In a split verdict dated 8 August 2025, the top Court considered whether the Dispute Resolution Panel (DRP) timelines are excluded from tax assessment deadlines. In the majority opinion of a bench of Justices B.V. Nagarathna and Satish Chandra Sharma, stated that the DRP’s 9-month period and AO’s 1-month period under Section 144C are additional to Section 153(3) under the Income Tax Act, 1961. The Supreme Court delivered the divided decision on tax assessment deadlines for foreign companies.
The matter in Assistant Commissioner Of Income Tax vs Shelf Drilling Ron Tappmeyer Limited arose from a high court ruling making proceedings time-barred under Section 153(3), as the limitation period expired before the Draft Assessment Order (DAO) was passed.Justice Nagarathna’s view prioritised the mandatory adherence to statutory deadlines as intended by the statute, whereas Justice Sharma’s opinion allowed for the extension of timeline in complex assessments involving foreign companies and tax disputes.
The verdict found the non-obstante clauses in Section 144C timelines operate independently and override that of Section 153(3). Also, the DRP’s 9-month period and AO’s 1-month period under Section 144C are additional to Section 153(3). The judgement referred to Commissioner of Income Tax v. Hindustan Bulk Carriers and reiterated that construction of a statute should not reduce it to futility. The ratio in Franklin Templeton Trustee Services Private Limited & Anr. v. Amruta Garg & Ors. was cited to show that interpretation of laws should not set a standard which is palpably unjust, unfair, unreasonable or does not make any sense
Justice Sharma opined that should proceedings under Section 92C be invoked, the time period in view of Section 153(4) of the Income Tax Act would be extended by a period of 12 months. Section 144C of the Income Tax Act mandates adherence to fixed timelines. A final assessment order needs to be passed within one month of the Draft Assessment Order under sub-section (4), or within 11 months if objections are filed before the Dispute Resolution Panel.
Considering the divergence in opinion expressed and split verdict, the Bench directed the Registry to place the matters before the Hon’ble Chief Justice of India for constituting an appropriate Bench to consider the issues afresh.
