Dispute Resolution Panel

The venturing of international businesses into the Indian market implies more sources of collection of tax in the country. However, as the businesses grow, so should the capabilities of the Revenue department in resolving disputes.

The Finance Bill 2009 brought in an additional option to assist in the litigation relating to transfer pricing matters called the Dispute Resolution Panel (DRP). The DRP is an Alternative Dispute Resolution (ADR) mechanism for resolving disputes related to Transfer Pricing in International Transactions. This Panel has been set up with a view to providing speedy disposal of cases in a fair and just manner.

The venturing of international businesses into the Indian market implies more sources of collection of tax in the country. However, as the businesses grow, so should the capabilities of the Revenue department in resolving disputes. The Finance Bill 2009 brought in an additional option to assist in the litigation relating to transfer pricing matters called the Dispute Resolution Panel (DRP).

The DRP is an Alternative Dispute Resolution (ADR) mechanism for resolving disputes related to Transfer Pricing in International Transactions. This Panel has been set up with a view to providing speedy disposal of cases in a fair and just manner. 

Eligible assessee

The assessees who can opt for resolution under the Dispute Resolution Panel are foreign companies and those assessees against whom an unfavourable order has been passed by a Transfer Pricing Officer.

Headquarters of the Dispute Resolution Panel

The panel shall have its headquarters at Delhi, Mumbai and Bengaluru with jurisdiction as prescribed. 

Constitution of the Dispute Resolution Panel

The Dispute Resolution Panel is a body constituted by the Central Board of Direct Taxes (CBDT) and is a collegium consisting of three Commissioners of Income-tax.

When can resolution be sought under DRP?

The Assessing Officer is required to forward a draft of his assessment order to the assessee where he intends to pass an order that is unfavourable to the assessee. The eligible assessee then is given a time limit of 30 days within which he has to decide whether to accept the order or to object to the same. 

If the assessee decides to object to the order, he can file his objections with either the Assessing Officer or the DRP. If the objections are filed with the DRP, they will consider the case, provide the assessee with an opportunity of being heard and then direct the Assessing Officer based on their assessment. Such directions given by the DRP are binding on the Assessing Officer. 

Matters to be considered by DRP

The DRP can make any enquiries in relation to the assessment and also direct any income-tax authority to make an enquiry and forward the results. The Panel is required to consider the following before coming to a conclusion or issuing directions:

• Draft order
• Objections filed by the assessee
• Evidence furnished by the assessee
• Report of any authority (like Assessing Offer, Transfer Pricing Officer or Valuation Officer)
• Records relating to the draft order
• Evidence collected 
• Result of enquiries made.

The time limit for issuing directions and passing an order

The DRP is required to issue directions to the Assessing Officer within 9 months from the end of the month in which the assessee receives the draft order. Once the Assessing Officer receives such directions, he shall have to complete his assessment in accordance with such directions within 1 month from the end of the month in which he receives such directions.

No opportunity of being heard will be provided to the assessee during this time.  If the assessee does not file any objections against the draft order within the prescribed period of 30 days or if he accepts the draft order, then the assessing officer is required to complete his assessment within 1 month from the end of the month where either such 30-day period ends or assessee accepts the draft order, as applicable.