The Supreme Court has issued a split verdict on whether the time spent in proceedings before the Dispute Resolution Panel (DRP) under Section 144C of the Income Tax Act, 1961 should be counted within, or excluded from, the limitation period prescribed under Section 153 for completing an assessment. The case arose from Assistant Commissioner of Income Tax vs. Shelf Drilling Ron Tappmeyer Ltd.
Justice BV Nagarathna held that the DRP procedure must be completed within the overall time limit under Section 153(3), while Justice Satish Chandra Sharma ruled that the DRP’s 11-month process operates in addition to the 12-month limitation period under Section 153(3).
Justice Nagarathna: Single Unified Timeline
Justice Nagarathna stressed that the legislative intent is to ensure speedy completion of assessments. She observed that all steps under Section 144C — from issuance of the draft order, objections, DRP directions, to the final order — must conclude within the Section 153(3) period of 12 months.
“If orders are not made within the stipulated time under Section 153(3), the return filed by the assessee will have to be accepted,” she stated, citing Parliament’s consistent trend of reducing assessment timelines through successive Finance Acts.
Justice Sharma: Separate Timelines for DRP Cases
Justice Sharma took a different view, holding that Section 144C establishes a distinct assessment process for eligible assessees, such as foreign companies and transfer pricing cases. According to him, the limitation under Section 153 applies only until the draft order stage, after which the DRP’s internal timelines — up to 11 months — run independently.
He noted that the non-obstante clauses in Section 144C(4) and (13) override Section 153’s constraints, allowing additional time for the DRP and final order stages.
Background of the Dispute
The case involved Shelf Drilling Ron Tappmeyer Ltd., a foreign company engaged in offshore drilling. For AY 2014–15, it declared a ₹120.18 crore loss under Section 44BB. Following scrutiny, a draft order issued in December 2016 recomputed income at ₹4.35 crore. After DRP proceedings, the final order came in October 2017.
The matter was remanded by the Income Tax Appellate Tribunal in October 2019, giving the revenue until March 2021 (later extended to September 2021 due to COVID-19) to finish reassessment. A new draft order issued on September 28, 2021 was challenged by the company as time-barred.
Case Details
Case Title: ACIT Versus Shelf Drilling Ron Tappmeyer Ltd. Etc.
Case No.: SLP (Civil) Nos.20569-20572 of 2023
Date: 08/08/2025
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