The Finance Bill, 2026 proposes a clarificatory amendment to resolve long-standing litigation on how the sixty-day period for passing an order by the Transfer Pricing Officer (TPO) is to be computed under section 92CA(3A) of the Income-tax Act, 1961. Courts had taken divergent views on whether the date of limitation for completing assessment should be included while counting the sixty days, resulting in several assessments being annulled despite the TPO having acted within what was considered the intended time frame. To align judicial interpretation with legislative intent, the Bill explicitly prescribes the manner of computing the sixty-day period by specifying fixed cut-off dates linked to the statutory limitation dates. The clarification is made retrospective from 1 June 2007 to protect past assessments. Parallel amendments are also proposed in the Income-tax Act, 2025, effective from 1 April 2026, to ensure consistency across both laws, reduce interpretational disputes, and provide certainty in transfer pricing proceedings.
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]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 4 of the Bill seeks to amend section 92CA of the Income-tax Act, 1961 relating to reference to Transfer Pricing Officer.
The said section provides that where an assessee, has entered into an international transaction or specified domestic transaction in any previous year, the Assessing Officer may refer to the Transfer Pricing Officer for the computation of the arm’s length price under section 92C in relation to the said international transaction or specified domestic transaction.
Sub-section (3A) of the said Act provides that the Transfer Pricing Officer is required to pass an order before sixty days prior to the date on which period of limitation specified 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.
In this regard, it is proposed to insert sub-section (3AA) so as to provide that for the purpose of making order under sub-section (3), the calculation of sixty days shall be made and shall be deemed to have been made in the following manner, namely:––
a. where the period of limitation expires on 31st of March of any year (not being a leap year), the order under sub-section (3) may be made up to the 30th of January of that year;
b. where the period of limitation expires on 31st of March of any year (being a leap year), the order under sub-section (3) may be made up to the 31st of January of that year;
c. where the period of limitation expires on 31st of December of any year, the order under sub-section (3) may be made up to the 1st of November of that year.
This amendment will take effect retrospectively from 1st June, 2007.
Clause 44 of the Bill seeks to amend section 166 of the Income-tax Act, 2025 relating to reference to Transfer Pricing Officer.
The said section provides that where an assessee, has entered into an international transaction or specified domestic transaction in any previous year, and the Assessing Officer has made a reference for computation of the arm’s length price in relation to the said international transaction or specified domestic transaction to the Transfer Pricing Officer.
Sub-section (7) of the said section 166 provides that where a reference to Transfer pricing Officer was made under sub-section (1), an order under sub-section (6) has to be made at any time sixty days before the expiry of the period specified in section 286 or 296, for making the order of assessment or reassessment or recomputation or fresh assessment.
It is proposed to amend the said sub-section to clarify that where a reference has been made under sub-section (1), an order under sub-section (6) has to be made at any time before one month prior to the month in which the period of limitation referred to in section 286 or 296, for making the order of assessment or reassessment or recomputation or fresh assessment, expires and accordingly, where such period–
(a) expires on the 31st March of any year, the order under sub-section (6) has to be made on or before the 31st January of that year;
(b) expires on the 31st December of any year, the order under sub-section (6) has to be made on or before the 31st October of that year.
This amendment will take effect from 1st April, 2026 and will, accordingly, apply in relation to the tax year 2026-2027 and subsequent years.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
4. Amendment of section 92CA.
In section 92CA of the Income-tax Act, 1961 (hereafter in this Part referred to as the Income-tax Act), after sub-section (3A), the following subsection shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 2007, namely:––
43 of 1961.
“(3AA). Notwithstanding anything contained in any judgment, order or decree of any court, for the purposes of making order under sub-section (3), the calculation of sixty days shall be made and shall always be deemed to have been made in the following manner, namely:––
(a) where the period of limitation expires on 31st of March of any year (not being a leap year), the order under sub-section (3) may be made up to the 30th of January of that year;
(b) where the period of limitation expires on 31st of March of any year (being a leap year), the order under sub-section (3) may be made up to the 31st of January of that year;
(c) where the period of limitation expires on 31st of December of any year, the order under sub-section (3) may be made up to the 1st of November of that year.”.
44. Amendment of section 166.
In section 166 of the Income-tax Act, for sub-section (7), the following sub-section shall be substituted, namely:––
“(7) Where a reference was made under sub-section (1), an order under sub-section (6) may be made at any time before one month prior to the month in which period of limitation referred to in section 286 or 296, for making the order of assessment or reassessment or recomputation or fresh assessment, expires and accordingly, where such period expires on––
(a) the 31st March of any year, the order under sub-section (6) shall be made on or before the 31st January of that year;
(b) the 31st December of any year, the order under sub-section (6) shall be made on or before the 31st October of that year.”.
