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TMI BlogMutual Agreement Procedure (MAP) GuidanceX X X X Extracts X X X X X X X X Extracts X X X X ..... r)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. 3. Though erstwhile rules 44G and 44H were in existence for a number of years, detailed information regarding MAP processes and guidance on issues related to such processes were not available in a comprehensive and consolidated manner. 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. 4. In view of the above, the Board has decided to issue this MAP guidance for the benefit of taxpayers, tax practitioners, tax authorities, and CAs of India and of treaty partners. 5. The MAP guidance is presented in the following four parts: Part A: Introduction and Basic Information; Part B: Access and Denial of Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manent Establishment * Characterisation or re-characterisation of an income or expense II. India's Tax Treaties or DTAAs India has a large network of tax treaties, almost all of which contain a MAP Article based on the provisions of Article 25 of the UN/OECD Model Tax Convention. These tax treaties (read with section 90 or 90A of the Income-tax Act, 1961) constitute the legal basis for taxpayers to apply for a MAP and for CAs to discuss and negotiate a MAP case with the endeavour of finding a resolution to the dispute. It is important for taxpayers to refer to the text of the relevant tax treaty itself to understand the conditions for applying for MAP under that tax treaty. India's tax treaties are available at www.incometaxindia.gov.in All the DTAAs entered into by India, which contain a MAP Article as mentioned above, require that a taxpayer of either treaty partner approaches the CA of its country of residence to request for a MAP 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. In most of the tax treaties of India, the ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm No. 34F also requires information about the name of the country or specified territory, the action of the tax authorities of which have aggrieved the Applicant. In item (k) above, the Applicant should provide the facts of the case; the analysis of issue(s) that are sought to be resolved under the MAP; and the reasons why the action taken by the tax authorities are not in accordance with the relevant DTAAs. In addition to the above information and details, Form No. 34F requires the following documents to be furnished at the time of making the application: * Copy of notice or order giving rise to the action not in accordance with the relevant DTAAs; * Any document(s) as support for considering the order/action of the tax authorities of the treaty partners to be not in accordance with the relevant DTAAs; * 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 before the CA of its country or specified territory of residence (treaty partner), in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanged views and come to a common understanding, the decision on the MAP application shall be communicated by the CA of India having jurisdiction over the case to the Indian taxpayer who had made the MAP application. As has been indicated above, once a MAP application is accepted, the CAs shall exchange views. In most cases, the views shall be communicated through position papers. Once a position paper is received from the other CA, the CA of India having jurisdiction over the case would examine the same and come to a negotiating position. She may also provide her own written comments to the other CA or ask for further clarification from her. After exchange of positions and comments, both the CAs would try and negotiate a resolution to the dispute at hand. They may meet in person or negotiate remotely through teleconference, video conference, or email. If both the CAs successfully resolve a MAP case, they would formalise a mutual agreement amongst themselves at the earliest possible. The CA of India having jurisdiction over the case would intimate the Indian taxpayer who had applied for MAP about the terms and conditions of the resolution. Acceptance or rejection of the MAP resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CAs of India receive intimation of MAP cases from the CAs of the treaty partners much beyond the "Start Date". This results in delaying the endeavour to resolve such MAP cases. India is fully committed to implement the outcomes of each and every MAP case. It is the endeavour of India to implement each MAP outcome expeditiously. 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: * How to apply for a MAP; * Whom to apply to for a MAP; * The role of the CAs of India in making an endeavour to resolve tax disputes under the MAP; * Timeframes and processes after the resolution of a MAP case; and * Role of Indian taxpayer and Indian tax authorities after the resolution of a MAP case. The rule can be accessed in the Income-tax Rules, 1962 that is available on our website www.incometaxindia.gov.in It can also be accessed at the following link: https://www.incometaxindia.gov.in/news/notification23 2020.pdf Part B Access and Denial of Access to MAP I. Access to MAP India provides wide and easy access to MAP to Indian taxpayers if they are aggrieved by an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), the 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. The latter would allow access to MAP but would not change the terms and conditions of the UAPA. Rather, they would request the CAs of the treaty partners to provide correlative relief. In respect of UAPA applications under consideration and negotiation, actions of tax authorities in India or overseas during such pendency of UAPA applications could give rise to taxation not in accordance with the relevant D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if requested for by the relevant taxpayers. II. Denial of Access to MAP The CAs of India can deny access to MAP in some situations or in certain particular cases. Such situations and particular cases are as follows: a) Delayed MAP Applications - If the taxpayers make a MAP application to the CAs of India or to the CAs of the treaty partners after the expiry of the time period specified in the Article relating to MAP(corresponding to Article 25(1) second sentence of the OECD Model Tax Convention) of the relevant DTAAs, the CAs of India would not provide access to MAP. This time period in most treaties is within three years from the first notification of the order/action of tax authorities that results or will result in taxation not in accordance with the relevant DTAAs. India is committed to providing this 3-year time period and almost all the DTAAs entered into by India has this time period. There are very few DTAAs where this minimum time period is missing, and efforts are on to amend those DTAAs to provide for the same. b) Taxpayer's Objection Not Justified - If the CAs of India come to a conclusion that the objection raised by the taxpayer on the action taken by tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y dispute resolution body. The process of settlement of disputes by ITSC is independent from the audit and examination functions of tax authorities. It is a voluntary process and a taxpayer has to apply for a settlement of its disputes. Once the application is accepted, the ITSC examines all aspects of the dispute and comes out with a settlement order. If the ITSC issues a settlement order, the same is binding on both the taxpayer and the tax authorities. The CAs of India shall not provide access to MAP to an Indian taxpayer who has already obtained a settlement order from the ITSC and such order covers the issues that are sought to be included in the MAP application. Similarly, the CAs of India shall not 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) has already obtained a settlement order from the ITSC and such order covers the issues that have been included in the MAP application accepted by the CAs of the treaty partners. The CAs of India shall also not provide access to MAP to an Indian taxpayer or admit a case under MAP where the CAs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 application (or that ofthe relevant party to the transaction on which the advance ruling is sought) has been admitted by the AAR and the question(s)/issue(s) specified in the application is under examination by the AAR. 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 The CAs of India can negotiate a MAP case with their counterparts and withdraw all or part of the adjustments made by tax authorities in India. However, the CAs of India cannot go below the returned income, as the same is expressly prohibited in Indian domestic law. In respect of transfer pricing cases, a 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&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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. The taxes whose collection can be suspended are those that have arisen from the dispute that is under discussion in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter of the CA of India having jurisdiction over the case providing details of the resolution) for giving effect to the MAP resolution. These timelines are expected to quicken the MAP implementation process and make it more efficient and effective. 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. 6. 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, rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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