Central Board of Direct Taxes has notified rules to regulate the procedure of the Dispute Resolution Panel (DRP) constituted under section 144C of the Income Tax Act, 1961 inserted by the Finance Act 2009. The rules came into effect from 20th November 2009. DRPs will be constituted at Delhi, Mumbai, Ahmedabad, Kolkata, Chennai, Hyderabad, Bengaluru and Pune.

Any foreign company, or any domestic company with transfer pricing issues, in whose case the income-tax assessing officer proposes to make any variation in the income or loss returned, may apply within a month of receiving the draft assessment order before the DRP for appropriate remedy by way of direction to the assessing officer. The direction will be binding on the assessing officer but the taxpayer will be at liberty to appeal against the assessment order incorporating directions of DRP before the Income Tax Appellate Tribunal (ITAT).

The Dispute Resolution Panel will be a collegium comprising of three Commissioners of Income Tax. The mechanism is investor-friendly and is also expected to reduce taxpayer grievance and litigation.

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