CBDT stick to resolution order in Cross Border Taxes

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CBDT said that Indian authorities will not move from the resolution order in cross-border tax disputes which are undergoing through mutual agreement procedure(MAP) passed by ITAT. Such MAP cases shall be closed as having been resolved by a domestic remedy. MAP is an alternative tax treaty, under which 2 countries came together to resolve tax-related disputes.

The CBDT has come out with a guidance note on the MAP. Tax disputes of certain characteristics clearly mentioned in IT department would be covered under MAP if they lead in taxation not in accordance with the relevant DTAAs. India shall be given with the extreme privilege to MAP where the Indian tax authorities apply domestic anti-abuse provisions. The CBDT also said that in case of orders of Income Tax Appellate Tribunal (ITAT), the Competent Authorities (CAs) of India shall not move from the orders of the ITAT for the corresponding year where the dispute is decided on merit basis.

It said that since MAP and domestic remedy proceedings can be availed by the taxpayers simultaneously, there could be cases where the ITAT in India passes an order in respect of the same disputes that are also being analysed under MAP. It also said that if the order of the ITAT does not solve the disputes but only sets them aside to be adjudicated afresh, then access to MAP would be provided again after the fresh adjudication by tax authorities.

In May, the government has already amended Income Tax rules to state that Indian authorities would endeavor to resolve disputes under MAP within a timeframe of 24 months, a move aimed at a speedy settlement of cases of MNCs which have opted the alternative dispute resolution process. Nangia & Co LLP Partner Shailesh Kumar said Indian tax authorities have apparently shown their intention to provide a speedy resolution to customers for paying the tax opting for MAP by the appointment of two dedicated offices for taking up MAP applications.

Thus with these instructions ,more taxpayers may be ready to opt for MAP to resolve their  tax disputes in India. The guidelines not only provide for resolution under Bilateral MAP applications, but also Multilateral MAP applications, where a cross border transactions involve more than two tax treaties in a Multinational Enterprise set-up.

AKM Global Tax Partner Amit Maheshwari said the MAP guidance lays down the procedure for accessing MAP, clarification on technical issues, and the implementation process. This would help taxpayers and competent  authorities of India as well as treaty partner countries.

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