SC split on DRP’s impact on Sec. 153 assessment timeline

Case Details:CA Assistant Commissioner of Income-tax (International Taxation) vs. Shelf Drilling Ron Tappmeyer Ltd. etc. - [2025] 177 taxmann.com 262 (SC)

Judiciary and Counsel Details

• B.V. NAGARATHNA and SATISH CHANDRA SHARMA, JJ.

Fact of the Case

In a recent ruling, the Supreme Court of India has addressed the interplay between Section 144C (Dispute Resolution Panel procedure) and Section 153 (assessment timelines) of the Income Tax Act, 1961. The central question is whether the period consumed by Section 144C proceedings should be included within or extend beyond the general limitation periods of Section 153. Due to fundamentally divergent opinions from Justice B.V. Nagarathna and Justice Satish Chandra Sharma, the matter has been referred to the Chief Justice of India for a larger bench to provide a definitive resolution.
The following are the key extracts from the ruling:
1)Justice Nagarathna’s Stance
Section 144C was introduced to accelerate the resolution of tax disputes, particularly for foreign companies, to foster a more favorable investment climate in India by providing a fast-track alternative dispute resolution mechanism.
Justice B.V. Nagarathna holds that the entire assessment procedure under Section 144C must be completed within the overall limitation period prescribed by Section 153(1) or (3), with no additional period intended by Parliament.
Justice Nagarathna interprets the non-obstante clause in Section 144C(1) as establishing a distinct procedural pathway for eligible assessees requiring a draft order, rather than overriding the overall limitation period in Section 153. She sees no inherent contradiction between the two sections.
In Justice Nagarathna’s view, the non-obstante clauses in Section 144C(4) and (13) impose narrower, specific timelines (one month) for certain actions within the DRP process, designed to ensure the entire Section 144C procedure concludes within the overarching 12-month limit of Section 153(3).
2)Justice Sharma’s Stance
In contrast, Justice Satish Chandra Sharma posits that Section 144C functions as a self-contained code, establishing its own specific timelines that operate in addition to the general limitation periods in Section 153.
Justice Sharma interprets the non-obstante clause in Section 144C(1) to mean that Section 153 timelines apply only to the stage of passing the draft assessment order, and the subsequent DRP process operates independently of Section 153.

SC Held

Justice Sharma views the non-obstante clauses in Section 144C(4) and (13) as explicitly extending the timeline for passing the final assessment order, operating independently of and in addition to Section 153, to ensure administrative workability.
Justice Nagarathna believes the Act is “certainly workable” even if Section 144C is subsumed, while Justice Sharma argues that such an interpretation would lead to a “complete catastrophe for recovering lost tax” and render the system “totally unworkable” for the Revenue.
3)Ultimate Outcome – Referral to a Larger Bench
Due to the fundamental and irreconcilable differences in interpretation between the two Justices, the Supreme Court has referred the matter to the Chief Justice of India for the constitution of an appropriate larger bench for a definitive resolution.

List Of Cases Referred to

• CIT v. Roca Bathroom Products Pvt. Ltd. 2022 SCC Online Madras 8777 (para 4.3),
•  Kalyankumar Ray v. CIT [1991] 191 ITR 634 (SC) (para 5.6),
• Central Bank of India v. State of Kerala (2009) 4 SCC 94 (para 5.8),
• Shree Sajjan Mills Ltd. v. CIT (1985) 4 SCC 590 (para 8.1), Kanailal Sur v. Paramnidhi Sadhu Khan AIR 1957 SC 907 (para 9.2),
•  MV Joshi v. MU Shimpi AIR 1961 SC 1494 (para 9.3),
•  VO Tractoroexport v. Tarapore and Co AIR 1971 SC 1 (para 9.4),
• R.S. Raghunath v. State of Karnataka (1992) 1 SCC 335 (para 10.1),
•  A.G. Varadarajulu v. State of T.N. (1998) 4 SCC 231 (para 10.2),
• Aswini Kumar Ghose v. Arabinda Bose, (1952) 2 SCC 237 (para 10.2),
• Ltd. v. Sidco Leathers Ltd. (2006) 10 SCC 452 (para 10.4),
•  Municipal Corpn., Indore v. Ratnaprabha, (1976) 4 SCC 622 (para 10.5),
• Tax v. Safari Retreats Private Limited (2025) 2 SCC 523 (para 10.7),
•  10.10 In Central India Spg., Wvg. & Mfg. Co. Ltd. v. Municipal Committee, 1957 SCC OnLine SC 18 (para 10.10),
• CIT v. Shahzada Nand and Sons [1966] 60 ITR 392 (SC) (para 10.10),
• CIT v. Jalgaon Electric Supply Co. Ltd. [1960] 40 ITR 184 (SC) (para 10.10),
• Pr. CIT v. Lionbridge Technologies (P.) Ltd. [2018] 100 taxmann.com 413/260 Taxman 273 (Bombay) (para 13.4),
•  Nokia India (P.) Ltd. v. Dy. CIT [2017] 85 taxmann.com 291/251 Taxman 85/407 ITR 20 (Delhi) (para 13.4),
•  CIT v. JK Commercial Corpn. Ltd. (1976) 4 SCC 517 (para 14),
•  CIT v. Hindustan Bulk Carriers (2003) 3 SCC 57 (para 53),
• Franklin Templeton Trustee Services Private Limited & Anr. v. Amruta Garg & Ors., (2021) 6 SCC 736 (para 54).