DTAA: CBDT issues norms for alternative tax dispute resolution mechanism

Our Bureau | | Updated on: Aug 07, 2020

The Central Board of Direct Taxes (CBDT) has issued a comprehensive mutual acceptance procedure (MAP) guidance for the benefit of taxpayers, tax practitioners, tax authorities, Chartered Accountants of India and of treaty partners.

This 17-page guidance comes in the wake of the recommendations of the Action 14 final report of the Base Erosion and Profit Splitting (BEPS) project of the OECD and G20 countries. This report had recommended that all countries that implement the BEPS package of measures must publish comprehensive MAP guidance.

A Mutual Agreement Procedure (MAP) is an alternative tax dispute resolution mechanism available to the taxpayers under the Double Taxation Avoidance Agreements (DTAAs) for resolving disputes giving rise to double taxation or taxation not in accordance with DTAAs. MAP can help in relieving double taxation either fully or partially.

Almost all DTAAs entered into by India have the MAP Article and it provides an additional dispute resolution mechanism to taxpayers in addition to those available under the domestic laws of India. A taxpayer can request for assistance under MAP regardless of the remedies provided under the Indian domestic law.

MAP enables the competent authorities (CAs) of India to engage with the CAs of other treaty partners and is a process which facilitates discussions and negotiations between both treaty partners as they endeavour to resolve international tax disputes, which are not in accordance with the relevant DTAAs. At present, India has two CAs for MAP cases and they are senior officers in Department of Revenue in the Finance Ministry. The two CAs of India are independent of the tax authorities who audit taxpayers and take their own decisions.

Meanwhile, the CBDT has in the MAP guidance clarified that if any element of this guidance comes in conflict with the domestic legislation, rules, regulations, instructions and circulars in India or with the DTAAs entered into by India, the provisions of the domestic legislation, circulars and rules, as the case may be, would prevail.

Published on August 07, 2020
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