Rules Amended For Faster Resolution Of MNCs' Tax Disputes Under MAP

The direct tax board has amended income tax rules to resolve mutual agreement procedure (MAP) disputes within a timeframe of 24 months. The move will help in speedy settlement of cases of multinational corporations which have opted for the alternative dispute resolution process.

The Central Board of Direct Taxes (CBDT) has amended Rule 44G dealing with application and procedure for giving effect to MAP and also revised Form 34F with respect to filing an application with the competent authority for invoking MAP.

MAP is an alternative dispute resolution process under the tax treaties. Under it, competent authorities of two countries enter into discussions to resolve tax-related disputes. As many as 600 tax disputes were resolved under MAP between April 2014 and December 31, 2018.

The amended rule also states that if a resolution is arrived at, the same will be communicated to the assessee, who will communicate his acceptance or non-acceptance within 30 days. Upon acceptance of the resolution, the assessee will withdraw any appeal filed in this regard and pay the tax determined by the assessing officer.

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AKM Global partner Amit Maheshwari said MAP proceedings are increasingly becoming popular with multinational corporations (MNCs) although the time taken to conclude them is an issue and this was recognised in the recently released peer review report.

"The competent authority has to now endeavour to complete it in the recommended two-year period for settlement of MAP disputes. Post this amendment, with India not going in for mandatory binding arbitration, MAP will increasingly be used by MNCs to resolve contentious issues," Maheshwari added.

Nangia Andersen LLP Director Sudin Sabnis said MAP is aimed at bringing in certainty through an alternative dispute resolution mechanism.

"The indicative timeframe of average 24 months to resolve disputes under MAP is a highlight of the new rules which would encourage taxpayers to hope for a speedy dispute resolution mechanism. This is also in line with Action 14 of the BEPS Project prescribing a standard to endeavour to resolve MAP cases in 24 months," Sabnis said.