Mutual Agreements Procedure (MAP) is a model or mechanism available to taxpayers to resolve disputes that have arisen due to double taxation. When two countries enter into an agreement to avoid double taxation, it gives a clear pathway to the concerned authorities under MAP in those particular jurisdictions. Article 25 of the OECD Model Convention for the Avoidance of Double Taxation talks about assistance of Competent Authorities under MAP.
The foremost benefit of MAP is avoidance of double taxation. It is very rare that a case under MAP is not resolved. Study report states that many tax-related disputes have been resolved between April, 2014 and December, 2018 with the MAP. The MAP resolution, once accepted, eliminates the need for unnecessary litigation.
AMENDMENT IN MAP PROCEDURE – RULE 44G
Prior to the amendment, Rule 44G of the Income Tax Rules, 1961 (the Rules), which deals with the application & procedure for giving effect to MAP agreement, provided only for the invocation of MAP i.e. any assessee aggrieved by the action of tax administrative of any foreign country, which attracts the provision of tax, which are not in accordance with tax convention/ tax treaties may make an application in Form No. 34F for invoking the MAP.
The Central Board of Direct Tax (CBDT) vide notification no 23/2020/F.No. 370142/31/2019-TPL dated 06.05.2020 has amended Rule 44G of the Rules and revised the Form 34F with respect to making application to Competent Authority for invoking MAP. The amendment in rule 44G now states:
- The Competent Authority in India shall endeavor 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 a specified average time period of 24 months.