In Writ Petition No. 2340 of 2021 -BOM HC- Bombay High Court rules Time Limit under Section 153 Income Tax Act prevails over Section 144C; accepts Shelf Drilling Ron Tappmeyer Limited's filed Return of Income due to time-barred Assessment order
Justice K.R. Shriram & Justice Firdosh P. Pooniwalla [04-08-2023]

Read Order: Shelf Drilling Ron Tappmeyer Limited v. Assistant Commissioner of Income Tax, (International Taxation) & Ors.

Chahat Varma

New Delhi, August 9, 2023: The Bombay High Court has ruled in favour of Shelf Drilling Ron Tappmeyer Limited (petitioner), accepting their filed Return of Income. The Court's decision was based on the fact that the final assessment order in the case was time-barred, leading to the conclusion that the petitioner's submitted Return of Income should be acknowledged.

The brief background of the case was that the petitioner, a company incorporated in the Cayman Islands and headquartered in Dubai, was engaged in shallow water drilling for the oil and gas industry. Through an Asset Purchase Agreement, the petitioner acquired the rig named J.T. Angel, which had been in operation under a contract between Oil and Natural Gas Corporation (ONGC) and Transocean Drilling Services (India) Pvt. Ltd. This contract continued until July 2013, after which the rig was utilized under a nomination contract for drilling services to ONGC from August 2013 to November 2013. Following major repairs and refurbishment at Pipavav Defence and Offshore Engineering Company Limited between December 2013 and March 2014, the rig resumed performing drilling services for ONGC until May 2017. The agreement with ONGC was entered through Shelf Drilling Offshore Services (India) Pvt. Ltd. (SDOSIPL), which sub-contracted the job work to the petitioner. For Assessment Year 2014-15, the petitioner filed its Return of Income, declaring a loss of Rs. 120,18,44,672. The loss was determined by choosing not to be assessed based on the presumptive taxation provisions under Section 44BB (3) of the Income Tax Act, and instead, computing its income under the regular provisions of the Act. Challenging the impugned order dated September 28, 2021, issued by Assistant Commissioner of Income Tax, (International Taxation), the petitioner filed this petition raising various grounds of challenge.

The bench of Justice K.R. Shriram and Justice Firdosh P. Pooniwalla acknowledged that Section 144C of the Act constituted a self-contained code of assessment, incorporating time limits at each stage of the envisaged procedure. However, the bench emphasized that whenever the legislative intention was to extend time limits, such provisions were explicitly laid out in Section 153 of the Act. The bench affirmed that upon careful examination of the language used in both Section 144C and Section 153, it was not tenable to conclude that the provisions of Section 153 were excluded from the application of Section 144C.

The bench held that time limit prescribed under Section 153 of the Act would prevail over and above the assessment time limit prescribed under Section 144C of the Act.

The bench opined that the assessments should be concluded within the prescribed twelve-month period outlined in Section 153(3) of the Act, especially when cases were remanded to the AO by the Income Tax Appellate Tribunal (ITAT) under Section 254 of the Act. Within this stipulated twelve-month timeframe, the AO was tasked with completing the entire procedure mandated under Section 144C, culminating in the issuance of a final assessment order. The AO was required to promptly issue an order as envisaged in Section 144C (1) of the Act, without waiting for reminders, as was the case here. The twelve-month period mentioned in Section 153(3) commenced from the financial year's end in which the Principal Commissioner received the Section 254 order from the ITAT. Hence, the AO was expected to initiate steps to release the final order in accordance with Sub-Section (13) of Section 144C within the allocated 12-month period.

In light of these considerations, the bench concluded that given the prevailing circumstances, as the time limit for the final assessment order was time-barred in the present case, the petitioner's submitted Return of Income should be accepted.