Section 144C

Section 144C — the law in short

What the courts have decided on section 144C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• ACIT v Shelf Drilling Ron Tappmeyer Supreme CourtCuts both ways
  Has the Supreme Court settled whether the s.144C nine-month DRP process runs over and above the s.153 limitation?
  A two-judge bench heard the Revenue's appeals against the Bombay High Court in Shelf Drilling and delivered a split verdict. One judge held the s.144C timelines operate independently of s.153(3); the other held the whole s.144C procedure must finish within the s.153(3) period. The matter was referred to the Chief Justice of India for an appropriate bench, so there is no binding ratio.
• Genpact India P Ltd v DCIT High CourtHelps taxpayer
  My refund came out of an appeal effect order and was paid years late. Can the department refuse the extra interest by blaming its own portal?
  No. Where the refund arises from giving effect to an appellate order, the additional interest is statutory. It can be refused only in the one situation the Act allows, namely delay attributable to the assessee. A broken departmental portal, an amalgamation the department was told about, and the pandemic are not delays attributable to the assessee.
• GE Oil & Gas India P Ltd v Addl/Jt/Dy/Asst CIT High CourtCuts both waysValidity unconfirmed
  You are an eligible assessee with a transfer pricing adjustment and the faceless unit passed a final order instead of a draft. What relief will the court give?
  The order goes, but not always as a clean quashing. The Madras High Court set aside a final order passed three days after the show cause notice cum draft assessment order and directed that the impugned order be treated as a draft assessment order, leaving the assessee to work out its remedies against it under s.144B.
• Blackstone Capital Partners Singapore VI v ACIT High CourtHelps taxpayerUnder appeal
  I hold a valid TRC. Can the AO go behind it and reopen my assessment for lack of substance?
  No. A valid tax residency certificate is statutorily the only evidence required to be eligible for treaty benefit, and the Indian authorities cannot disregard a certificate issued by another State's tax authority. Since Article 13(4) of the India-Singapore treaty then protected the capital gains, no income chargeable to tax had escaped assessment and the s.148 notice was invalidated.
• Piramal Enterprises Ltd v Addl/Jt/Dy/Asst CIT High CourtHelps taxpayerValidity unconfirmed
  You asked for a video hearing after the show cause notice and the order came anyway. Is that fatal?
  Yes. Once you have responded to a show cause notice under s.144B and asked for a personal hearing, the request must be taken into account, and ordinarily it will not be refused. An order passed without dealing with that request is unsustainable, and the fact that a further remedy exists later in the process does not cure it.
• Pfizer Healthcare India P Ltd v JCIT High CourtHelps taxpayer
  The TPO's order was one day late. Does that kill the transfer pricing addition?
  Yes. The sixty days run backwards from the s.153 limitation date, excluding that date itself, so an order passed on the sixtieth day is out of time. The requirement is mandatory, not directory, limitation goes to jurisdiction, and an order a single day late is non est along with everything built on it.
• Turner International India Pvt Ltd v DCIT High CourtHelps taxpayer
  After the Tribunal remanded my transfer pricing case, the assessing officer went straight to a final assessment order without a draft order. Is that order valid?
  No. The Delhi High Court set aside the final assessment orders for assessment years 2007-08 and 2008-09, the demand notices and the penalty proceedings, because the assessing officer did not first pass a draft assessment order as section 144C(1) mandatorily requires. The Court held the point was no longer res integra, following Zuari Cement, whose affirmation by the Supreme Court through dismissal of the Revenue's special leave petition it noted, along with Vijay Television, ESPN Star Sports and International Air Transport Association. It rejected the Revenue's argument that the omission was a curable defect to be remedied by a remand.
• Sony Ericsson Mobile Communications India P Ltd v CIT High CourtCuts both waysUnder appeal
  The TPO says my advertising spend is higher than comparables and has added the excess as brand building for my foreign parent. Can he do that?
  Not by that route. The bright line test — treating advertising, marketing and promotion spend above a comparable's level as a separate transaction of brand building for the foreign associated enterprise — has no statutory mandate, and the parameters the Special Bench laid down in L.G. Electronics do not bind either side. The Delhi High Court set the Tribunal's approach aside as based on an erroneous legal standard and sent the matters back for fresh consideration.
• Shell India Markets P Ltd v ACIT High CourtHelps taxpayerValidity unconfirmed
  The TPO says we issued shares to our parent too cheaply. Can he tax the shortfall?
  No. The issue of equity to a non-resident parent is on capital account and gives rise to no income, and Chapter X is machinery for computing income at arm's length, not a charge. With no income there is nothing for the transfer pricing machinery to work on, and re-characterising the alleged shortfall as an interest-bearing loan has no statutory foundation.
• Vijay Television P Ltd v DRP High CourtHelps taxpayer
  The AO skipped the draft order and passed a final one. Can a corrigendum cure that?
  No. The procedure in s.144C is mandatory and the draft order is the gateway to the eligible assessee's right to go to the DRP. Once a final order is passed, with a demand notice and penalty proceedings, the AO is functus officio and a corrigendum cannot convert it into a draft; the defect is an absence of power, not a curable mistake.
• CIT v Agnity India Technologies P Ltd High CourtHelps taxpayer
  The Transfer Pricing Officer has put Infosys into my comparables. I am a small captive software unit working only for my parent - can I get it thrown out?
  Yes. The Delhi High Court upheld the Tribunal's exclusion of Infosys Technologies Ltd from the comparable set of a captive software developer. Infosys was a giant with Rs.9,028 crore of revenue against the assessee's Rs.16.09 crore, it bore full entrepreneurial risk, owned branded products, spent heavily on advertising and research, and delivered half its work onsite. The assessee was a risk-free captive doing only offshore contract development for its parent. With Infosys and Satyam out, the one surviving comparable gave 11.11%, below the assessee's own 17% margin. No substantial question of law arose and the Revenue's appeal was dismissed.
• CIT v Roca Bathroom Products High CourtCuts both ways
  Are proceedings before the Dispute Resolution Panel outside the ordinary limitation for completing an assessment?
  A Division Bench of the Madras High Court affirmed the single judge and held that the DRP process is not unfettered by limitation: the proceedings remain circumscribed by the limits of time fixed by s.153. It is the decision the Bombay High Court followed in Shelf Drilling, and it is the High Court line the Revenue has carried to the Supreme Court.
• Shelf Drilling Ron Tappmeyer v ACIT High CourtCuts both ways
  Does the DRP route under s.144C buy the Assessing Officer extra time, or must the whole assessment still finish within the s.153 limitation?
  Non-resident assessees argued that the overall limitation in s.153 continued to govern even where the DRP route was taken, so that a final order passed long after that date was time-barred. The Bombay High Court agreed, holding that s.153 is not excluded by s.144C and that the non obstante clause operates only to the limited extent of the one-month window for passing the final order after the Panel's directions.
• SHL (India) v DCIT High CourtCuts both ways
  If the Assessing Officer passes a final assessment order on an eligible assessee without first issuing a draft order, can s.292B save it?
  After a transfer pricing adjustment was proposed, the Assessing Officer passed a final order under s.143(3) without first forwarding a draft assessment order under s.144C(1). The Bombay High Court quashed the order, the demand notice and the penalty notice as void ab initio, and held that s.292B cannot confer jurisdiction that the officer never had.
• Sky High Appeal XLIII Leasing v ACIT ITATHelps taxpayer
  Can the officer apply the PPT to my India-Ireland treaty claim just because both countries signed the MLI?
  No, on this Tribunal's view. The India-Ireland treaty is a covered tax agreement under the MLI, but the Tribunal held that no MLI provision — including the PPT — can be given effect in India without a separate notification under s.90(1), and none had been issued. The treaty benefits on aircraft lease rentals were allowed, the Tribunal also holding the lessors had no permanent establishment in India and that Article 8 covers the rental of aircraft in international traffic.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.