- To Provide Speedy dispute resolution for investors, the Central Board of Direct Taxes (CBDT) has modified the norms for Mutual Agreement Procedures (MAP) by prescribing two years as the average time-frame for resolving cases.
What is MAP?
MAP is aimed at bringing in certainty via an alternative dispute resolution mechanism. It forms part of a tax treaty wherein competent authorities of respective countries enter into discussions to resolve the dispute that has arisen by any action of a tax authority that is not in accordance with the tax treaty. - Mutual Agreement Procedure (MAP) is an alternative process to resolve the disputes under the tax treaties. In this process, competent authorities of the two countries try to resolve the tax-disputes by doing discussion. Record says that around 600 tax-related disputes have been resolved between 1st April 2014 and 31st December 2018 with this process.
Earlier, there were two rules, 44G and 44H. 44G dealt with a case of an Indian resident taxpayer who was aggrieved by the action of the tax authority of another country, which was not in accordance with the tax treaty. 44H prescribed a case of reference from a competent authority of another country as regards action by the Indian income tax authority, wherein the competent authority of India called and examined the records to give his response to the competent authority of the other country in an effort to resolve the dispute. Now, CBDT has amended 44G and omitted 44H. - The Revised Income Tax rules states that “The competent authority in India shall endeavor to arrive at a mutually agreeable resolution of the tax disputes…in accordance with the agreement between India and the other country or specified territory within an average time period of twenty-four months,”.
- The rule also clarifies that if a resolution takes place through this process then it will be shared with the assessee, Who can express their response as to whether they accept it or not within 30 days. In the case of acceptance, they have to withdraw the filed appeal if any, and then they have to pay the applicable tax as per the resolution.
- it seems that the purpose of the MAP is to bring certainty through alternative dispute resolution mechanisms
The indicative timeframe of average 24 months to resolve the dispute under MAP is a highlight of the new rules which would encourage taxpayers to hope for a speedy dispute resolution mechanism. This is also in line with Action 14 of the BEPS Project prescribing a standard to endeavor to resolve MAP cases in 24 months,”.
The amended Form 34F now also covers the actions of officials which are not as per the terms of the agreements along with the details of the remedy and the documentary evidence. Sabnis further added that “While India remains embroiled in major international tax and transfer pricing cases, the new rules display the intent of the government to achieve certainty and endeavor to bring faster resolution in place of the long drawn Traditional litigation process.
Thanks & Regards
CA Pankaj Mishra Mishra