Financial Daily from THE HINDU group of publications
Tuesday, May 10, 2005
Financial Daily from THE HINDU group of publications Tuesday, May 10, 2005 |
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Industry & Economy
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Taxation Double taxation avoidance — Mutual agreement norms come under CAG scanner K. R. Srivats
New Delhi , May 9 THE mutual agreement procedures (MAP), which taxpayers opt for to resolve disputes arising from double taxation avoidance agreements (DTAAs), have come in for close scrutiny of the Comptroller and Auditor-General of India (CAG). A CAG report tabled in Parliament has indicated certain deficiencies and inconsistencies in MAP that may prove detrimental to the interests of the revenue. The CAG has said that the option given to the assessee for accepting or rejecting the resolution has rendered the dispute resolution mechanism "totally ineffective," as the assessee would still have the option of taking up the case under normal appellate channels in spite of the resolution by competent authorities being in favour of revenue. The report has also highlighted the absence of coordination between the departmental officers and the appellate authorities. It has noted that appellate authorities had taken contrary decisions in certain cases where the competent authorities of other States agreed that certain streams of income were taxable in India. "This could have been avoided by better coordination amongst various authorities in the department, which would have prevented loss of revenue," the CAG report said. It also pointed out a revenue procedure of the Inland Revenue Service (IRS) of the US that specifically provided for coordination between the appellate authorities and IRS. The CAG report held that the competent authority in the US would not, without the consent of the appellate authorities, accept or continue to consider a taxpayer's request for assistance if the matter is already agitated in the courts. "Further, in the case of simultaneous process under MAP and appeal, the concerned representatives would consult each other so that the terms of resolution and the principles and facts upon which it is based are compatible with the position that the competent authority intends to present to the foreign competent authority with respect to the issue. However, no such procedure has been adopted in India," the CAG report said. The CAG report also highlighted that there are no instructions on the action to be taken by the assessing officer when the case is being simultaneously processed under MAP and appeal. Except in the case of the US and the UK, there are no instructions to obtain bank guarantee to safeguard the interest of the revenue for disputed demands. MAP is an additional mechanism for resolving tax disputes and usually given effect to, notwithstanding any time limits, under the domestic law of the Contracting States. Under MAP, a taxpayer can approach the competent authority of the contracting State of which he is a resident and where he feels that the assessment to be made or the order passed is not in accordance with the terms of the DTAA.
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