SC delivers split verdict on income tax appeal involving foreign firm, CJI may refer to larger bench

The case involved foreign drilling companies, including Shelf Drilling Ron Tappmeyer Ltd.

The dispute centred on whether the time period provided under Section 144C for the issuance of draft assessment orders should be treated independently or subsumed within the overall limitation period prescribed under Section 153 for completing assessments.

Justice Nagarathna rejected the appeal of the revenue department and concluded that the high court was correct in holding that assessment proceedings initiated under Section 144C in these cases were time-barred, as the final orders could not be passed within the extended deadline of September 30, 2021.

However, Justice Sharma allowed the Revenue’s appeals, holding that Sections 144C and 153 operate in a coordinated manner and must be interpreted harmoniously.

He noted that rigid interpretation of timelines under Section 153 could result in a denial of fair opportunity to the assessees and breach the principles of natural justice.

The pleas arose from a batch of petitions filed by non-resident assessees before the Bombay High Court, which were allowed via a common judgment dated August 4, 2023.

The assessees, engaged in offshore drilling activities, had opted out of the presumptive taxation scheme under Section 44BB for the assessment year (AY) 2014–15 and declared significant losses in their returns.

The Revenue’s challenge to these decisions brought the matter before the apex court.

With inputs from PTI