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Question Bank
Question
What is the significance of Section 144C of the Income Tax Act, 1961, and how does it differ from the regular assessment procedure?
Solution
Section 144C of the Income Tax Act, 1961, introduces a special dispute resolution mechanism for eligible assessees, such as non-residents or foreign companies. Unlike the regular assessment under Section 143(3), this provision mandates the Assessing Officer (AO) to first issue a draft assessment order to the assessee. The assessee then has 30 days to either accept the variations or file objections before the Dispute Resolution Panel (DRP). The DRP’s directions are binding, and the AO must pass the final order within one month of receiving these directions. This process ensures expeditious resolution of disputes, particularly in cases involving international transactions or transfer pricing, as highlighted in the Finance Act, 2009.
Key Terms:
Eligible assessee (non-residents/foreign companies)
Draft assessment order
Dispute Resolution Panel (DRP)
30-day objection period
Expeditious dispute resolution
Question
How does the non-obstante clause in Section 144C(1) impact the assessment procedure for eligible assessees?
Solution
The non-obstante clause in Section 144C(1) ("notwithstanding anything to the contrary contained in this Act") ensures that the special procedure for eligible assessees overrides other general provisions of the Income Tax Act. This clause empowers the AO to issue a draft order instead of a final assessment order initially, which is a departure from the standard process under Section 143(3). The clause emphasizes that the timelines and mechanisms under Section 144C operate independently, particularly in cases involving transfer pricing adjustments or foreign entities. However, it does not exclude the overarching limitation periods under Section 153.
Key Terms:
Non-obstante clause
Override general provisions
Draft order vs. final order
Independent procedure
Transfer pricing adjustments
Question
What are the time limits prescribed under Section 153(3) for passing a fresh assessment order after remand by appellate authorities?
Solution
Section 153(3) specifies that a fresh assessment order (after remand by appellate authorities like the Income Tax Appellate Tribunal (ITAT) under Section 254) must be passed within:
12 months from the end of the financial year in which the remand order is received by the Principal Chief Commissioner/Commissioner.
This timeline is strict and includes the entire process, from issuing the draft order (if Section 144C applies) to passing the final order. The proviso to Section 153(3) clarifies that this period is non-extendable, except in cases covered under Section 92CA (transfer pricing). Delays beyond this period render the assessment time-barred.
Key Terms:
Fresh assessment order
Remand by ITAT (Section 254)
12-month limitation
Non-extendable deadline
Time-barred assessment
Question
How do the non-obstante clauses in Sections 144C(4) and 144C(13) interact with the limitation period under Section 153?
Solution
The non-obstante clauses in Sections 144C(4) and 144C(13) ("notwithstanding anything contained in Section 153") clarify that the specific timelines under Section 144C override the general limitation under Section 153 only for procedural steps, such as:
Passing the final order within one month of DRP directions (Section 144C(13).
Completing assessments within nine months of the draft order (Section 144C(12).
However, these clauses do not extend the overall 12-month limitation under Section 153(3). The harmonious interpretation is that the DRP process must conclude within the outer limit of Section 153(3).
Key Terms:
Override procedural timelines
One-month deadline for final order
Harmonious interpretation
No extension of Section 153(3)
DRP process subsumed under limitation
Question
What is the legislative intent behind introducing Section 144C, and how does it balance taxpayer rights and revenue interests?
Solution
The legislative intent behind Section 144C, as per the Finance Act, 2009, was to create an alternate dispute resolution mechanism for speedy resolution of tax disputes involving foreign investors and transfer pricing cases. Key objectives include:
Reducing prolonged litigation: By allowing objections to be resolved by the DRP before appeals.
Certainty for non-residents: Avoiding delays that deter foreign investment.
Balancing powers: The AO’s draft order is subject to DRP scrutiny, ensuring fairness.
However, the strict timelines (e.g., 9 months for DRP directions, 1 month for final order) ensure revenue interests are protected while preventing undue delays.
Key Terms:
Alternate dispute resolution
Speedy resolution for foreign investors
DRP scrutiny
Strict timelines
Balance between taxpayer and revenue
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