioner or Deputy Commissioner or Assistant Commissioner authorised by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D in respect of any person or class of persons.