INTRODUCTION:
> Any country suffering disputes with respect to Transfer Pricing adjustments, Existence of a Permanent Establishment, Attribution of profits to a Permanent Establishment, Characterisation or re-characterisation of an income or expense lead, on being result taken, by legal or administrative authorities as per domestic laws underprivileged (deprived) either/both of treaty partners for having access or recourse to applicability of Double Taxation Avoidance Agreement (DTAA).
> The global concerns lead international organizations like OECD Countries, G-20 Nations etc. endeavoured to create a platform wherein legal backings are being conceptualized and Implemented by all the countries for smoothening as well as curtailment of administrative time and complexity at the same time lowering of cost while creating transference into legal podiums.
> India has a large network of Double Taxation Avoidance Agreements (‘DTAAs’ or ‘Tax Treaties’, hereinafter) with various countries. The DTAAs, inter-alia, provide rules and mechanisms for allocation of taxing rights amongst the treaty partners; avoidance of economic and juridical double taxation; and resolution of taxation not in accordance with the treaty through the Mutual Agreement Procedure (‘MAP’, hereinafter).
> Rule 44G of the Income-tax Rules, 1962 has been notified recently vide G.S.R.282 (E) dated 6thMay, 2020. This rule substitutes the previous rules 44G and 44H, which dealt with the same issue of implementation of MAP. The rule provides, inter-alia, the processes to be followed by the competent authorities (‘CA’ or ‘CAs’ hereinafter) of India till the resolution of the issue of taxation not in accordance with the treaty and the processes to be followed by the field authorities to implement the outcome of the MAP. The new rule is applicable w.e.f 6th May, 2020 and, accordingly, applies to all MAP cases pending with the CAs of India as on 6th May, 2020.
Mutual Agreement Procedure (MAP) Guidance ISSUD BY CBDT following OECD Recommendations-CRUX
| Sr. no. | index | sub-points |
| 1 | What is Mutual Agreement Procedures (herein after referred to as MAP)? | |
| 2 | Global scenario and India’s position | |
| 3 | Applicability | |
| 4(i) | Map Guidance/2020
Part-I: Introduction and Basic Information |
I Mutual agreement procedure (MAP)
II India’s Tax Treaties and or DTAAs III Making a MAP Application in India IV The MAP process V Timeframe for Resolving and Implementing MAP cases |
| 4(II) | Part-II: Access or Denial of Access to MAP | I Access to MAP
(a) Unilateral Advance pricing Agreements (b) Safe Harbour (c) Orders of Income Tax Appellate Tribunal ii Denial of Access to Map (a) Delayed MAP Application (b) Taxpayer’s Objection Not Justified (c) Incomplete MAP Applications/ Documents/Information (d) Income-tax Settlement Commission (e) Authority for Advance Rulings |
| 4(III) | Part-III: Technical Issues | I. Downward Adjustment
II. Resolution of Recurring Issues III. Interest and Penalties IV. Secondary Adjustments V. Bilateral & Multilateral APAs VI. Suspension of Collection of Taxes during the Pendency of MAP VII. Adjustment of taxes paid in pursuance of demand raised by an order under Section 201 of the Income-tax Act |
| 4(IV) | Part-IV: Implementation of MAP Outcome | I. Implementation of MAP
II. Timelines III. Information to CAs of India |
| 5 | Conclusion | |
| 6 | References and Resources | |
I. What is Mutual Agreement Procedures (MAP)?
> Effective Mutual Agreement Procedures is part of a broader project to improve the functioning of existing international tax dispute procedures and to develop supplementary dispute resolution mechanisms unilaterally, Bi-laterally or multi-laterally.
> Mutual Agreement Procedure (MAP) is an alternate tax dispute resolution mechanism available to the taxpayers under the DTAAs for resolving disputes giving rise to double taxation or taxation not in accordance with DTAAs. MAP can help in relieving double taxation either fully or partially. Almost all DTAAs entered into by India have the MAP Article and it provides an additional dispute resolution mechanism to taxpayers in addition to those available under the domestic laws of India. A taxpayer can request for assistance under MAP regardless of the remedies provided under the Indian domestic law.
> A MAP request can be made by a taxpayer when it considers that the actions of the tax authorities of one or both of the treaty partners results or will result in taxation not in accordance with the relevant DTAA. MAP cases involve cross-border double taxation that could either be juridical double taxation (same income taxed twice in the hands of the same entity in two different countries) or economic double taxation (same income taxed in the hands of two separate entities, who are Associated Enterprises, in two different countries).
> The MAP article in tax conventions allows designated representatives (the “competent authorities”) from the governments of the contracting states to interact with the intent to resolve international tax disputes. These disputes involve cases of double taxation (juridical and economic) as well as inconsistencies in the interpretation and application of a convention.
> Since most probable occurrences of double taxation are dealt with automatically in tax conventions through tax credits, exemptions, or the determination of taxing rights of the contacting states, the majority of MAP cases are situations where the taxation of an individual or entity is unclear.
> A noteworthy point is that the MAP article in most conventions does not compel competent authorities actually to reach an agreement and resolve their tax disputes. They are obliged only to use their best endeavours to reach an agreement. Unfortunately, on occasion competent authorities are unable to come to an agreement. Reasons for unresolved double taxation range from restrictions imposed by domestic law on the tax administration’s ability to compromise to stalemates on economic issues such as valuations.
II. Global Scenario and India’s Position
Global Scenario:
> Manual on Effective Mutual Agreement Procedures (MEMAP)-February 2007 were issued for clarity over MAP concept and for better understanding.
> The Action 14 final report on “Making Dispute Resolution More Effective”, of the Base Erosion and Profit Shifting (‘BEPS’, hereinafter) project of the G-20 and OECD countries, had recommended that all countries that implement the BEPS package of measures must publish comprehensive MAP guidance.
> Some conventions currently include arbitration clauses in their MAP articles. However since these procedures are new, there has been limited guidance and experience in their use. Even the EU Arbitration Convention that first entered into force in 1995 has only had a few actual cases concluded. This lack of experience may change in the near future if more cases line up for arbitration and the OECD considers changes to the OECD Model Tax Convention to update guidance on supplementary dispute resolution mechanisms for MAP.
India’s Position:
> Clarifications on Rollback Provisions of Advance Pricing Agreement Scheme was introduced vide circular No. 10/2015 dated 10th June, 2015 inter-alia provided that the Advance Pricing Agreement provisions were introduced in 2012 through insertion of sections 92CC and 92CD in the Income-tax Act, 1961 by the Finance Act, 2012. Subsequently, the Advance Pricing Agreement Scheme was notified vide S.O. 2005 (E), dated 30/8/2012, thereby inserting Rules 10F to 10T and Rule 44GA in the Income-tax Rules, 1962.
> Rollback provisions in the APA Scheme were introduced through subsection (9A) inserted in section 92CC by the Finance (No. 2) Act, 2014 and the relevant rules, namely, Rules 10MA and 10RA, have been notified recently vide S.O. 758(E) dated 14th March, 2015 and S.O. 915(E) dated 1st April, 2015. Authority even provided FAQs and answers for such roll back provisions to provide transparency and clarity over said concepts or provisions.
> Based on the recommendations of OECD and G-20 Countries, Action 14 final report that all countries that implement the BEPS package of measures must publish comprehensive MAP guidance, CBDT (India) issued guidance vide MAP Guidance /2020 dated 7th August, 2020 for the benefit of taxpayers, tax practitioners, tax authorities, and CAs of India and of treaty partners.
MAP guidance is presented in the following four parts:
- Part A: Introduction and Basic Information;
- Part B: Access and Denial of Access to MAP;
- Part C: Technical Issues; and
- Part D: Implementation of MAP outcomes.
III. Applicability
> Concept of MAP was originally envisaged in 1995 by OECD countries.
> Applicant should be treaty partner.
> Actions of the tax authorities of one or both of the treaty partners results or will result in taxation not in accordance with the relevant DTAA.
> Application to be initiated and to be applied in a country wherein treaty partner is Resident or having nationality or domicile.
> Transaction Applicability:
(a) Transfer pricing adjustments
(b) Existence of a Permanent Establishment
(c) Attribution of profits to a Permanent Establishment
(d) Characterisation or re-characterisation of an income or expense
IV. MAP Guidance/2020-Part I-Introduction and Basic Information
I. Mutual Agreement Procedure
> MAP is alternate tax dispute resolution mechanism besides domestic laws.
> For dispute rise to double taxation or taxation not in accordance with DTAAs.
> Help in relieving double taxation fully or partially
> MAP facilitates Competent Authorities (herein after to be referred as CSs) between or among treaty partners discussions and negotiations.
> Two CAs from India designated by department of finance
Mr. Rashmi Das -Joint Secretary, FT & TR-I for North America and Europe cases and
Mr. Rajat Bansal Joint Secretary, FT & TR-II for location except America and Europe cases
> CAs of India are independent of tax authority directly supervised through CBDT.
> MAP cases involve only cross-border double taxation that could either be juridical double taxation (same income taxed twice in the hands of the same entity in two different countries) or economic double taxation (same income taxed in the hands of two separate entities, who are Associated Enterprises, in two different countries).
> Time Limit for Making an Application
(a) Most of the Treaties- 3 years
(b) Some Treaties- 3 years or less than 3 years
(c) As per the recommendation of Action 14 Final Report of BEPS issued by OECD, time limit to be 3 years.
(d) India through introducing mechanism of MLI i.e. Multilateral Instrument (w.e.f. 1st October 2019), all deficient tax treaties which did not have time limit 3 years have been modified.
II. India’s Tax Treaties or DTAAs
> India is having treaties, agreements, arrangements or extradition treaties with:
| Comprehensive Agreements | 95 Countries |
| Intergovernmental agreement to improve International Tax compliance & to Implement FATCA | 1 country i.e. USA |
| Limited Agreements | 8 Countries |
| Limited Multilateral Agreement | 6 Countries |
| Other Agreements | 3 Countries |
| Specified Associations Agreements | 1 Country i.e. Taipei |
| Synthesised Text | 22 Countries |
| Tax Information Exchange Agreement (TIEA) | 20 Countries |
> All comprehensive agreement contain Article 25 for MAP in UN/OECD Model Tax Convention.
> These tax treaties (read with section 90 or 90A of IT Act, 1961) constitute legal base to apply MAP.
> Apply to MAP only if the tax authorities of the other treaty partner make an adjustment or take an action that results or will result in double taxation or taxation not in accordance with the relevant tax treaty.
III. Making an MAP Application in India
| Who Apply | To Whom | Why | Form | Legal Base |
| Resident/ National/ Domicile of India | CA of India based on Jurisdictional authority | Action of Authority not in accordance with relevant tax treaty | Form No 34F | Rule 44G |
Rule 44G:
‘44G (1): Where an assessee, being a resident of India, is aggrieved by any action of the tax authorities of any country or specified territory outside India for the reason that, according to him, such action is not in accordance with the terms of agreement with such other country or specified territory, he may make an application to the Competent Authority in India seeking to invoke the mutual agreement procedure, if provided in such agreement, in Form No. 34F.’
Information and details required in form 34F
a) Name of the Applicant; b) Permanent Account Number (PAN)/Aadhar Number; c) Circle/Ward; d) Assessment Year(s); e) Previous Year(s); f) Office Address & Telephone Number; g) Residential Address & Telephone Number (if applicable); h) Status; i) Name and Designation of Tax Authority in the other country or specified territory (Treaty Partner); j) Date of the notice or order giving rise to the action; k) Is the order/action of the Tax Authority of the Treaty Partner not in accordance with the agreement? If so, the reasons thereof; and l) Details of remedy sought in the other country or specified territory, if any, with documentary evidence.
Documents required-Form 34F-apart from information and details
> Copy of notice or order giving rise to the action not in accordance with the relevant DTAAs;
> Any document(s) as support for above notice or order;
> Any document(s) as evidence of remedy sought in the other country or specified territory; and
> Any other document that the applicant may want to submit or the CAs of India may ask for.
If an Associated Enterprise or related party of an Indian taxpayer submits a MAP application
> CA of its country or specified territory of residence (treaty partner) must expeditiously intimate CAs of India based on location about their acceptance of MAP Application.
> in respect of any order/action of the tax authorities of India or of the tax authorities of such treaty partner
IV. THE MAP PROCESS
BILATERAL MAP PROCESS
(a) IF map APPLICATION ACCEPTED-steps
> Intimate to CA of relevant treaty partner (herein after referred to as Other CA)
> In written communication like notification or invocation
> With reason why taxation not in accordance with the relevant DTAA
> Also request to Other CA to provide her written position
> On the order/action of the tax authorities of her country.
(B) IF map APPLICATION not ACCEPTED-steps
> Write to other CA reason for such non-acceptance
> Request other CA for her views and comments of her (notification/bilateral consultation) through position papers.
> Examine position papers by Indian CA and come to negotiating position.
> Indian CA may ask for further clarification from other CA
CONCLUSIONS:
> Both CA try & negotiate a resolution to dispute.
> If required meet in person or on teleconference, video conference, or email.
Situation No 1:
Successful Resolution:
> Formalise mutual agreement at the earliest
> Intimate Indian Tax payer by CA of Jurisdiction about terms and conditions of resolutions.
> Acceptance or rejection of the MAP resolution is the prerogative of the Indian taxpayer.
> In both situations MAP case is said to be resolved.
Situation No 2:
Non-Successful Resolution:
- Close the MAP case as unresolved
- Intimation to Indian Tax Payer about the non-resolution of the dispute.
Situation No 1 & 2:
In a reverse situation, where the MAP application has been accepted by the CAs of treaty partners, some of the processes described above would flow in the reverse direction.
MULTILATERAL MAP PROCESS
> Multilateral MAP cases shall involve all the above processes (like exchange of position papers, negotiations, finalization of mutual agreements, etc.) on a multilateral basis amongst the CAs concerned.
> executed in the form of a series of parallel bilateral MAP cases
> The CAs of India can agree to accept a multilateral MAP request if all the following conditions are fulfilled:
> All the participating countries or specified territories have DTAAs with each other;
> The transaction or issue in dispute has a bearing on all the treaty partners, directly or indirectly, and non-resolution of the dispute would result in taxation not in accordance with the relevant DTAAs; and
> The CAs of all the participating countries or specified territories agree to negotiate a multilateral MAP.
V. TIMEFRAME FOR RESOLVING AND IMPLEMENTING MAP CASES
> India is committed to endeavour to resolve MAP cases in 24 months as minimum standards recommended in the BEPS Action 14 final report.
> It’s not commitment but Endeavour as all case cannot be resolved
> The period of 24 months is to be computed from the “Start Date” of a MAP case.
> Mostly MAP application is initiated by Non-Resident taxpayer before CA of other countries or territories.
> “Start Date” is determined by the other CAs in accordance with the MAP Statistics Reporting Framework.
> Late intimation of MAP “Start Date” results in delaying resolutions.
> The process and timeframes to implement such outcomes are contained in rule 44G of the Income-tax Rules, 1962. The rule, inter-alia, provides the following:
a. How to apply for a MAP;
b. Whom to apply to for a MAP;
c. The role of the CAs of India in making an endeavour to resolve tax disputes under the MAP;
d. Timeframes and processes after the resolution of a MAP case; and
e. Role of Indian taxpayer and Indian tax authorities after the resolution of a MAP case.
PART B
Access and Denial of Access to MAP
I. ACCESS TO MAP
India provide wide and easy access to Indian tax payer as well as tax payer of foreign country if being aggrieved on grounds of cases/situations if they result in taxation not in accordance with the relevant DTAAs:
a) Transfer pricing adjustments;
b) Determination of existence of a Permanent Establishment;
c) Attribution of profits to Permanent Establishments, whether admitted or not by the taxpayer;
d) Characterisation or re-characterisation of an item of expense or payment as a taxable expense or payment (like Royalty or Fee for Technical Services (FTS) or Interest); and
e) Characterisation or re-characterisation of an item of receipt as a taxable income (like Royalty or Fee for Technical Services (FTS) or Interest).
> India shall provide access to MAP even in a situation where the Indian tax authorities apply domestic anti-abuse provisions.
> Domestic Anti-Abuse Provisions consist of Unilateral Advance Pricing Agreements, Safe Harbour Rules, Order of Income Tax Appellate Tribunal
> Where obligation to deduct tax at source on the payment made by an Indian entity to a non-resident entity, MAP access will be provided but relevant discussion will be carried out only when assessment order will be passed and relevant tax payer considers that the assessment order results or would result in taxation not in accordance with the relevant DTAA.
There are a few circumstances where India would provide access to MAP but the CAs of India would not negotiate any other outcome than what has already been achieved in such circumstances. The circumstances are the following:
(A) Unilateral Advance Pricing Agreements:
> Where an Indian or foreign taxpayer enters into a unilateral Advance Pricing Agreement (‘UAPA’, hereinafter) with the Central Board of Direct Taxes (CBDT),
> CAs of the other countries or specified territories may accept MAP applications from their taxpayers in respect of such UAPAs if any decision of the tax authorities of such other countries disturbs the income declared in the returns filed in pursuance of the UAPAs, and notify the CAs of India.
> Indian CA would allow MAP but will not change terms and conditions of the UAPA.
> Rather would request other CA to provide correlative relief.
(i) UAPA Application and Entered into Status:
- If Application of UAPA is under consideration and negotiation, both CA may accept MAP but will not process such MAP cases till the time UAPA is entered into.
- If UAPA entered into:
a. CA of India would not change terms and condition of UAPA
b. Rather would request to other CA correlative relief.
- If UAPA not entered into:
CAs of India would start processing such MAP cases, as all other MAP cases.
(II) Safe Harbour:
> Where an Indian or foreign taxpayer applies safe harbour provisions, as applicable on its international transactions
> and the return of income is accepted by the tax authorities of India,
> the CAs of the other countries or specified territories may accept MAP applications from their taxpayers in respect of any decision of the tax authorities of such other countries
> If such decision disturbs the returns filed in pursuance of such safe harbour provisions, and notify the CAs of India.
> CA of India would allow access to MAP but would not change ALP of International Transaction covered under Safe Harbour Provisions.
> CA of India would request the CAs of the treaty partners to provide correlative relief.
(III) Order of Income tax Appellate Tribunal:
> Income Tax Appellate Tribunal (‘ITAT’, hereinafter) in India passes an order in respect of the same disputes that are also being examined under MAP.
> MAP and domestic remedy proceedings can be availed by the taxpayers simultaneously
> ITAT is an independent statutory appellate body, which is outside the administrative jurisdiction of the Indian tax authorities; and is the highest fact-finding body on tax matters. CAs in India shall not deviate from the orders of the ITAT for the relevant year where the dispute is decided on merits.
> In such cases the CA of India would request the CAs of the treaty partners to provide correlative relief, if required. Such MAP cases shall be closed as having been resolved by a domestic remedy.
> If the order of the ITAT does not resolve the disputes but only sets them aside to be adjudicated afresh
> Access to MAP would be provided again after the fresh adjudication by tax authorities, if requested for by the relevant taxpayers.
II. denial of ACCESS TO MAP
Access to MAP denied in following cases:
a) Delayed MAP Applications:
> If the taxpayers make a MAP application after the expiry of the time period specified in the Article relating to MAP, CAs of India would not provide access to MAP.
> Minimum Time period in most of treaty entered into by India is three (3) years from first notification of the order/action of tax authorities that results or will result in taxation not in accordance with the relevant DTAAs.
> Few DTAA do not have minimum time limit, efforts are made for 3 years minimum period as recommended by Action 14 of OECD regarding BEPS.
b) Taxpayer’s Objection Not Justified
> If objection raised by the taxpayer not justified, CA can deny the application.
> CA of India discuss the case with both tax payers but such discussion should not be interpreted as consultation as to how to resolve the case.
c) Incomplete MAP Applications/ Documents/ Information
> Form no 34F it should be completed in all respects.
> If found some errors or defects by CA of India, Indian tax payer has to remedy errors or defects and should provide information and documents within reasonable time.
> No time defined in rule 44G but has to give reasonable time taxpayer like
i. For defects or errors-30 days
ii. For information and documents-90 days
> Time limit can be extended by CA of India depends on facts or circumstances.
d) Income-tax Settlement Commission
> The ITSC is an independent statutory dispute resolution body independent from the audit and examination functions of tax authorities.
> Voluntary process and a taxpayer has to apply for a settlement of its disput
> The CAs of India shall not provide access to MAP to an Indian taxpayer who has already obtained a settlement order and such order covers the issues that are sought to be included in the MAP application.
> The CAs of India shall also not provide access to MAP to an Indian taxpayer or admit a case under MAP where the CAs of the treaty partners have accepted a MAP application by a taxpayer of their country or specified territory if either of such taxpayer’s settlement application has been admitted by the ITSC and the settlement matter is under examination by the ITSC
> However, if the ITSC refuses to issue a settlement order, or issues an order without making a settlement, or the proceedings before the ITSC abate,and then the tax authorities take action which in the opinion of the taxpayer results or will result in taxation not in accordance with the relevant DTAAs, the CAs of India shall provide access to MAP to an Indian taxpayer or admit a case under MAP where the CAs of the treaty partners have accepted a MAP application by a taxpayer of their country or specified territory.
E) Authority for Advance Ruling (AAR)
> Taxpayer applies to AAR for giving advance rulings on questions/issues brought before it by a taxpayer.
> AAR is an independent statutory dispute prevention body Independent from the audit and examination functions of tax authorities.
> AAR examines all aspects of the question(s)/issue(s) brought before it and pronounces its advance ruling
> AAR if pronounced then it is binding on both taxpayer & tax authorities.
> The CAs of India shall not provide access to MAP to an Indian taxpayer who has already obtained an advance ruling from the AAR and such advance ruling covers the issues that are sought to be included in the MAP application.
> CAs of India shall refuse to admit a case under MAP where the CAs of the treaty partners have accepted a MAP application by a taxpayer of their country or specified territory who (or its associated enterprise in India or the relevant party to the transaction on which the advance ruling is sought) has already obtained an advance ruling from the AAR and such advance ruling covers the issues that have been included in the MAP application accepted by the CAs of the treaty partners.
> In addition to the situations and particular cases at (a) to (e) above, it is clarified that no MAP access shall be provided in respect of issues that are purely governed by India’s domestic law and arise due to the implementation of India’s domestic legal provisions.
PART-C: Technical Issues
I. Downward Adjustment
> CAs of India cannot go below the returned income In respect of transfer pricing
> plain reading of the provisions of sub-section (3) of section 92 of the Income-tax Act, 1961 makes it clear that if the application of the arm’s length price of an international transaction results in reducing the income chargeable to tax or increasing the loss, as computed on the basis of books of account maintained, then the provisions of the said section 92 shall not apply.
> The CAs of India have to adhere to this provision while negotiating transfer pricing MAP cases involving adjustments made by Indian tax authorities.
> However, in respect of MAP cases involving adjustments made by tax authorities of a treaty partner, the Indian CA may go below the returned income of the Indian taxpayer to implement the MAP in full measure in accordance with treaty obligations.
II. Resolution of Recurring Issues
> CAs of India may resolve recurring issues on the same principles, as adopted in a prior MAP resolution.
> Cannot solve recurring issue in advance of an order/action by the tax authority.
> Don’t have power to prevent the tax authorities from making an order that is not in conformity with prior MAP resolutions in case of the same taxpayer and on the same issues.
III. Interest and Penalties
> In most of the disputes on the quantum of income that are resolved under MAP, there are consequential issues of interest and penalty which CA of India does not handle.
> Hence issue of interest and penalty is to be taken care by domestic laws.
IV. Secondary Adjustment
> India has a provision to make secondary adjustments in respect of cases where the primary transfer pricing adjustment has been made in financial year 2016-17 or thereafter hence CA of India is obligated to do so.
V. Bilateral and Multi-Lateral APAs:
> India has a well-established APA Program that includes unilateral, bilateral and multilateral APAs.
> In respect of issues for which a bilateral or multilateral APA application has already been filed and accepted, MAP applications on the same issues for the same years should not be made by the taxpayers.
> If such MAP applications are made either before the CAs of India or the CAs of treaty partners, the CAs of India shall consult with their counterparts and not admit such MAP applications.
> However, if a bilateral or multilateral APA application fails to result in an Agreement for any reason, then a MAP application on the same issue and for the same years can be made either before the CAs of India or the CAs of treaty partners and the same may be accepted by the CAs of India if it satisfies all conditions of a MAP application.
VI. Suspension of Collection of Taxes during the Pendency of MAP
> With a limited number of treaty partners, India has entered into a Memorandum of Understanding (MoU), under the ambit of the MAP Article that provides for keeping the collection of taxes in a case under suspension during the pendency of MAP in that case.
> Taxpayers have to adhere to the terms and conditions mentioned in the MoU.
> MAP cases with countries where no such MoU exists in the DTAAs, will be governed by domestic legislations
VI. Adjustment of taxes paid in pursuance of demand raised by an order under Section 201 of the Income-tax Act
Payment of taxes (excluding interest) made as a result of demand arising out of an order passed under section 201 of the Income-tax Act on the Indian taxpayer (payer entity) may be allowed to be adjusted against the tax liability of the non-resident taxpayer (payee entity) in the event of resolution of MAP in the case of such non-resident taxpayer for the relevant issues and relevant years.
PART D: IMPLEMENTATION OF MAP OUTCOMES
1. Implementation of MAP
> MAP cases in which an order of the ITAT (for the same assessment year that has been resolved under MAP) comes to the knowledge of the CAs of India after the MAP has been resolved or is pronounced after the MAP has been resolved but not yet implemented.
> In respect of the above cases/situations, the MAP outcomes cannot be implemented and the CAs of India would inform their counterparts about the outcomes of the ITAT order and request them to provide correlative relief for the adjustments sustained by the ITAT, if any.
II. Timeliness
> The new rule 44G provides clear timing for implementing a MAP resolution is 30 days (from the date of receipt of a communication from the CAs of India) to convey its acceptance (mandatory) of the MAP resolution and to submit evidence of withdrawal of domestic appeals.
> If failed, MAP resolutions is unimplemented.
> Same way AO given 1 month to give effect MAP resolution from the date of receiving the letter of CA of India
> While intimating the Pr. CCIT concerned the details of resolution agreed under the MAP, the CAs of India shall mark a copy of their letter to the Assessing Officer, her controlling officer, the CIT/PCIT and CCIT concerned, and to the taxpayer to ensure expeditious implementation.
III. Information to CAs of India
> The Assessing Officer, in addition to sending a copy of the order giving effect to the MAP resolution to the CA of India having jurisdiction over the case,
> Must also provide information regarding the amount/date of payment of taxes by the taxpayer or amount/date of issue of refund to the taxpayer (as the case may be), withdrawal of appeals filed by the tax authorities, and any other relevant details.
5. CONCLUSION
The MAP guidance, as above, may be adhered and referred to by taxpayers, tax practitioners, tax authorities in India, and CAs of India. If any element of the MAP guidance comes in conflict with the domestic legislation, rules, instructions, and circulars in India or with the DTAAs entered into by India, the provisions of such domestic legislation, rules, instructions, and circulars or the DTAAs, as the case may be, shall prevail.
6. RESOURCES & REFERENCES
| 1 | MANUAL ON EFFECTIVE MUTUAL AGREEMENT PROCEDURES(MEMAP)-February 2007 version |
| 2 | Clarifications on Rollback Provisions of Advance Pricing Agreement Scheme vide circular no. 10/2015 issued by CBDT |
| 3 | India-Dispute-Resolution-Profile-MAP-1st March 2019 |
| 4 | Mutual Agreement Procedure (MAP) Guidance issued by CBDT-MAP Guidance/2020 dated 7th August, 2020 |
| 5 | Link: https://www.oecd.org/india/ |
| 6 | Link:https://www.incometaxindia.gov.in/Documents/MAP-GUIDANCE-7th-August-2020.pdf, https://www.oecd.org/ctp/38061910.pdf |
| 7 | https://www.pwc.in/assets/pdfs/publications-2011/pwc_india_-_mutual_agreement_procedure_answering_queries-130112.pdf |
https://www.incometaxindia.gov.in/pages/international-taxation/dtaa.aspx
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