CBDT issues guidance note on MAP, stipulates cases where ITAT has passed order

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Indian authorities will not deviate from the resolution order passed by statutory appellate body ITAT in cross-border tax disputes which are undergoing simultaneous resolution through mutual agreement procedure (MAP), the income tax department has said. MAP is an alternative dispute resolution process under the tax treaties, under which competent authorities of two countries enter into discussions to resolve tax related disputes. As many as 600 tax disputes have been resolved under MAP between April 1, 2014 to December 31, 2018.

The Central Board of Direct Taxes (CBDT) has come out with a guidance note on MAP which also specifies cases or situations in which India will provide access to MAP.

Tax disputes relating to transfer pricing adjustments, determination of existence of a permanent establishment, attribution of profits to permanent establishments, characterisation or re-characterisation of an expense or receipt as a taxable expense or taxable income would be covered under MAP if they result in taxation not in accordance with the relevant DTAAs.

The guidance note also said that India shall provide access to MAP even in a situation where the Indian tax authorities apply domestic anti-abuse provisions. The CBDT also said that in case of orders of Income Tax Appellate Tribunal (ITAT), the Competent Authorities (CAs) of India shall not deviate from the orders of the ITAT for the relevant year where the dispute is decided on merits.

It said that since MAP and domestic remedy proceedings can be availed by the taxpayers simultaneously, there could be instances where the ITAT in India passes an order in respect of the same disputes that are also being examined under MAP.

“Since the 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, the CAs in India shall not deviate from the orders of the ITAT for the relevant year where the dispute is decided on merits,” the CBDT guidance note said.

Such MAP cases shall be closed as having been resolved by a domestic remedy.

“However, if the order of the ITAT does not resolve the disputes but only sets them aside to be adjudicated afresh, then access to MAP would be provided again after the fresh adjudication by tax authorities, if requested for by the relevant taxpayers,” it added.

In May, the government amended Income Tax rules to state that Indian authorities would “endeavour” to resolve disputes under MAP within a timeframe of 24 months, a move aimed at speedy settlement of cases of MNCs which have opted the alternative dispute resolution process.

Nangia & Co LLP Partner Shailesh Kumar said Indian tax authorities have apparently shown their intention to provide a speedy resolution to taxpayers opting for MAP by appointment of two dedicated offices for taking up MAP applications and negotiations.

“With these guidelines, more taxpayers may be inclined to opt for MAP to resolve their tax disputes in India. The guidelines not only provide for resolution under Bilateral MAP applications, but also Multilateral MAP applications, where a cross border transactions involve more than two tax treaties in a Multinational Enterprise set-up,” Kumar added.

AKM Global Tax Partner Amit Maheshwari said the MAP guidance lays down the procedure for accessing MAP, clarification on technical issues and implementation process.

“This would help taxpayers and competent authorities of India as well as treaty partner countries to understand India’s position,” he added.

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