To focus on ‘DRP’ hinted at in, – .Supplement to Machinery vs. Substantive Provision- Analytical Study

Hitachi High Technologies Singapore Pte Ltd. Vs. DCIT (ITAT Delhi), ITA Nos. 2683 to 2688/DEL/2015, Dated: 17 September, 2019



10. In the re-adjudication proceedings, the DRP framed its order on 27.03.2015 pursuant to the directions of the Tribunal but final assessment order was passed by the Assessing Officer on 30.03.2015 framed u/s 143(3) r.w.s 144C(13)/254 of the Act.

11. The appellant is before us against this order.

12. The ld. counsel for the assessee argued vehemently and bifurcated his submissions into four parts, which needs to be adjudicated by us and for the sake of convenience, the same are categorised as under:

i) While re-adjudicating on the directions of the ITAT, the DRP has exceeded the directions.

ii) In framing the final assessment order, the Assessing Officer has put the assessee in a more worse position than it was before filing appeal.

iii) There is no PE of the appellant

iv) Since there is no PE of the appellant, no profit can be attributed.

13. We will now address the issues raised by the ld. counsel for the assessee one by one.





12. In Testeels Ltd. v. N.M. Desai, Conciliation Officer AIR 1970 Guj. 1, a Full Bench of Gujarat High Court speaking through P.N. Bhagwati, J. (as his Lordship then was) made a lucid enunciation of law on the subject in the following words:–

“The necessity of giving reasons flows as a necessary corollary from the rule of law which constitutes one of the basic principles of the Indian constitutional set up. The administrative authorities having a duty to act judicially cannot therefore decide on considerations of policy or expediency. They must decide the matter solely on the facts of the particular case, solely on the material before them and apart from any extraneous considerations by applying pre-existing legal norms to factual situations. Now the necessity of giving reasons is an important safeguard to ensure observance of the duty to act judicially. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and excludes or, at any rate, minimises arbitrariness in the decision making process. Another reason which compels making of such an order is based on the power of judicial review which is possessed by the high court under article 226 and the supreme court under article 32 of the constitution. These courts have the power under the said provisions to quash by certiorari a quasi-judicial order made by an administrative officer and this power of review can be effectively exercised only if the order is a speaking order. In the absence of any reasons in support of the order, the said courts cannot examine the correctness of the order under review. The high court and the Supreme Court would be powerless to interfere so as to keep the administrative officer within the limits of the law. THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THERE WOULD BE INSIDIOUS, ENCOURAGEMENT TO ARBITRARINESS AND CAPRICE. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SUBJECT TO JUDICIAL SCRUTINY AND CORRECTION.

11. In view of the above discussion, we are of the view that the order of the Learned DRP is not sustainable. It is set aside on remitted back to the Learned DRP for re-adjudication. All the appeals of the assessee are allowed for statistical purposes.”


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24. Further, we find that the provisions of section 251(2)of the Act are different from the provisions of section 144C(8) & (11) of the Act. The ld. CIT(A) is an appellate authority, whereas the DRP is a continuation of the assessment proceedings where the DRP acts as a corrective mechanism to guide the Assessing Officer for making error free assessments. The role of a DRP, in our humble understanding, is to assist the Assessing Officer in determining the correct income so that correct tax may be levied.


Points need to mainly focusing on:

A) In the cited itat (Del) case the issue was centered on the tax treaty concept of ‘PE’, being the ‘source of income’ (‘business profits’). The tax treaty implications, therefore, have had to be obligingly kept in focus.

B) More significantly, that is a case in which it is the order of the ‘DRP’ – its merits and demerits- the itat had to necessarily consider in handing out its decision.

C) The expected (wished for!) role of ‘DRP’, – as candidly emphasised by the HC court, – is to act as a corrective mechanism to guide the assessing officer for making error free assessments. Premised so, is not, with no two views possible, a matter for a serious re-consideration- that is, how far the avowed basic objective of section 144C – as inserted way back in 2009; now to be rtw the connected amendment of sec 246A (see clause (ba) of sub-sec (1)-happens to be, or shows signs of being, accomplished in days to come?!

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January 2021