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Assistant Commissioner of Income Tax v. Shelf Drilling Ron Tappmeyer Limited

Civil Appeal · 2025 INSC 946Decided 8 Aug 2025
C.A. No.-010586-010589 - 2025 (arising out of SLP (Civil) Nos. 20569-20572 of 2023, with connected SLP (Civil) No. 25798 of 2024)
Mrs. Justice B.V. Nagarathna

Background

The respondents were foreign companies engaged in offshore oil and gas drilling who filed tax returns claiming a special presumptive-tax status. When the tax department proposed to vary their declared income, it had to first pass a "draft" assessment order and give the companies a chance to object before a Dispute Resolution Panel, before finalizing the assessment: a special procedure under Section 144C of the Income Tax Act, reserved for such "eligible assessees." The core legal dispute was whether the extra time this special procedure takes must fit inside the ordinary overall time limit for completing an assessment (Section 153), or whether it runs separately and adds time on top. The Bombay High Court had ruled in the companies' favour, holding the assessments in this case were time-barred; the tax department appealed to the Supreme Court.

Decision Breakdown

The two-judge bench could not agree. Justice Nagarathna held that the timelines under Section 144C must be read as falling within, not on top of, the overall limitation period under Section 153, meaning that once the draft assessment order was passed close to the outer deadline, no valid final order was possible, and the returns as originally filed had to stand; she therefore dismissed the tax department's appeals and upheld the High Court's ruling in the companies' favour. Justice Satish Chandra Sharma reached the opposite conclusion, holding that Section 144C's own timelines operate independently for the draft order/Dispute Resolution Panel process, and that reading them as swallowed by Section 153 would practically deny genuine assessees the benefit of that special procedure; he would have set aside the High Court's judgment and allowed the department's appeals. Because of this direct disagreement on how to interpret the law, the two judges jointly ordered, in a short "Order of the Court," that the matter be placed before the Chief Justice of India to constitute a fresh, appropriate bench to decide the question afresh, leaving the underlying legal issue formally unresolved for now.

Lesson Learnt

Even senior judges can genuinely disagree on how to interpret the same tax statute, and when that happens the Supreme Court does not simply average out or postpone the dispute. It refers the legal question to a differently constituted bench so a clear, binding answer can eventually be given. For taxpayers and tax authorities, this means the exact deadline rules for assessing income of certain "eligible assessees" (including many foreign businesses) remained unsettled as of this judgment and will need to be watched for a future ruling.

Official source (sci.gov.in)View Judgment (PDF)

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