Assessment order under section 172(4) attracts DRP procedure; treaty protection depends on residence-based tax liability and effective management.

A summary assessment under section 172(4) was treated as an assessment order for DRP purposes, so the draft order procedure under section 144C applied to an eligible foreign company. The time-limit references in the provision were read as illustrative to preserve its operation, and the failure to issue a draft order was not sustained. On treaty protection, freight received through a Danish commercial manager in a representative capacity was held to belong to the Danish enterprise, whose effective management and residence-based liability to tax satisfied the Indo-Danish treaty test. Actual taxation of that specific freight in Denmark was not required, so the receipts were not taxable in India.

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Issues: (i) Whether an order made under section 172(4) of the Income-tax Act, 1961 is an assessment order so as to attract the draft order procedure under section 144C; (ii) Whether the freight receipts were taxable in India or entitled to protection under the Indo-Danish tax treaty.

Issue (i): Whether an order made under section 172(4) of the Income-tax Act, 1961 is an assessment order so as to attract the draft order procedure under section 144C.

Analysis: Section 172(4) contemplates a summary assessment of income, but it still computes taxable income and therefore answers the description of an assessment order. The scheme of section 144C applies to eligible assessees, including foreign companies, and the absence of an express cross-reference to section 172(4) did not justify excluding such orders from the DRP mechanism. The statutory time-limit difficulty was treated as a matter of construction, with the references to sections 153 and 153B read as illustrative to preserve the working of the provision. On the peculiar facts, the failure to issue a draft order could not be sustained, and the matter would otherwise call for a remand.

Conclusion: Yes. An order under section 172(4) is an assessment order for this purpose, and section 144C was held applicable.

Issue (ii): Whether the freight receipts were taxable in India or entitled to protection under the Indo-Danish tax treaty.

Analysis: The freight was received by the Danish commercial manager in a representative capacity for the Danish shipping enterprise, which bore the entrepreneurial risks and was the beneficial owner of the income. The treaty residence test under Article 4 turned on liability to tax on a global basis by reason of residence or similar connecting factors, not on proof that the particular income was actually taxed in Denmark. The evidence supported the finding that the enterprise was effectively managed from Denmark, and the authorities below erred in insisting on actual taxation of the freight in Denmark or in treating the intermediary as the owner of the income.

Conclusion: No. The freight receipts were not taxable in India and treaty protection was available.

Final Conclusion: The impugned tax demands were set aside and the appeal succeeded in full.

Ratio Decidendi: A summary assessment under section 172(4) is an assessment order capable of attracting the DRP procedure for an eligible foreign company, and treaty protection under a residence article depends on liability to tax and effective management in the residence state, not on proof of actual taxation of the specific income there.

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