When does section 161(4) of the Income-tax Act, 2025 bar the application of the arm’s length price computation?
Question and options
When does section 161(4) of the Income-tax Act, 2025 bar the application of the arm’s length price computation?
When it would increase the income or reduce the loss
When the transaction is below ₹1 crore in value
When the transaction is settled in a foreign currency
When it would reduce the income or increase the loss
Answer and explanation
Section 161(4) of the Income-tax Act, 2025 provides that the arm’s length computation does not apply if it would reduce the income chargeable or increase the loss computed from the books for the year of the transaction. The provision exists to protect the revenue, so an adjustment that increases income is exactly what it permits.
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