Dispute Resolution Panel (DRP) for Transfer Pricing in India | CA Nainit Savla

Dispute Resolution Panel (DRP) for Transfer Pricing

Section 144C DRP Objections, Hearings and Directions for TP and International Tax Disputes

The Dispute Resolution Panel (DRP) is a collegium of three Principal Commissioners (or Commissioners) of Income Tax established under Section 144C of the Income Tax Act to provide expedited dispute resolution for eligible assesses -- foreign companies, and Indian companies with international transactions -- who receive a draft assessment order with a proposed variation (TP adjustment or other addition). The DRP was introduced to provide a faster, expert forum for resolving transfer pricing and international tax disputes without the lengthy CIT(A) process.

When a draft assessment order is received, the taxpayer must choose within 30 days whether to file an objection with the DRP or proceed to ITAT after final assessment. Filing with DRP is generally advantageous for TP disputes -- DRP commissioners have technical TP expertise, and DRP proceedings allow the taxpayer to submit additional comparables, economic analysis, and legal precedents not previously submitted to the TPO. Our team provides complete DRP representation from objection filing through the hearing and directions stage.

DRP Process Under Section 144C

Step	Action	Timeline
1. Draft Assessment Order	AO passes draft order with proposed TP/other additions; served on taxpayer	After TPO order
2. DRP Objection Filing	Taxpayer files objections (Form 35A) with the DRP electronically	Within 30 days of draft order
3. DRP Proceedings	DRP issues notices, calls for information, conducts hearings with AO and taxpayer	After filing of objections
4. DRP Directions	DRP issues binding directions to the AO specifying the proper ALP / additions	Within 9 months of DRP application
5. Final Assessment Order	AO passes final assessment order per DRP directions; demand notice issued	Within 1 month of DRP directions
6. ITAT Appeal	Taxpayer (or AO with PCIT approval) can appeal to ITAT against final order	Within 60 days of final order

Our DRP Services

DRP Objection Drafting

Comprehensive DRP objection documents covering every ground of addition in the draft assessment order -- TP adjustments, PE attribution, treaty applicability, withholding tax issues -- with supporting analysis and precedents.

Additional Comparables Submission

Refreshed benchmarking with updated comparables data and additional comparables not submitted to the TPO -- strengthening the arm's length case with more recent and functionally superior comparables.

Economic Analysis for DRP

Preparation of economic analysis papers for DRP -- characterisation analysis, functional adjustments, working capital adjustments, extraordinary items analysis, and economic comparability analysis of the TPO's proposed comparables.

DRP Hearing Representation

Oral representation at DRP hearings -- presenting arguments on TP methodology, comparables selection, functional characterisation, and legal precedents to the DRP bench.

DRP Direction Analysis

Detailed analysis of DRP directions to identify grounds for ITAT appeal, and computation of tax and interest impact of the DRP-directed adjustments for cash flow planning.

Joint DRP and MAP Strategy

Advisory on running DRP and MAP (Mutual Agreement Procedure) proceedings simultaneously for cross-border TP disputes involving double taxation risk in treaty partner countries.

Frequently Asked Questions

Who is eligible to file an objection with the DRP?

DRP objections can be filed by "eligible assesses" -- defined under Section 144C as (a) a foreign company, or (b) any person in whose case a TP adjustment has been proposed, or (c) a person in whose case any variation proposed by the AO is in connection with an international transaction or specified domestic transaction. If the taxpayer is a domestic company with no international transactions and no TP issues, they cannot file with the DRP -- they must appeal to the CIT(A). The choice between DRP and CIT(A) must be made within 30 days of receiving the draft assessment order -- it cannot be changed after the deadline.

Can a taxpayer submit new evidence at the DRP stage?

Yes. The DRP can admit new evidence, additional comparables, and updated benchmarking data not submitted during TPO proceedings. This is one of the significant advantages of the DRP over proceeding directly to ITAT -- the taxpayer gets a second opportunity to present strengthened economic analysis and additional factual evidence before an expert forum. The DRP has the power to confirm, reduce, or enhance any proposed variation, and to consider any matter arising out of the assessment proceedings, even if not specifically raised in the objections.

Are DRP directions binding on the taxpayer?

DRP directions are binding on the Assessing Officer -- the AO must pass the final assessment order in conformity with the DRP directions. However, DRP directions are NOT binding on the taxpayer -- the taxpayer can still appeal the final assessment order (which incorporates the DRP directions) to the ITAT. Similarly, the AO (with the approval of the PCIT) can also appeal DRP directions to the ITAT. This means that a favourable DRP direction for the taxpayer can still be challenged by the tax department at ITAT -- conversely, an unfavourable DRP direction can still be challenged by the taxpayer.

Received a Draft Assessment Order? File Your DRP Objection Within 30 Days.

Our TP team drafts comprehensive DRP objections with updated comparables, economic analysis, and legal precedents -- and represents you at DRP hearings.