The Hindu Business Line : Indo-US taxation pact benefit extended to Indian entities

New Delhi, Nov. 3 In a boost to the mutual agreement procedure (MAP) process between India and the US, the Finance Ministry has agreed not to resort to collection of outstanding direct taxes from Indian entities during the pendency of a MAP invoked by a US resident.

The MAP process is used to resolve the disputes in the application of double taxation avoidance agreements (DTAA) between countries.

Hitherto, under the Indo-US DTAA, the benefit of keeping in abeyance the collection of taxes during the pendency of a MAP, invoked by a US resident, was available only to the US entity. The Competent Authorities of India and the US had entered into a memorandum of understanding some years back, which provided for such a benefit to US resident entity that had invoked a MAP.

The Central Board of Direct Taxes (CBDT) has now extended this MoU benefit on suspension of collection during MAP to Indian entities as well, official sources said.

Indian tax authorities would now keep the enforcement of collection of outstanding taxes in abeyance in respect of Indian taxpayer after obtaining confirmation regarding pendency of MAP and on receipt of a bank guarantee.

“The latest stance will be helpful as there were instances where the MoU benefit was sought to be denied at India in respect of the demands raised as a result of transfer pricing adjustments made in the hands of the Indian entity for which the US resident invoked the MAP option,” Mr Samir Gandhi, Tax Partner, Deloitte Haskins & Sells, told Business Line.

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