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Answering queries
Mutual Agreement
Mutual Agreement
Procedure Procedure
- Demystified
 What is Mutual Agreement Procedure (MAP)?
What are the key benefits of pursuing MAP?
What kind of issues can be taken for resolution under
MAP?
Who can apply for assistance of Competent
Authorities under MAP?
What is the time limitation for filing of MAP?
Considering that, pursuant to Finance (No. 2) Act,
2009, the Assessing Officer would first issue the
draft Assessment Order in cases involving transfer
pricing adjustment and foreign companies; can an
application for assistance of Competent Authorities
under MAP be made?
Does the taxpayer have to exhaust the appeal options
available under the domestic litigation route to apply
for assistance under MAP?
Can a taxpayer participate in the negotiation process
between the Competent Authorities?
How soon the taxpayer can expect the outcome under
MAP?
Is the outcome under MAP binding on the taxpayer
and the Revenue?
Can outcome under MAP for a year be applied even
for subsequent years?
Can a resolution under MAP be treated as an Arm’s
Length Price?
What is the procedure for withdrawal of domestic
appeal in case the settlement under MAP is accepted?

2 PwC Mutual Agreement Procedure 3

 What is Mutual Agreement
Procedure (MAP)?

MAP is an alternative available to taxpay- • The main benefit of pursuing MAP is

ers for resolving disputes giving rise to elimination of double taxation (either
double taxation whether juridical or juridical or economic). It is very rare
economic in nature. that a case under MAP is not resolved.
The agreement for avoidance of double • Also, cases involving certain
taxation between the countries would jurisdictions (US, UK and Denmark),
give authorization for assistance of the Indian authorities have entered
Competent Authorities in the respective into an agreement under which the
jurisdiction under MAP. In the context taxpayer can choose to provide a
of OECD Model Convention for the bank guarantee for the outstanding
Avoidance of Double Taxation, Article tax demand. In such cases, the tax
25 provide for assistance of Competent demand would not be pursued by the
Authorities under MAP. tax authorities until disposal of the
MAP application.
• The MAP resolution, once accepted,
eliminates the need for protracted
litigation.

What are the key benefits

of pursuing MAP?

4 PwC Mutual Agreement Procedure 5

 What kind of issues can
be taken for resolution The taxpayer of the country having to
bear the incidence of double taxation
under MAP?
can apply for assistance of Competent
Authorities under MAP to resolve the
issue of such double taxation.
Generally, the issues giving rise to E.g.: ABC Co Ltd is an Indian subsidiary
double taxation (either juridical of ABC Inc in US. ABC Co Ltd provides
or economic) are submitted by the contract software development services
taxpayers for resolution under MAP. to ABC Inc and is compensated on a ‘cost
Some of the instances giving rise to plus’ basis for the contractual services.
double taxation are: During a Financial Year the international
transaction of ABC Co Ltd were
• Adjustment arising from Transfer
scrutinized by the Transfer Pricing Officer
Pricing assessment
in India and an upward adjustment
• Issues relating to existence of to income was made. The upward
Permanent Establishment adjustment to the income, due to higher
• Characterisation of income transfer price, in the hands of ABC Co Ltd
would give rise to double taxation to ABC
• Attribution of profits to Permanent Inc., US. In such cases, under the India
Establishment - US Tax Convention, ABC Inc can apply
for assistance of Competent Authorities
under MAP to resolve such incidence of
double taxation.

Who can apply for

assistance of Competent
Authorities under MAP?

6 PwC Mutual Agreement Procedure 7

 What is the time limit
for filing of MAP?
The language generally used in the tax
Conventions allow the taxpayers to apply
for MAP even in anticipation of a dispute
giving rise to double taxation. Technically,
The time limitation for filing an application for MAP one can file a MAP application upon receipt
is governed by the respective Treaty for Avoidance of of the draft Assessment Order. However,
Double Taxation entered into between the countries. from a practical perspective, the Competent
Generally, the time limit ranges between two to three Authority might not begin the negotiation
years from the date of the notice giving rise to double process until the final Assessment Oder
taxation. Based on our experience, the date of has been issued as the tax demand would
order of the original Assessment would be reckoned only crystallize upon issuance of the final
for computation of time limitation for filing an Assessment Order.
application for assistance of Competent Authorities
under MAP.
Certain Conventions for Avoidance of Double Considering that, pursuant
Taxation between the countries provide for three to Finance (No. 2) Act,
years from the date of receipt of first notice giving 2009, the Assessing Officer
rise to double taxation. (E.g., Convention between
India – Australia, Convention between India – China,
would first issue the draft
Convention between India – Germany etc.) Assessment Order in
In cases where the Convention for Avoidance of cases involving transfer
Double Taxation does not provide for time limit pricing adjustment and
the domestic tax provision on time limit has to be foreign companies; can an
looked into for filing an application for assistance application for assistance
of Competent Authorities under MAP. E.g., the
Convention for Avoidance of Double Taxation
of Competent Authorities
between India and UK does not provide time limit under MAP be made?
for filing for assistance under MAP. However, the UK
domestic regulation provides a time limit of six years
from the end of the relevant financial year to which
adjustment relates.
8 PwC Mutual Agreement Procedure 9
 Can a taxpayer participate
in the negotiation process
between the Competent
Authorities?

The negotiation process between the

Competent Authorities of countries
under MAP, are generally a ‘closed door’
event. Thus, the taxpayer would not
have access to and cannot participate
in the negotiation process between the
Competent Authorities.
Taxpayers can work with the Competent
Authorities to explain their own case
Option of resolution under MAP is an and positions prior to the negotiation
additional dispute resolution option meetings between the Competent
available to the taxpayer. It can be Authorities.
pursued simultaneously with the dispute
resolution options available under
domestic regulation.

Does the taxpayer have to

exhaust the appeal options
available under the domestic
litigation route to apply for
assistance under MAP?

10 PwC Mutual Agreement Procedure 11

 Is the outcome under MAP
binding on the taxpayer
and the Revenue?

Under the Indian tax Conventions While the taxpayers have the option
(entered into with other countries) of either accepting or rejecting the
there is no timeline for disposal of resolution arrived at under MAP,
application for assistance of Competent should the taxpayer opt to accept the
Authorities under MAP. Based on our MAP resolution, it will be binding on
experience, the resolution under MAP the Revenue for that international
can be expected within a period of two transaction and for that Assessment Year.
years from the filing of an application.
Rule 44H (4) of the Indian Income Tax
Rules, 1962 provide that the Assessing
Officer shall, within 90 days of receipt of
the resolution by the Chief Commissioner
or Director General of Income Tax, give
effect to the resolution provided:
• The taxpayer gives his acceptance to
the resolution arrived at under MAP;
and
• Withdraw the appeal filed under the
domestic litigation provisions
How soon the taxpayer
can expect the outcome
under MAP?

12 PwC Mutual Agreement Procedure 13

 Can a resolution under
MAP be treated as an
Arm’s Length Price?

The resolutions under MAP are for the

particular issues and the Assessment
Years covered in the application for The resolution arrived at by the
assistance of Competent Authorities Competent Authorities under MAP
under MAP. Thus, strictly speaking, the are based on the negotiation with
resolution under MAP for one year cannot the objective of settlement of issues.
be applied for the subsequent year. The negotiated settlement cannot be
considered as an Arm’s Length Price
That said, the principle agreed upon for
which needs to be based on principles of
one year is likely to be followed in MAP
Transfer Pricing.
proceedings for the subsequent years
should the taxpayer choose to apply
for MAP for the those years. However,
since the MAP resolution is in the nature
of settlement between two Competent
authorities, it cannot be used as a basis
for supporting arm’s length nature under
the domestic litigation process.

Can outcome under MAP

for a year be applied even
for subsequent years?

14 PwC Mutual Agreement Procedure 15

 Notes

If the taxpayer accepts the resolution

arrived at under MAP, a letter indicating
the acceptance of resolution under
MAP, and withdrawal of appeal (to the
extent of the issues covered under the
MAP resolution) need to be made to
the Assessing Officer and the Appellate
Authorities before whom an appeal is
filed under domestic litigation provisions.

What is the procedure for

withdrawal of domestic
appeal in case the
settlement under MAP is
accepted?

16 PwC Mutual Agreement Procedure 17

About PwC

PwC firms provide industry-focused Complementing our depth of industry

assurance, tax and advisory services to expertise and breadth of skills is
enhance value for their clients. More our sound knowledge of the local
than 161,000 people in 154 countries business environment in India. We
in firms across the PwC network share are committed to working with our
their thinking, experience and solutions clients in India and beyond to deliver
to develop fresh perspectives and the solutions that help them take on
practical advice. See pwc.com for more the challenges of the ever-changing
information. business environment.
At PwC, we push ourselves - and our The Indian firm has offices in
clients - to think harder, to understand Ahmedabad, Bangalore, Bhubaneshwar,
the consequences of every action and to Chennai, Delhi NCR, Hyderabad,
consider new perspectives. Our goal is Kolkata, Mumbai and Pune.
to deliver a distinctive experience to our
clients and people around the world.
Contributors
In India, PwC (www.pwc.com/India)
Kunj Vaidya
offers a comprehensive portfolio of Associate Director
Advisory and Tax & Regulatory services; E-mail: kunj.vaidya@in.pwc.com
each, in turn, presents a basket of finely Tele:+91-991661 6611
defined deliverables. Network firms of
Umesh Rao
PwC in India also provide services in Manager
Assurance as per the relevant rules and E-mail: umesh.rao@in.pwc.com
regulations in India. Tele: +91-9886255120
 Contacts
Other Transfer Pricing Contacts (Partners)

Ahmedabad
President Plaza, 1st Floor,
Shyamal Mukherjee Plot No. 36
Joint Leader - TRS Opposite Muktidham Derasar,
Direct: +91 (124) 3306000 Thaltej Cross Road
Mobile: +91 9810057587 S.G. Highway, Ahmedabad 380054
Email: shyamal.mukherjee@in.pwc.com Tele:+91 79 30917000
PricewaterhouseCoopers Private Limited Dhaivat Anjaria
Building No. 10, Tower – C, 17th Floor, Email:dhaivat.anjaria@in.pwc.com
DLF Cyber City,
Gurgaon -122 002 India Bangalore/Hyderabad/Chennai
6th Floor, Millenia Tower ‘D’,
Ketan Dalal 1 & 2, Murphy Road
Joint Leader - TRS Ulsoor, Bangalore 560 008
Telephone: + 91 (22) 3306000 Ph: +91 80 40796000
Mobile: + 91 98200 39516
Email: ketan.dalal@in.pwc.com Indraneel R Chaudhury
Email: indraneel.r.chaudhury@in.pwc.com
PricewaterhouseCoopers Private Limited
Rakesh Mishra
PwC House, Plot 18/A, Guru Nanak
Email: rakesh.mishra@in.pwc.com
Road, Bandra (W),
Mumbai - 400 050 India Mumbai
PwC House, Plot No. 18/A
Rahul K. Mitra Guru Nanak Road (Station Road)
Country Leader - Transfer Pricing Bandra (West), Mumbai 400 050
Mobile: + 91 9830055281 Tele: +91 22 66891000
Email: rahul.k.mitra@in.pwc.com
PricewaterhouseCoopers Private Limited Sanjay Tolia
Building No. 10, Tower – C, Email: sanjay.tolia@in.pwc.com
17th & 18th Floor Dhaivat Anjaria
DLF Cyber City, Gurgaon 122 002 Email: dhaivat.anjaria@in.pwc.com
Bipin Pawar
Tele:+91 (124) 3306000
Email: bipin.pawar@in.pwc.com
Munjal Almoula
Email: munjal.almoula@in.pwc.com

20 PwC Mutual Agreement Procedure 21

 Delhi NCR
Building No. 10, Tower – C,
17th & 18th Floor
DLF Cyber City, Gurgaon 122 002
Tele: +91 124 3306000
Tarun Arora
Email: arora.tarun@in.pwc.com

Pune
GF-02, Tower C
Panchshil Tech Park
Don Bosco School Road
Yerwada, Pune - 411 006
Tele:+91 20 41004444
Dinesh Supekar
Email:dinesh.supekar@in.pwc.com

22 PwC Mutual Agreement Procedure 23

www.pwc.com/india

This report does not constitute professional advice. The information in this report has been
obtained or derived from sources believed by PricewaterhouseCoopers Private Limited
(PwCPL) to be reliable but PwCPL does not represent that this information is accurate
or complete. Any opinions or estimates contained in this report represent the judgment
of PwCPL at this time and are subject to change without notice. Readers of this report
are advised to seek their own professional advice before taking any course of action or
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report in respect of the information contained within it or for any decisions readers may
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© 2011 PricewaterhouseCoopers Private Limited. All rights reserved. In this document,

“PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in
India), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL),
each member firm of which is a separate legal entity.

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