Supreme Court Split Verdict: ACIT vs Shelf Drilling: Impact on Foreign Company Tax Deadlines

The Supreme Court’s Split Verdict in ACIT v. Shelf Drilling Ron Tappmeyer Ltd. Why It Matters for Foreign Companies and Tax Timelines

In early 2025, the Supreme Court of India delivered a split verdict in a tax dispute that could reshape how timelines for assessments work — especially for foreign companies operating in India.

The case, Assistant Commissioner of Income Tax v. Shelf Drilling Ron Tappmeyer Ltd., asked a deceptively simple question:

Do the time limits under Section 153(3) of the Income Tax Act also apply when an assessment is done under Section 144C — the route used for foreign companies and cases involving the Dispute Resolution Panel (DRP)?

Two judges looked at the same law and reached opposite conclusions. Now, a larger bench will decide.

What Was at Stake?

On the surface, this might look like a fight about technical deadlines. But it’s much bigger:

• It affects how long tax officers have to finish assessments for foreign companies — a group already dealing with complex cross-border tax rules.
• It will decide whether the general time limit in Section 153(3) can cut short or override the timelines built into Section 144C’s special DRP process.
• The ruling could influence how Indian courts handle conflicts between general legal rules and special procedures in other areas too.

The Two Sections in Question

Section 144C
This section creates a special path for certain taxpayers — especially foreign companies — where the Assessing Officer (AO) first issues a draft order. The taxpayer can file objections before the Dispute Resolution Panel (DRP). The DRP gives directions, and then the AO issues the final order. The section sets its own steps and implied timelines.

Section 153(3)
This is a general rule for assessment deadlines. It tells the AO how long they have to complete an assessment after certain events (like when a higher court sends the case back). The usual limit is 12 months, with some exceptions.

The legal puzzle: Does Section 144C’s special process replace Section 153(3)’s general deadline, or do both apply together?

The Facts Behind the Case

Shelf Drilling Ron Tappmeyer Ltd., a foreign offshore drilling company, filed its 2014–15 returns. The tax officer rejected its books and issued a draft assessment order under Section 144C. The DRP process followed, and the assessment was completed — but the company challenged whether the AO missed the legal deadline by not following Section 153(3).

The issue travelled up the court system and landed before the Supreme Court.

What the Judges Said

Justice B.V. Nagarathna — Section 153(3) Does Apply

She said Section 153(3) is the general law on assessment timelines, meant to prevent open-ended tax proceedings. Unless Section 144C clearly says it replaces Section 153, the default time limit should still apply.
Her view protects taxpayers from lengthy uncertainty.

Justice Satish Chandra Sharma — Section 144C Stands Alone

He said Section 144C is a self-contained system with its own built-in timeline and stages. Applying Section 153 on top would disrupt how the DRP process was designed to work.
His approach gives tax officers more flexibility in complex cases.

Because they disagreed, the case now goes to a larger bench for a final ruling.

Why This Split Matters

1. Certainty vs. Flexibility
   • If Section 153 applies, taxpayers get quicker closure.
   • If Section 144C stands alone, the process could take longer — but may allow for more thorough examination in complicated international cases.
2. Impact on the DRP
   • The DRP was created to reduce tax litigation and give technical oversight.
   • This decision will shape how much control the DRP process has over assessment timelines.
3. Ripple Effects Beyond Tax Law
   • The ruling will influence how courts treat “special” laws vs. “general” laws in other regulatory fields.

What Could Happen Next

The larger bench will need to answer:

• Does Section 144C have enough legal force to override Section 153’s deadlines?
• If both sections apply, which one wins when their timelines clash?
• What happens if the AO follows 144C’s process but misses the 153 deadline?

Practical Tips for Taxpayers and Advisors

• Track timelines carefully — until the larger bench rules, assume either view could prevail.
• Keep all DRP records — these could be crucial if you need to prove a deadline was missed.
• Act quickly — don’t wait until deadlines are in dispute; use writ petitions or appeals if needed.
• Plan for cross-border evidence delays — start gathering documents early, especially in transfer pricing or treaty cases.

The Bigger Picture

This case isn’t just about two sections of the Income Tax Act. It’s about how far the law should go to ensure finality for taxpayers versus giving tax officers enough time to investigate complex cases.

Deadlines are more than just dates — they’re tools that shape behaviour. A strict timeline pushes for efficiency; a flexible one allows for thoroughness. The Supreme Court’s final decision will decide where India strikes that balance.