Where a transfer pricing assessment proposes an adjustment to a taxpayer’s income, the Dispute Resolution Panel (DRP) provides an alternative mechanism for challenging the proposed variation before the final assessment order is passed. The process offers a defined statutory timeline, but taxpayers must understand both its procedural requirements and the scope of the Panel’s powers before choosing this route.
Who Can Approach the Panel?
The DRP mechanism is available to an eligible assessee, which includes a foreign company and a taxpayer whose case involves a proposed variation arising from an order of the Transfer Pricing Officer.
In such cases, the Assessing Officer is required to issue a draft assessment order proposing the relevant variation. The taxpayer can then accept the proposed variation or file objections before the DRP. <Cite refs={["turn956384search1","turn956384search6"]}/>
The Timeline and the Decision Point
An eligible assessee must file objections within thirty days of receiving the draft assessment order. The objections must be submitted both to the DRP and to the Assessing Officer. If the taxpayer neither accepts the variations nor files objections within the prescribed period, the Assessing Officer proceeds to complete the assessment on the basis of the draft order.
This short window makes advance preparation important. Taxpayers should assess potential objections during the transfer pricing proceedings rather than waiting until the draft order is received.
Powers of the Panel
The DRP can confirm, reduce or enhance the variations proposed in the draft assessment order. Its directions are binding on the Assessing Officer, who must complete the assessment in conformity with them.
Importantly, the Panel is not restricted to reducing the proposed adjustment. It can also enhance a variation, including by considering matters arising from the assessment proceedings even if the taxpayer has not raised them in its objections. The Panel cannot, however, set aside a proposed variation or direct a further enquiry for the purpose of passing the assessment order. An opportunity of being heard must be provided where the proposed directions are prejudicial to the taxpayer or the Revenue. <Cite refs={["turn956384search1","turn956384search3"]}/>
Time Limits and Further Appeals
The DRP is required to issue its directions within nine months from the end of the month in which the draft assessment order is forwarded to the eligible assessee. The Assessing Officer must ordinarily pass the final assessment order within one month from the end of the month in which the directions are received.
A taxpayer dissatisfied with the final assessment order may appeal to the Income Tax Appellate Tribunal. A taxpayer who does not pursue the DRP route follows the applicable regular appellate procedure instead. <Cite refs={["turn956384search3","turn956384search1"]}/>
Preparing Effective Objections
Objections should address each proposed variation separately, setting out the relevant facts, legal position and supporting evidence. Benchmarking analysis, intercompany agreements, functional and risk assessments, and contemporaneous transfer pricing documentation should be organised to support each ground.
A well-prepared record is particularly important because the Panel considers the draft order, objections, evidence and relevant assessment records. Taxpayers should therefore ensure that material submissions and supporting explanations are properly placed on record during the earlier proceedings.
Conclusion
The DRP provides an alternative route for resolving eligible transfer pricing disputes within a defined statutory framework. However, its power to enhance proposed variations makes it important to assess the strengths and risks of the case before filing objections. Taxpayers should prepare their position well before the draft order is received, keeping the statutory deadline and the potential scope of the Panel’s directions in view.
