Section 144C of the Act provides that in case of certain eligible assessees, viz., foreign companies and any person in whose case transfer pricing adjustments have been made under sub-section (3) of section 92CA of the Act, the Assessing Officer (AO) is required to forward a draft assessment order to the eligible assessee, if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee. Such eligible assessee with respect to such variation may file his objection to the DRP, a collegium of three Principal Commissioners or Commissioners of Income-tax. DRP has nine months to pass directions which are binding on the AO.

It is proposed that the provisions of section 144C of the Act may be suitably amended to:-

(A) include cases, where the AO proposes to make any variation which is prejudicial to the interest of the assessee, within the ambit of section 144C;

(B) expand the scope of the said section by defining eligible assessee as a non-resident not being a company, or a foreign company.

This amendment will take effect from 1st April, 2020. Thus, if the AO proposes to make any variation after this date, in case of eligible assessee, which is prejudicial to the interest of the assessee, the above provision shall be applicable.

[Clause 70]

Extract of Relevant Clauses of Finance Bill, 2020

Clause 70

“Clause 70 of the Bill seeks to amend section 144C of the Income-tax Act relating to reference to dispute resolution panel.

Sub-section (1) of the said section provides that the Assessing Officer is required to forward a draft of the proposed order of assessment to the eligible assessee, if he proposes to make on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.

It is proposed to amend the said sub-section so as to enable the eligible assessee to file his objection to dispute resolution panel where the Assessing Officer proposes to make any variation which is prejudicial to the interest of such assessee.

Clause (b) of sub-section (15) of the said section defines ‘eligible assessee’ for the purposes of the said section.

It is also proposed to substitute sub-clause (ii) of the said clause so as to include a non-resident, not being a company, or a foreign company under the definition of ‘eligible assessee’.

These amendments will take effect from 1st April, 2020.”

Extract of Relevant Amendment Proposed by Finance Bill, 2020

70. In section 144C of the Income-tax Act,–

In section 144C of the Income-tax Act,–

(a) in sub-section (1), the words “in the income or loss returned” shall be omitted;

(b) in sub-section (15), in clause (b), for sub-clause (ii), the following sub-clause shall be substituted, namely:–

“(ii) any non-resident not being a company, or any foreign company.”.

Source- Finance Bill 2020 / Union Budget 2020-21

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