CBDT amends rule for speedy resolution of tax disputes under treaties

Change in rule 44G of MAP calls for mutually resolution of tax disputes as agreement between India and the other nation, within 24 months

The Central Board of Direct Taxes (CBDT) has amended a rule to settle disputes expeditiously under the mutual agreement procedure (MAP), which is a dispute resolution process under tax treaties. It has also revised form 34F, which is used to make an application to invoke the MAP.

The direct tax board has amended rule 44G of MAP in this regard. The amended rule states that the competent authority in India will endeavour to arrive at a mutually agreeable resolution of tax disputes, in accordance with the agreement between the country and others, within an average of 24 months.

The amended rule further states that once a resolution is arrived at, the assessee concerned should communicate his acceptance or non-acceptance within 30 days of receiving the communication.

Upon acceptance, the assessee will withdraw any appeal filed in this regard and pay the tax determined by the assessing officer.

The amended rule requires the competent authority in India to call for relevant records from the income tax authorities, assessee in the country, and also understand the action taken by authorities that are not in accordance with the terms of the agreements between New Delhi and that country.

The revised form 34F seeks details of remedy sought along with documentary evidence, in addition to assessee-specific information contained in the earlier form.

MAP is an alternative dispute resolution process under the tax treaties. Under it, competent authorities of respective countries enter into discussions to resolve the dispute, which has arisen due to any action of a tax authority not in accordance with the treaty.

Sudin Sabnis, director at Nangia Andersen, said: “The indicative timeframe of an average 24 months to resolve the dispute under MAP would encourage taxpayers to hope for a speedy dispute resolution mechanism.”

Amit Maheshwari, tax partner at AKM Global, said the MAP proceedings are increasingly becoming popular with MNCs, even as the time taken to complete them is an issue. 

“Post this amendment, MAP will increasingly be used by MNCs to resolve contentious issues.”