Section 144C of ITA, 1961 : Section 144C: Reference To Dispute Resolution Panel

Explanation using Example

Imagine a software company in India, "Tech Innovations Pvt. Ltd.", which has transactions with its associated enterprise in the United States. The Indian Tax Authority suspects that the transfer prices for these transactions have been manipulated to reduce taxable income in India. Consequently, the Transfer Pricing Officer (TPO) proposes adjustments to the company's taxable income.

Under Section 144C of the Income-tax Act, 1961, the Assessing Officer (AO) drafts a proposed order reflecting these adjustments and forwards it to Tech Innovations Pvt. Ltd., as it is an "eligible assessee" being affected by transfer pricing adjustments.

Tech Innovations Pvt. Ltd. receives this draft order on April 1st and now has until April 30th to:

• Accept the adjustments, in which case the AO will finalize the assessment based on the draft order; or
• Object to the adjustments by filing their objections with both the Dispute Resolution Panel (DRP) and the AO within the 30-day period.

If Tech Innovations Pvt. Ltd. chooses to object, the DRP will consider their objections and the draft order, along with any other relevant materials, and may issue directions to the AO. The AO must then complete the assessment in accordance with the DRP's directions.

This procedure allows Tech Innovations Pvt. Ltd. an opportunity to resolve disputes related to transfer pricing adjustments in a streamlined manner, potentially avoiding prolonged litigation.