The Government has proposed a clarificatory amendment on the manner of computing the 60-day period available to the Transfer Pricing Officer (TPO) for passing an order under section 92CA of the Income-tax Act.
This clarification aims to align legislative intent with administrative practice and bring certainty to an area that has seen extensive litigation over the years.
Background: Section 92CA and the 60-Day Rule
Section 92CA of the Income-tax Act, 1961 empowers the Assessing Officer (AO) to refer the determination of Arm’s Length Price (ALP) of an international transaction or specified domestic transaction to the Transfer Pricing Officer.
As per section 92CA(3A), the TPO is required to pass an order at least 60 days before the expiry of the limitation period prescribed under section 153 or section 153B for completion of assessment, reassessment, recomputation or fresh assessment.
The Controversy: How Are 60 Days to Be Counted?
Despite the seemingly straightforward provision, courts have differed on how the 60-day period should be computed specifically, whether the date of limitation for assessment should be included or excluded while counting the 60 days.
While the legislative intent was always to include the date of limitation in computing the 60-day period, several judicial decisions interpreted the provision strictly and held otherwise. As a result, multiple transfer pricing assessments were annulled, even though the TPO orders were passed with what the department considered a valid 60-day buffer.
This divergence between intent and interpretation led to uncertainty, avoidable litigation, and revenue loss.
Legislative Response: Clarificatory Amendment Proposed
To address this issue conclusively, it has been proposed to explicitly clarify the manner of computation of the 60-day period under section 92CA(3A).
The amendment provides that:
- The date of limitation for completion of assessment is to be included while computing the 60-day period available to the TPO.
- The clarification will apply notwithstanding any judgment, order or decree of any court, thereby overriding contrary judicial interpretations.
Retrospective Effect Under the Income tax Act, 1961
Importantly, this clarification in the Income tax Act, 1961 will operate retrospectively from 1 June 2007 , the date from which section 92CA(3A) was originally introduced.
This retrospective application is intended to:
- Validate past TPO orders passed in accordance with legislative intent
- Reduce ongoing and future litigation on this procedural issue
- Provide certainty to both taxpayers and tax authorities
Alignment with the New Income-tax Act, 2025
The upcoming Income-tax Act, 2025 , effective from 1 April 2026, seeks to simplify language and reduce interpretational disputes. To ensure consistency between the old and new regimes, parallel amendments are proposed in the 2025 Act , clearly setting out the correct method of computing the 60-day period.
This alignment ensures that the clarified intent is uniformly reflected in both statutes, preventing the re-emergence of similar disputes under the new law.
Key Takeaway
The proposed clarification on the computation of 60 days for TPO orders marks a decisive step towards certainty, consistency, and litigation reduction in transfer pricing proceedings. By explicitly stating that the date of limitation is included in the 60-day count—and by applying this clarification retrospectively—the amendment seeks to close a long-running chapter of procedural disputes in Indian transfer pricing law.
Official copy of the Clause is as follows
Clarifying the manner of computation of sixty days for passing the order by the Transfer Pricing Officer.
Section 92CA of the Income-tax Act, 1961 deals with the case where assessee, has entered into an international transaction or specified domestic transaction in any previous year, and the Assessing Officer (AO) may 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 (TPO).
2. Section 92CA(3A) states that TPO is required to pass an order before 60 days prior to the date on which period of limitation under 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.
3. There has been considerable litigation in courts as to how the period of sixty days referred in section 92CA(3A) is required to be computed. The intent of the legislature has always been to include the date of limitation in the computation of sixty days. However, the courts have annulled number of assessments holding that period of sixty days does not include the date of limitation and therefore assessments which have lawfully made by the Transfer Pricing Officer with clearly sixty days remaining for completion of final assessment as per section 153 or 153B as the case may be, have been struck down, though the legislative intent is otherwise.
4. The Income-tax Act, 2025 is coming into force from the 1st of April, 2026. The objective of the new law has been to provide simplicity in language and provisions so as to avoid interpretational issues and prevent litigation. Therefore, there is an urgent need to clarify the position of law in the new Income-tax Act, 2025. The intention of the legislature also needs to be clearly laid out in the Income-tax Act, 1961 so that the intent is uniformly reflected in the two Acts.
5. Accordingly, notwithstanding anything contained in any judgment, order or decree of court, it is proposed to be clarified in section 92CA(3A) as to how the period of sixty days is required to be computed. Suitable amendments are also proposed to be carried out in the Income-tax Act, 2025 so that correct interpretation is taken, litigation is minimized and certainty is achieved.
6. The clarification in Income-tax Act, 1961 shall come into force with retrospective effect from 1st day of June, 2007. The amendment in Income-tax Act, 2025 shall come into force with effect from 1st day of April, 2026.
[Clause 4, 44]
CAclubindia
