AMLEGALS is a full service law firm with offices in Ahmedabad (Gujarat), Mumbai (Maharashtra) and operations in 14 cities of India. The firm specializes in IBC, GST, Arbitrations, Contracts and Commercial Laws and focuses equally on Proactive Litigation and Advisory.
Mutual Agreements Procedure (MAP) is a model or mechanism available to taxpayers to resolve disputes that have arisen due to double taxation.
To print this article, all you need is to be registered or login on Mondaq.com.Mutual Agreements Procedure (MAP) is a model or mechanism available to taxpayers to resolve disputes that have arisen due to double taxation. When two countries enter into an agreement to avoid double taxation, it gives a clear pathway to the concerned authorities under MAP in those particular jurisdictions. Article 25 of the OECD Model Convention for the Avoidance of Double Taxation talks about assistance of Competent Authorities under MAP.
The foremost benefit of MAP is avoidance of double taxation. It is very rare that a case under MAP is not resolved. Study report states that many tax-related disputes have been resolved between April, 2014 and December, 2018 with the MAP. The MAP resolution, once accepted, eliminates the need for unnecessary litigation.
Prior to the amendment, Rule 44G of the Income Tax Rules, 1961 (the Rules), which deals with the application & procedure for giving effect to MAP agreement, provided only for the invocation of MAP i.e. any assessee aggrieved by the action of tax administrative of any foreign country, which attracts the provision of tax, which are not in accordance with tax convention/ tax treaties may make an application in Form No. 34F for invoking the MAP.
The Central Board of Direct Tax (CBDT) vide notification no 23/2020/F.No. 370142/31/2019-TPL dated 06.05.2020 has amended Rule 44G of the Rules and revised the Form 34F with respect to making application to Competent Authority for invoking MAP. The amendment in rule 44G now states:
The aforesaid amendment is in line with the recommendations provided under Base Erosion and Profit Shifting ("BEPS") Action Plan 14 i.e. Making Dispute Resolution Mechanisms More Effective.
OECD states that "The BEPS Action 14 Minimum Standard seeks to improve the resolution of tax-related disputes between jurisdictions. Inclusive Framework jurisdictions have committed to have their compliance with the minimum standard reviewed and monitored by its peers through a robust peer review process that seeks to increase efficiencies and improve the timeliness of the resolution of double taxation disputes."
MAP provides for a cost effective alternative to multiple litigation processes and such proceedings are binding on tax authorities in India. Major benefit of MAP is that it is not binding on the taxpayer and he can still continue with the domestic remedies available under the Act, i.e. it's not a mandatory remedy which tax payer needs to opt for, it's an additional remedy available to the taxpayer.
The new amended rules under Rule 44G of Income Tax Rules, 1962 clearly show the intention of the Indian government to encourage settlement and avoid unnecessary litigation, which would help in faster resolution than traditional litigation process.
This content is purely an academic analysis under "Legal intelligence series".
© Copyright A MLEGALS.
Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.
