1 / 48

Sheetal Shah

Institute of Chartered Accountant’s of India Authority for Advance Ruling (AAR) Mutual Agreement Procedure (MAP) CA Rajan Vora 9 th August 2013. Sheetal Shah. Outline . Authority for Advance Rulings (AAR) Overview Key benefits of advance rulings Procedure for applying AAR – Scope

mac
Download Presentation

Sheetal Shah

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Institute of Chartered Accountant’s of India Authority for Advance Ruling (AAR) Mutual Agreement Procedure (MAP) CA RajanVora 9th August 2013 Sheetal Shah

  2. Outline • Authority for Advance Rulings (AAR) • Overview • Key benefits of advance rulings • Procedure for applying • AAR – Scope • Maintainability of application • Hearing on pronouncement of ruling • Binding nature of ruling • Withdrawal and revocation of ruling • Appeal against the ruling • AAR (Procedure) Rules, 1996 • Important rulings

  3. Overview • The Authority for Advance Rulings (‘AAR’) is an independent quasi-judicial body, which is set up to consider international tax issues arising from proposed or existing transactions. • The body was conceptualized as a mechanism to provide, certainty on an expeditious basis to non-residents, with respect to their Indian tax obligations by pronouncing rulings quickly. • AAR rulings are binding only on the parties involved. However, since its inception, the AAR has contributed significantly to the texture and depth of Indian international tax jurisprudence by its consideration of evolving issues of international tax. • Advance rulings instill a sense of confidence in foreign investors as it helps them plan their business affairs in an efficient manner keeping in mind the tax implications in India.

  4. Key Benefits of Advance Ruling • Significantly faster dispute resolution process as compared to the normal litigation process • Advance ruling take approx 12-15 months, as compared to substantial time involved even at the second-level appellate tribunal level Time taken : 7-12 years Writ / Special Leave Petition Approx 12 mths Supreme Court High Court/ Supreme Court High Court Advance Ruling Time taken : 12-15 months ITAT CIT (A)/ DRP Authority for Advance Rulings Assessing Officer Standard Appeal Process Advance Ruling

  5. Overview Composition of Bench The AAR comprises of three members: • Chairman, who is a retired judge of the Supreme Court; • Member from the Indian Revenue Service, who is qualified to be a member of the CBDT; and • Member from the Indian Legal Service who is, or is qualified to be, an Additional Secretary to the Government of India • Current bench of the AAR • Chairman - Hon’ble Justice ArijitPasayat • Member (Revenue) - Mr. T B C Rozara • However, the Chairman alone could also constitute a valid AAR bench

  6. Advance Ruling • An application can be made before the AAR by - • Tax liability arising from a transaction which has been undertaken / proposed to be undertaken by the non-resident Non-Residents • Tax liability of a non- resident arising from a transaction undertaken / proposed to be undertaken with the resident Residents • Determination in respect of an issue relating to the computation of income which is pending before any income tax authority or the Appellate Tribunal • COD is not required for PSU for advance ruling as there is no dispute between applicant and revenue Public Sector Companies • Determination/ decision whether an arrangement which is proposed to be undertaken by any person is an impermissible avoidance arrangement as referred to in Chp X-A or not . GAAR to be effective from 1.4.2015 Non-resident/ resident

  7. Procedure Checklist… • Application for Advance Ruling should be made in – • Form No. 34C – in case of non-resident applicant • Form No. 34D – in case of resident applicant • Form No. 34E – in case of resident applicant (notified by Central Government) • No. of copies of the application – • 6 + 1 copies – if the taxpayer has a jurisdictional commissioner • 7 + 1 copies – if the taxpayer doest not have a jurisdictional commissioner (On a safe side, it is always better to have 9 copies executed in original) • Filing Fees– • A Filing fees of INR 10,000/- is payable (by means of an account payee demand draft in favor of ‘Authority for Advance Rulings’ payable at New Delhi • Paper size – • There is no restriction on the type and size of paper. The application can be printed and filed on a regular A4 size paper

  8. Procedure Checklist (Contd.) • Signing of the Application • The application and annexure, in case of a company should be signed by the Managing Director or Director • In case if Managing Director / Director is not able to sign, the application/annexure should be signed by an person duly authorised in that behalf • The Power of Attorney authorising the signatories is to be attached along with the application. • If the Power of Attorney is executed by a non-resident, the same should be duly apostilled • Documents • The documents attached alongwith the Application need to be duly certified / apostilled as appropriately required • Translation of documents • If the documents are in a language other than English, the same should be translated in English / Hindi and properly verified.

  9. Application Application to be filed in prescribed form along with filing fees Details of questions proposed and applicant’s analysis to be provided Applicant permitted to withdraw application within 30 days Procedure on filing Commissioner (CIT) • Application forwarded to the jurisdictional CIT • Where applicant is not assessed to tax,CBDT to designate a CIT within two weeks • CIT to provide comments on the application * • AAR can call for tax records from the CIT, where required Examination • AAR examines the allowability of the application • AAR may admit or reject the application • Applicant to be given a reasonable opportunity to be heard before rejection * Whether the action of CIT calling for additional information from the Applicant by issuing notice u/s.133(6) or by carrying out survey/ search for the relevant information valid?

  10. Hearing AAR can call for additional information, where necessary Additional facts/ questions can be admitted at the AAR’s discretion AAR to hear applicant as well as the CIT Default in appearance by the CIT/applicant could result in an ex-parte order Procedure on filing (Contd.) Ruling • AAR to endeavor to pronounce a ruling within six months (recommendatory) • Ruling can be modified where there is a change in law or facts • Rectification of order possible in the event of a mistake apparent on record Appeal • Writ petition filed before the High Court • Special Leave Petition (SLP) filed before the Supreme Court* • Writ / SLP can be filed either by the applicant or the tax authorities Modification / rectification not possible after ruling has been given effect to * If there is a change of Law with retrospective effect , application by the Applicant or revenue has to be made to AAR

  11. Advance Ruling - Scope • Residential Status – Non-resident, when can apply? • Previous year i.e. the financial year immediately preceding the financial year in which the application is made that has to be considered for purposes of determining the maintainability of an application for advance ruling. • Generally, applicants may raise any question which relates to tax liability - • Both ‘questions of law’ as well as ‘questions of fact’ can be raised before the AAR • Questions can pertain to both, concluded transactions as well as anticipated transactions • Hypothetical questions can not be raised before AAR

  12. Advance Ruling - Scope • Questions on which advance rulings can be sought? • The advance ruling is to be given on questions specified in relation to a transaction by the applicant. The question must relate to the applicant itself and not to any other person. • Illustration: • Where the question sought to be raised relates not to the applicant, who is a non-resident company, but to its resident Indian subsidiary the application is liable to be rejected. • However, a foreign company can ask for a ruling on questions • regarding its tax liability on the income derived by it from an Indian trust and as to whether the trust would be taxable under section 164 or section 161 on which would depend the assessment of the foreign company.

  13. Advance Ruling – Maintainability of application • Maintainability of the application before the AAR – Section 245R(2) • Authority shall not allow the application where question raised in the application – • Is “already pending” before any income tax authority, Tribunal or any Court; except resident notified by CG – PSU • Involves determination of fair market value of any property; or • relates to a transaction, which is designed prima facie for avoidance of income tax

  14. Advance Ruling – Maintainability of application • Significance of the word ‘already pending” • When is a ‘question’ said to be pending? What is the stage at which • it can be said that a question is said to be pending? • a. Can a question be said to be pending when a return of income is filed by the applicant before filing of application and hence entire assessment is open before the Tax Authority? • b. After filing the return of income, intimation u/s 143(1) is received with or without further tax payable/ refundable and no assessment u/s 143(3) is made. In such a case, does intimation u/s 143(1) amounts to ‘pendency of question’? • c. Can a question be said to be pending where the assessment proceedings are pending but the particular question/issue has not been raised therein? In other words, is a question said to be pending only when that question is pending before the income-tax authorities and not simply because the entire • assessment proceedings are pending.

  15. Advance Ruling – Maintainability of application Significance of the word ‘already pending” d. If intimation u/s 143(1) or order u/s 143(3) is passed and if the period for issue of notice u/s 148/ 263 has not expired? Does it mean that since there is a probability of assessment/ revision being made under such provisions, the ‘question is pending’ before the Income tax authorities? e. After an assessment order is received, the Assessee has 30 days of filing an appeal before the CIT(A). If the Assessee files an application before the AAR before the expiry of 30 days, and then files an appeal against the assessment, is the application maintainable which is filed during the vacuum period of 30 days?

  16. Advance Ruling – Maintainability of application • Significance of the word ‘already pending” - Recent judicial updates • Whether the question on which the ruling is sought is maintainable, if the applicant had filed tax returns before filing application for advance ruling and whether the same can be considered as issue pending before Income Tax Authorities in terms of proviso Sec 245R? • Net App B.V. (Delhi High Court) [W.P.(C) 3959/2012] dt: 14.08.2012 • Upon a return of income being filed, the matter is “pending“, in the sense that the AO has the right to take such steps, including issuance of notice. • The rationale for the bar in the Proviso to s. 245R(2) is that if the applicant wishes to plan its affairs and transactions in advance, it is free to do but once it proceeds to file a return, the AAR’s jurisdiction to entertain the application for advance ruling is taken away, because the AO would then be seized of the matter, and would possess a multitude of statutory powers to examine and rule on the return. • The fact that the AAR followed a different practice in the past, is irrelevant because there is no estoppel against a statute.

  17. Advance Ruling – Maintainability of application Significance of the word ‘already pending” - Judicial updates Earlier rulings delivered on this issue:

  18. Advance Ruling – Maintainability of application Significance of the word ‘already pending” – Judicial updates Earlier rulings delivered on this issue:

  19. Advance Ruling – Maintainability of application Significance of the word ‘already pending” – Judicial updates

  20. Advance Ruling – Maintainability of application • Significance of the word ‘already pending” • Whether a subsidiary company’s AAR application is admissible where the holding company’s case is pending before Tribunal? • Yes, refer decision of Gujarat High Court in case of GSPL India Transco Ltd [ TS – 632-HC-2012 (Guj)] • Whether pendency of proceedings or order passed under section 201, as a consequence of failure to comply with the requirements of section 195, can stand in way of the Authority to give an advance ruling under section 245R(4)? • No, refer Groupe Industrial Marcel Dassault [340 ITR 353], BurmahControl Plc [305 ITR 375], Partly, SEPCO III Electric Power Construction Corpn [340 ITR 225] • Whether a ruling can be declined on the ground that the amalgamation proceedings are pending under the Companies Act? • No, refer Star Television Entertainment [321 ITR 1] • 5) Where no litigation is pending in case of payee, application filed by payer is ,maintainable

  21. Advance Ruling – Maintainability of application • Transaction or an issue which is designed prima facie for avoidance of income-tax • Depends upon the facts of each case. • Useful reference can be made to the following rulings: • A [343 ITR 455] • XYZ Re, [220 ITR 377] (AAR)] • Groupe Industrial Marcel Dassault [340 ITR 353] • ABC International Inc [241 CTR (AAR) 289] • Goodyear Tire & Rubber [334 ITR 69] • Star Television Entertainment [321 ITR 1] • Canoro Resources Ltd [313 ITR 2] • Determination of Arm’s Length Price in a Transfer Pricing scenario typically outside the purview of an advance ruling

  22. Advance Ruling – Maintainability of application • Recently, Bombay High Court in case of Mahindra BT [Writ Petition No 2632 of 2012 dated 25 July 2013] • Background • Mahindra BT (Mauritiius Co) had moved an application seeking a ruling from the AAR regarding the taxability of the sale of Indian Company’s shares to AT&T USA. • The said ruling was admitted under section 245R(2) by AAR. • Ruling of AAR u/s 245R(4) [210 taxman 638] • It noted that this transaction is in circumvention of SEBI Guidelines. • It held that when a transaction is entered into by circumventing a provision, rule or guideline enacted or issued in public interest, that transaction has to be looked at from the angle of public interest sought to be subserved and the consequence of that transaction on public interest. • Even outside the proviso to Section 245R(2) of the Act, this Authority has a discretion to refuse a ruling in an appropriate case. Hence, AAR under its discretion, refused to rule on the application, citing it as an act intended to circumvent a guideline issued in public interest.

  23. Advance Ruling – Maintainability of application • Aggrieved by the above, the applicant filed a Writ Petition before the Bombay High Court • Ruling of Bombay High Court • No contravention by Tech Mahindra of SEBI guidelines, full disclosure made in red herring prospectus, as evidenced by SEBI letter to Income tax Department • Discretionary power of AAR to refuse a ruling cannot be arbitrary or based on mere suspicion of illegality but can be exercised only where fraud or illegality is ex-facie evident or established in some proceedings • In these circumstances, the authority is not correct in refusing to give a ruling at the time of final hearing in the absence of any fresh material, merely on the basis of the suspicion. • Hence, the matter is set aside and AAR is directed to give a ruling on merits of the case. • Regarding department’s contention that applicant can move to AAR for modification/rectification of order under Rule 18/19 of the AAR (Procedure) Rules, 1996. • On this aspect, the HC rejected the department contention and held that under the present facts no application for modification or rectification under Rule 18 or 19 of the Advance Ruling Rules would lie.

  24. Advance Ruling – Maintainability of application • As Rule 19 also presupposes that the order to be rectified is an order on which a ruling is rendered. Admittedly no ruling has been rendered by the impugned order. Therefore, rectification application would also not lie. • However, the HC has left the issue open on the aspect that, whether the Authority after having admitted the questions can refuse to give a ruling on the question of law formulated at the final hearing without there being any change in facts or circumstances and whether an Authority being a creature of the statue can refuse to rule on the question raised before it even if the same is not hit by the proviso under Section 245R(2) of the Act.

  25. Advance Ruling – hearing and pronouncement of the ruling • Post admission stages • Once the application is admitted, an order under section 245R(2) is issued i.e. admission order. • A notice for final hearing is issued for giving an opportunity of being heard to the applicant. • Final hearing takes place • Pronouncement of ruling within 6 months. However, it is made clear that the time limit of six months for pronouncing advance ruling is recommendatory and not mandatory and an advance ruling given after the expiry of six months is not invalid as being beyond the said period. • Publishing* the ruling on the website.

  26. Advance Ruling – Binding Nature of the ruling The ruling pronounced by the authority is binding on both parties before it. “245S: Applicability of Advance Ruling: The advance ruling pronounced by the Authority under section 245R shall be binding only: (a) on the applicant who had sought it; (b) in respect of the transaction in relation to which the ruling had been sought; and (c) on the Commissioner, and the income-tax authorities subordinate to him, in respect of the applicant and the said transaction.” The advance ruling so pronounced continues to be binding unless there is a change in law or facts on the basis of which the advance ruling was pronounced. Although, the ruling pronounced by AAR is binding in respect of that transaction, both on applicant and Tax Authorities, however it has persuasive value for others.

  27. Advance Ruling – Withdrawal and Revocation of the ruling • Withdrawal of application - Section 245Q(3) • Within 30 days from the date of filing of a valid application complete in all respects according to the Act and Rules in the office of the Authority. • The limit of 30 days is not to be construed in a strict sense, as one may ask for withdrawal after the expiry of 30 days or before the final hearing is concluded. • However, in such cases withdrawal of the application is at the discretion of the Authority and depends on the facts of each case. • Advance ruling to be void in certain circumstances – Section 245T • Where the Authority finds, on a representation made to it by the Commissioner of Income-tax or otherwise, that an advance ruling pronounced by it has been obtained by the applicant by fraud or misrepresentation of facts. • In such a situation all the provisions of the Income-tax Act shall apply as if such advance ruling had never been made. The applicants are advised to ensure that there is full and true disclosure of all material facts while seeking ruling from the Authority.

  28. Advance Ruling – Appeal against the ruling • No provision under the Act for appealing against the ruling of AAR • In order to ensure the degree of certainty, it was specified that the rulings would be non-appealable in nature. • However, parties may opt to exercise their constitutional rights of reconsideration by approaching the Supreme Court under the SLP route under Article 136 of the Constitution of India, and in certain situations, by approaching a High Court by filing a writ petition in terms of Article 226 and 227 of the Constitution. • Recent ruling of Supreme Court (SC) regarding appealability against the Rulings of AAR - in case of Columbia Sportswear Company vs. Director of Income Tax, Bangalore dated 30 July 2012 [SLP (C)No. 31543 of 2011] • Question before the SC • Whether an advance ruling pronounced by the Authority for Advance Rulings (‘AAR’) can be challenged before the High Court (‘HC’) under Article 226/ 227 of the Constitution of India (‘the Constitution’) or before the SC under Article 136 of the Constitution?

  29. Advance Ruling – Appeal against the ruling • Decision of the SC • AAR is not a Court and it is a body exercising judicial power conferred under the Income Tax Act, 1961 and accordingly, is a ‘Tribunal’ within the meaning of Articles 136 and 226/ 227 of the Constitution. • The fact that the ruling pronounced by the AAR is "binding" does not affect the jurisdiction of the Court under Article 136 or under Articles 226 and 227 of the Constitution to entertain a challenge to the ruling. • Further, if the Special Leave Petition (‘SLP’) raises “substantial question of general importance” or “a similar question is already pending before the SC for a decision” or good grounds are made or put up, the SC would entertain a SLP, directly against an order of the Authority and not otherwise. • Writ Petition against AAR ruling to be heard "directly" by division bench of High Courts and to be decided by Courts as "expeditiously as possible“ This ruling has affirmed the view expressed by Delhi High Court that ‘AAR is Tribunal’ in case of UAE Exchange Centre [ 313 ITR 94 ]

  30. Advance Ruling – AAR Procedure Rules, 1996 Certain Important rules Rule 11 - Submission of additional facts before the Authority Discretion of the authority to permit or require the applicant to submit such additional facts as may be necessary to enable it to pronounce its advance ruling. Rule 19 - Rectification of mistakes The Authority may, with a view to rectifying any mistake apparent from the record, mend any order passed by it before the ruling pronounced by the Authority has been given effect to by the Assessing Officer. Such amendment may be made suomotu or when the mistake is brought to its notice by the applicant or the Commissioner, but only after allowing the applicant and the Commissioner reasonable opportunity of being heard.

  31. Advance Ruling – AAR Procedure Rules, 1996 • Scope of rectification power of AAR • Recently, AAR in case of CTCI Overseas Corporation Ltd [AAR No 854 of 2009 dated 31 May 2013, has explained the scope of rectification power of AAR • Background: • A Hong Kong company (FCo) entered into a consortium agreement with an Indian company to execute a project in India. As per the contract, FCo was responsible for offshore supplies and services. FCo approached the AAR to determine the taxability in India of the income earned from offshore supplies. • It was claimed that since offshore supply took place outside of India, no part of income from offshore supplies was liable to tax in India. • The AAR in the original Ruling [342 ITR 217, dated 1 February 2012] seems to conclude that the consortium constituted AOP through which FCo had business connection and that Fco accordingly triggered tax liability in India under s.9(1)(i) in absence of treaty protection. • However, no part of income was held chargeable, as no operations were carried out in India.

  32. Advance Ruling – AAR Procedure Rules, 1996 • Rectification Petition by the Tax Authority • The Tax Authority filed rectification application to AAR under Rule 19 of Authority for Advance Rulings (Procedure) Rules, 1996 (Rules) against original ruling contending that once the consortium is held to be giving rise to AOP, individual members cannot be assessed to tax. • Conclusion of AAR in original ruling that FCo was not liable to pay tax in India was contended to be a mistake apparent from record. • Recall order by AAR • After hearing parties in its recall order [76 DTR 282, dated 27 August 2012], the AAR observed that, the conclusion that offshore supplies are not taxable in India is inconsistent with the finding’ of AAR that the assessable entity in India was AOP; • The members thereof cannot be assessable entities. Accordingly, the AAR directed for reopening of that part of the Ruling which held that offshore supplies were not liable to tax in India. The original application of FCo itself was directed to be posted for fresh hearing on the question of taxability of offshore supplies.

  33. Advance Ruling – AAR Procedure Rules, 1996 • Final order of AAR • After final hearing, the AAR disposed of the proceedings by concluding as follows: • Jurisdiction of AAR is confined to questions on which the Ruling is sought. The issues raised before AAR for Ruling can be reframed for greater clarity and convenience. • Under rectification application, it is not permissible to reframe the questions or issues already dealt with in original Ruling. Also, no further questions can be added in rectification petition to raise issues for the first time. • AAR does not have jurisdiction to decide new questions which were not originally formulated or adjudicated. Reopening of the earlier issues is not permissible. • The AAR cannot give a Ruling on the issue that the applicant is not liable to tax and somebody else is liable to be taxed.

  34. Advance Ruling – AAR Procedure Rules, 1996 Certain Important rules Rule 25 – Publication of order Such of the orders of the Authority, as the Chairman deems fit for publication in any authoritative report or the press, may be released for such publication on such terms and conditions as the Chairman may specify. Taxpayers may apply to the AAR for not publishing the Ruling due to client sensitivity/ confidentiality. However, the decision of whether to publish or not to publish lies with the Chairman.

  35. Advance Ruling – Important Rulings • Taxability of direct or Indirect transfer of shares of an Indian Company by a non resident company • Favourable • M/S.Sanofi Pasteur Holding SA, [Andhra Pradesh High Court] 257 CTR 401 • Armstrong World Mauritius Multiconsult Ltd [252 CTR 260] • SmithklineBeecham Port Louis Ltd. [24 taxmann.com 153] • Castleton Inv.Ltd. [(No.999 of 2010) dt 14 August 2012] • Moody’s Analytics Inc. (AAR Nos. 1186 to 1189 of 2011) • Ardex Investments Mauritius [ 63 DTR 257] • Deere & Company [337 ITR 277] • D.B. Zwirn Mauritius [333 ITR 32] • VNU International [334 ITR 56] • Dana Corporation [321 ITR 178] • Adverse • Orient Green Power Pte Ltd [ AAR 973 of 2010 dt 14 August 2012] • Z [249 CTR 225] • A [343 ITR 455]

  36. Advance Ruling – Recent Important Rulings • Taxability of payments made to group companies under a secondment agreement - Deputation of expatriates • Favourable • Cholamandalam Ms General Insurance Co. Ltd.[309 ITR 356] • Bangalore Tribunal decision in Ariba Technologies (India) Pvt. Ltd [TS-258-ITAT-2012(Bang)] and Abbey Business Services (India) P. Ltd [TS-532-ITAT-2012(Bang)] • Adverse • Centrica India Offshore Private Ltd [249 CTR 11] • Target Corporation India Ltd [24 taxman.com 152] • Verizon Data Services India Ltd [337 ITR 192], set aside by High Court Madras HC [WP No 14921 of 2011 DT 14 Nov 2011]

  37. Advance Ruling – Recent Important Rulings • Taxability of payments received from use or sale of/ access to software • Favourable • Dassault Systems K.K. [ 322 ITR 125] • Factset Research Systems Inc., [317 ITR 169] • Bharati AXA General Insurance Co. Ltd [326 ITR 477] • Adverse • Acclerys KK, [68 DTR (AAR) 206] • Citrix Systems Asia Pacific Pty Limited [68 DTR (AAR) 185] • Millennium IT Software Ltd [338 ITR 391] • Lanka Hydraulic Institute Ltd [337 ITR 47] - Partly

  38. Advance Ruling – Recent Important Rulings • Taxability of payments made / received for availing or providing general business support services, IT Services, Inspection verfication services. • Favourable • Shell Technology India Pvt Ltd [246 CTR 158] • R.R. Donnelley India Outsource (P) Ltd [335 ITR 122] • BharatiAxa General Insurance Co. Ltd[326 ITR 477] • Ernst & Young (P) Ltd [323 ITR 184] • Against • Mersen India Pvt Ltd [A.A.R. No.1074 of 2010] dt: 16 April 2012 • ThoughtbuzzPvt Ltd [250 CTR 1] • XYZ [AAR Nos. 886 to 911, 913 to 924, 927, 929 and 930 of 2010] 19 March 2012 - Partly • Shell India Markets (P) Ltd. [67 DTR (AAR) 1] • Perfetti Van Melle Holding B.V [65 DTR (AAR) 12]

  39. Advance Ruling – Recent Important Rulings • Applicability of section 115JB to foreign companies • Favourable • Timken Company [326 ITR 193] • Praxair Pacific Ltd [326 ITR 276 ] • Against • Castleton Inv.Ltd. [(No.999 of 2010) dt 14 August 2012] • SmithklineBeecham Port Louis Ltd. [24 taxmann.com 153] • Moody’s Analytics Inc. (AAR Nos. 1186 to 1189 of 2011)

  40. Further information can be obtained from • AAR website - www.aar.gov.in • Relevant sections governing the provisions of AAR – 245N to 245V of the Income Tax Act, 1961 • Authority for Advance Rulings (Procedure) Rules, 1996 • Notes provided in the respective forms of Application • BCAS Publication - Advance Rulings Law and Procedures – A Compilation • Handbook available on the AAR website

  41. Outline • Mutual Agreement Procedure - MAP • Overview • Mechanism of MAP • Categories of dispute covered

  42. MAP • Mechanism to resolve disputes relating to taxation not in accordance with a tax treaty • Resolution of disputes through Competent Authorities (‘CA’) of contracting states • India CA: Officer authorized by Central Government, Recently, CBDT appointed AkhileshRanjan as new Indian Competent Authority • Other Countries CA: Ministry of Finance or Apex tax authority or Tax Commissioners or Directors as their representatives • Disputes involve cases of double taxation (juridical and economic) as well as inconsistencies in the interpretation and application of a convention • Remedy under Mutual Agreement Procedures (‘MAP’) available irrespective of remedies available under the domestic tax law

  43. Mechanism under MAP Tax dispute • Application could be made where taxation not in accordance with tax treaty has occurred • CA of home country has discretion to accept or reject the application • Tax payer could make representations before CA Applicant approaches the CA in country of residence (home country) Dispute capable of unilateral resolution No Yes Should be resolved by CA of home country Should be resolved by consultation

  44. Categories of disputes covered Specific case provisions General interpretative provisions Cases not provided for in DTAA • Arise where a person who is resident of a contracting state considers that the actions of one or both the contracting states results or will result in taxation not in accordance with the provisions of a DTAA • Includes issues relating to interpretation of terms under treaty • General in nature and could be initiated suo-moto by CA • Provides for elimination of double taxation in cases not provided in DTAA

  45. MAP Procedure – An overview Admission • Application admitted at CA’s discretion Consultation • Host country CA called upon for dispute resolution - Where issue cannot be resolved unilaterally by home country CA, MAP request (Application) Tax payer to make a MAP request to the home country CA Solution • MAP solution issued by CA of home country • - Implementation of solution Negotiation • CAs initiate negotiation and attempt to reach an amicable resolution Representation • Tax payer may be requested to make written or oral representations Process typically requires 2 – 3 years for completion

  46. Indian statutory regime

  47. MAP vs Appeal Process – Comparative Overview

  48. Thank You

More Related