CBDT instruction on use of technical expert’s opinion in assessment proceedings

In a recent ruling, in the case of Bharti Cellular, the Supreme Court (SC) acknowledged the role of technical experts while deciding on tax issues arising from complex technical matters. The SC, accordingly, directed the Central Board of Direct Taxes (CBDT) to issue directions to tax authorities, including transfer pricing officers, to take opinion of technical experts and bring on record technical evidence in cases involving complex technical issues and substantial revenue. Pursuant to the above, the CBDT has issued Instruction No. 5/2011 [F. No. 225/61/2011 – IT(A-11)] dated 30 March 2011 (Instruction). This Tax Alert summarizes the above Instruction.

 

The Instruction is an important development in the tax examination and assessment procedure as it recognizes the role of technical experts while dealing with complex and difficult technical issues that arise in taxation, especially on transfer pricing matters. While the Instruction directs the tax authorities to rely on technical experts in appropriate circumstances, one would expect that taxpayers would also be allowed to rely on technical experts to present their evidence or rebut the findings of the tax authorities’ experts, if necessary.