Rule 82 enables an assessee to exercise an option under section 166(9)(a) to determine the arm’s length price (ALP) for two consecutive tax years following the first reference year in a single proceeding. This option must be exercised by furnishing Form No. 46 within the prescribed time period—between the end of the third tax year and 30 June immediately succeeding that year—along with an accountant’s certificate in Form No. 47. The Transfer Pricing Officer (TPO) is required to examine whether prescribed conditions are satisfied and pass a written order within one month declaring the option valid or invalid. The core condition is that the international or specified domestic transactions in the second and third tax years must be similar to those in the first year. Similarity requires no change in the transfer pricing method, no material change in functions performed, assets employed, or risks assumed, and no material change in business activities, financial or accounting methods, or contractual terms governing responsibilities and risk allocation. Changes in business results, holding structure, or associated enterprise will not invalidate the option if the underlying transaction and functional profile remain materially consistent. The assessee must also have complied with timely filing of accountant reports and returns and must not fall under Chapter XVI-B or involve associated enterprises in notified jurisdictions. Objections to invalidation may be filed before the Commissioner. The option may be cancelled if inaccurate or non-bona fide information is discovered, after giving opportunity of hearing. If declared invalid or cancelled, ALP determination proceeds only for the first tax year.
Extract of Rule No. 82 of Draft Income-tax Rules, 2026
Rule 82
Exercise of option for determination of Arm’s length price for multiple years in a single proceeding.
(1) The option or options as per section 166(9)(a) may be exercised by an assessee for determination of Arm’s length price for multiple year in a single proceeding by furnishing Form No. 46 for two consecutive tax years (the second tax year and the third tax year respectively) immediately following the tax year (the first tax year) in respect of which reference has been made in its case under section 166.
(2) The Form No. 46 in respect of international transactions or specified domestic transactions shall be furnished, within the period, beginning from the end of the third tax year and ending on the 30th day of June succeeding the third tax year.
(3) The Form No. 46 furnished in sub-rule (2) above shall be accompanied by a certificate from the accountant in Form No. 47.
(4) In a case where the international transactions or the specified domestic transactions fulfil the conditions prescribed in sub-rule (5), the Transfer Pricing Officer shall, within one month from the end of month in which such option or options are exercised, pass an order, in writing, declaring whether the option or options exercised in Form No. 46 are valid or invalid.
(5) For the purposes of sub-rule (4) the prescribed conditions are as under, ––
(a) The international transactions or the specified domestic in the second and third tax year for which option or options has been exercised in Form No. 46 should be similar to the international transactions or the specified domestic transaction in the first tax year;
(b) The relevant transactions shall be treated to be similar if they satisfy the following conditions, namely: –
(i) There is no change in the method to determine the arm’s length price for the relevant transactions; and
(ii) The functions performed, taking into account assets employed and the risks assumed, by the parties in respect of the relevant transactions remain materially consistent; and
(iii) In respect of the relevant transactions, the business activities, the relevant financial, tax, and accounting methods; and classification of the assessee, in case of a company, remained materially the same; and
(iv) The option or options exercise would be applicable even when there is a change in the business result or holding structure of the Associated Enterprise, or change in the Associated Enterprise, provided there is no material change in the relevant transaction and no material change in the functions performed, taking into account assets employed and the risks assumed; and
(v) There is no change in the contractual terms (whether or not such terms are formal or in writing) of the relevant transactions which explicitly or implicitly laid down how the responsibilities, risks and benefits are to be divided between the parties to the relevant transactions. Draft Income-tax Rules, 2026 99
(c) Assessee has furnished in the first and the second tax years, ––
(i) report from the accountant under section 172 on or before the specified date referred to in that section; and
(ii) return of income on or before the due date referred to in section 263(1);
(d) Assessee shall undertake to furnish for the third tax year, ––
(i) report from the accountant under section 172 on or before the specified date referred to in that section; and
(ii) return of income on or before the due date referred to in section 263(1);
(e) The case of the assessee for the first, second and the third tax years is not covered under the provisions of Chapter XVI-B. (f) None of the Associated Enterprises relevant to the transactions is a resident of a jurisdiction which has been notified under section 176 of the Act.
(6) If the assessee objects to the order of the Transfer Pricing Officer under sub-rule (4) declaring the option to be invalid, it may file its objections with the Commissioner, to whom the Transfer Pricing Officer is subordinate, within fifteen days of receipt of the order of the Transfer Pricing Officer.
(7) On receipt of the objection referred to in sub-rule (6), the Commissioner shall after providing an opportunity of being heard to the assessee pass appropriate orders in respect of the validity or otherwise of the option exercised by the assessee and cause a copy of the said order to be served on the assessee and the Transfer Pricing Officer.
(8) In a case where, during the proceedings under section 166, it is found that the information provided by the assessee in the Form No. 46 is inaccurate or not bona fide or the accountant furnishes the certificate in Form No. 47 to the same effect or conditions as specified in sub-rule (5) are not met, the order passed under sub- rule (4) shall be cancelled.
(9) Before cancelling the order passed under sub-rule (4), the Transfer Pricing Officer shall give the assessee a reasonable opportunity of being heard and take the approval from the Commissioner before cancelling the order.
(10) Where the option or options exercised by the assessee, are declared as invalid under sub rule (4) or the order passed under sub-rule (4) is cancelled, by the Transfer Pricing Officer, 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).
