Summary and Analysis of Assistant Commissioner of Income Tax vs. Shelf Drilling Ron Tappmeyer Ltd

1. Heading of the Judgment

Assistant Commissioner of Income Tax (International Taxation) & Others vs. Shelf Drilling Ron Tappmeyer Ltd. Etc.
(Civil Appeal Nos. ______ of 2025; Supreme Court of India)

Citation:

Assistant Commissioner of Income Tax vs. Shelf Drilling Ron Tappmeyer Ltd. (2025 INSC 946).

2. Related Laws and Sections

The judgment interprets the interplay between:

• Section 144C of the Income Tax Act, 1961 (Reference to Dispute Resolution Panel).

• Section 153 of the Income Tax Act, 1961 (Time limit for completion of assessment/reassessment).

• Key Sub-Sections:
  Section 153(3) (Limitation for fresh assessment after remand by appellate authorities).
  Section 144C(1), (4), (13) (Non-obstante clauses and timelines for draft/final orders).

• Other Provisions: Sections 143(3), 144, 254 (Assessment procedures and Tribunal's remand powers).

3. Basic Judgment Details

• Parties:
  Appellants: Revenue (Income Tax Department).
  Respondents: Shelf Drilling Ron Tappmeyer Ltd. (non-resident assessees engaged in oil exploration).

• Core Issue: Whether the 11-month procedure under Section 144C (DRP process) is independent of or subsumed within the limitation period under Section 153(3) for passing final assessment orders.

• High Court Decision: Bombay High Court quashed draft assessment orders as time-barred, holding that Section 144C must comply with Section 153(3)’s timelines.

• Supreme Court Outcome:
  Justice Nagarathna (Majority): Upheld the High Court’s view (revenue’s appeals dismissed).
  Justice Sharma (Minority): Favored revenue’s interpretation (appeals allowed).

4. Explanation of the Judgment

Background

• The respondents (foreign companies) filed income returns under Section 44BB (presumptive taxation for mineral oil exploration).

• For Assessment Year (AY) 2014–15, they opted out of presumptive taxation and declared losses.

• Draft assessment orders were issued, objections were filed before the DRP, and final assessments were completed.

• The Income Tax Appellate Tribunal remanded the matter for fresh adjudication (order dated 04.10.2019).

• The Assessing Officer issued a draft assessment order on 28.09.2021.

• Contention of Assessees: The final assessment could not be passed as the limitation period under Section 153(3) expired on 30.09.2021 (extended by COVID-19 relaxations).

Conflict Between Sections 144C and 153(3)

• Revenue’s Argument (Appellants):
  Section 144C is a "self-contained code" with independent timelines.
  Non-obstante clauses in Section 144C(4) and (13) override Section 153(3).
  The DRP process (11 months) should be excluded from Section 153(3)’s 12-month limitation.

• Assessees’ Argument (Respondents):
  Section 144C must operate within the limitation period of Section 153(3).
  No parliamentary intent to grant additional time; strict interpretation of fiscal statutes required.
  Expiry of limitation on 30.09.2021 invalidated subsequent proceedings.

Justice Nagarathna’s Majority View (Dismisses Revenue’s Appeals)

1. Harmonious Interpretation:
   Section 144C’s procedure (draft order → DRP → final order) must be completed within Section 153(3)’s 12-month limitation.
   The non-obstante clause in Section 144C(1) only distinguishes procedures for eligible assessees (non-residents), not timelines.

2. Legislative Intent:
   Section 144C was introduced (2009) for speedy resolution of disputes involving foreign entities. Extending timelines defeats this purpose.
   Budget speeches and explanatory notes emphasize "expeditious disposal."

3. Non-Obstante Clauses:
   Section 144C(1) overrides assessment procedures (not limitation periods).
   Sections 144C(4)/(13) override Section 153 only for specific steps (e.g., 1-month deadline post-DRP directions), not overall limitation.

4. Consequences:
   Failure to pass final orders within Section 153(3)’s timeline voids the assessment. The assessee’s original return stands accepted.

Justice Sharma’s Minority View (Allows Revenue’s Appeals)

• Section 144C provides a distinct mechanism with independent timelines.

• The DRP process consumes substantial time; requiring it to fit within Section 153(3) would cause "complete catastrophe" for tax recovery.

• Non-obstante clauses in Section 144C(4)/(13) expressly override Section 153.

Final Ruling

• Majority Decision (Binding):
  The DRP process does not get additional time beyond Section 153(3)’s limitation.
  Draft orders issued on 28.09.2021 were invalid as the limitation expired on 30.09.2021.
  Revenue authorities must pass orders within statutory timelines; no further action permitted in these cases.

• Impact: Assessments for eligible assessees (non-residents) must align with strict limitation periods under Section 153.