9911796707
TMI BlogIndia-UK Double Taxation Avoidance Agreement (DTAA) - Suspension of Collection of taxes during Mutual Agreement Procedure-regardingX X X X Extracts X X X X X X X X Extracts X X X X ..... horities of India and UK have signed a Memorandum of Understanding (MOU) regarding suspension of collection of taxes during the pendency of MAP. In terms of the MOU, the collection of outstanding taxes in case of a taxpayer who is a resident of UK and whose request under MAP is under consideration of Competent Authorities, shall be kept in abeyance subject to furnishing of a bank guarantee of an amount equal to the amount of tax under dispute and interest accruing thereon as per the provisions of the Income-tax Act. A copy of the MOU is enclosed along with a model draft of bank guarantee to be furnished by the taxpayer. These are self explanatory. On receipt of a formal request in terms of this MOU from a taxpayer resident of UK, the Assessing Officer (AO) concerned is required to keep the enforcement of collection of outstanding taxes in abeyance in respect of such taxpayer who has— ( i ) invoked MAP through UK Competent Authority and same has been admitted by the Indian Competent Authority (a confirmation to this effect to be obtained from the Foreign Tax Division of Central Board of Direct Taxes); and ( ii ) furnished Bank guarantee in the model draft format for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) The Competent Authorities have arranged and desired to agree that with regard to amounts of taxes covered under Article 2 of the Convention and potentially payable to the Government of the United Kingdom, the Inland Revenue will suspend collection proceedings until putting into effect a mutually agreed disposition of the MAP proceedings concerning the amounts in question; and (B) The Competent Authorities have arranged and desired to agree that with regard to amounts of taxes covered under Article 2 of the Convention and potentially payable to the Government of India, the Assessing Officer will suspend collection until putting into effect a mutually agreed disposition of the MAP proceedings concerning the amounts in question. Now Therefore, in consideration of the premises, covenants and conditions herein contained and in implementing this arrangement : It is hereby agreed between the Competent Authorities as follows : (1) The tax authorities of India and the United Kingdom shall retain the right to demand security in appropriate cases, as deemed fit and necessary to avoid prejudicing the interests of their respective Governments. (2) In India, as security, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Competent Authority to the other at the conclusion of the Mutual Agreement Procedure. (9) In the event of a lapse of security under paragraph (2) or (3), the taxpayer shall be permitted to substitute another form of security under such paragraph, provided such substitution takes effect not less than 30 days prior to the lapse of the prior security. Such substitution will relieve the bank which provided the first Bank Guarantee from its obligations to the concerned Government of India or the United Kingdom under that first security. (10) The terms of this Memorandum may be reviewed by the Competent Authorities at anytime in the future upon the request of either party. ANNEXURE A To The President of India acting through and represented by [ Designation ], Income-tax Department, Ministry of Finance, Government of India, New Delhi Bank Guarantee as security for keeping the recovery of tax demand in abeyance during the pendency of a Mutual Agreement Procedure (MAP) [ Applicable in case of non-resident assessees, and Indian companies and other entities affiliated with United Kingdom companies, who have invoked the Mutual Agreement Procedure ] This deed of Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions of the agreements between the Assessee and the Government that may underlie this Bank Guarantee, the decision of the Government as to whether any amount should be paid out by the Bank to the Government hereunder shall be final and binding. (2) The Bank further agrees that the guarantee herein contained shall remain in full force and effect for a period of 3 years from the date hereof, i.e. , till . . . . . . [ Insert date ]; and further agrees to renew this guarantee for another 3 years on the following terms : the Bank will provide the Government with written notice no later than 60 days prior to the expiration date of this Bank Guarantee if the taxpayer has not renewed the agreements between the Assessee and the Bank that underlie this Bank Guarantee for an additional period of 3 years. If the Government does not receive a renewal of this Bank Guarantee or a substitute Bank Guarantee for the amounts of tax and interest in dispute prior to 30 days before the expiration date of this Bank Guarantee, the Government may instruct the Bank to pay the guaranteed amounts prior to expiration of the Bank Guarantee. Provided further that, notwithstanding any other things co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Bank from its such liability. The Bank hereby agrees and undertakes that any claim which the Bank may have against the Assessee shall be subject and subordinate to the prior payment and performance in full of all the obligations of the Bank hereunder and the Bank will not without prior written consent of the Government exercise any legal rights or remedies of any kind in respect of any such payment or performance so long as the obligations of the Bank hereunder remain owing and outstanding, regardless of the insolvency, liquidation or bankruptcy of the Assessee or otherwise howsoever. The Bank will not counter claim or set off against its liabilities to the Government hereunder any sum outstanding to the credit of the Government with it. (6) This Bank Guarantee shall be governed by and construed in accordance with the laws of the Republic of India (without regard to its principles of conflict of laws). (7) The Bank undertakes not to revoke this Guarantee during its currency except with the previous consent of the Government in writing. (8) Notwithstanding anything stated above, liability of the Bank under this guarantee is restricted to Rs. ......... [ Insert Amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
