I-T dept can now challenge DRP ruling

MUMBAI: The income tax department will soon be able to appeal against the orders of the Dispute Resolution Panel, the appellate body for disputes arising from transfer pricing and other issues related to taxing cross-border transactions.

The Budget proposes to amend sections 253 and 254 of the Income Tax Act to allow the department to move the Income Tax Appellate Tribunal if it feels aggrieved by a DRP order. The amendment will take effect in July 2012.

As of now, a DRP order is binding on the income tax department, while the taxpayer has the right to move the appellate tribunal.

“This is a significant amendment which will have a bearing on transfer pricing-related decisions,” said Sanjay Sanghvi, tax lawyer with Khaitan & Co.

The provisions for DRP were introduced in the Finance Act 2009 with a view to bring about speedy resolution of disputes in the case of international transactions particularly involving transfer pricing.