Tax Dept prescribes 2-year window to resolve disputes through MAP

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.

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 Board amended 44G dealing with application and procedure for giving effect to MAP agreement and revised Form 34F with respect to making application to the competent authority for invoking MAP. “The competent authority in India shall endeavour 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 notification said.

To expedite process

Sudin Sabnis, Director at Nangia Andersen LLP, said the indicative time-frame of an average 24 months to resolve the dispute under MAP highlights the new rules that will expedite the dispute resolution mechanism. This is also in line with Action 14 of the BEPS Project prescribing a standard to endeavour to resolve MAP cases within two years. The potential involvement of the taxpayer in the process reassures the taxpayer that his grievance and submission are well heeded. The revised Form 34F now seeks to include actions of authorities which are not in accordance with the terms of the agreements as well as details of remedy, along with documentary evidence.

According to notification dated May 6, if a resolution is so arrived, the same shall be communicated to the assessee, who shall communicate his acceptance or non-acceptance within 30 days. Upon acceptance of the resolution, the assessee shall withdraw any appeal filed in this regard and pay the tax determined by the assessing officer (AO) after giving effect to the resolution. With regard to the issues contained in Form No. 34F, the amended rule requires the competent authority in India to call for relevant records from tax officers/assessee in India and understand the actions taken by the tax department that are not in accordance with the terms of the agreements between India and the other country or specified territory.

Here, notification defines ‘competent authority in India’ as an officer authorised by the Centre for the purposes of discharging the functions as such.

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