1

TAX DISPUTE RESOLUTION UNDER

MAP: INDIAN PERSPECTIVE

-ARPIT GUPTA, IIIRD YEAR STUDENT,

HIDAYATULLAH NATIONAL LAW UNIVERSITY
 2
WHAT IS MAP?

 Mutual Agreement Procedure (MAP) is an alternate mechanism for

resolution of international tax dispute provided by the treatise,
irrespective of remedies provided by domestic law.
 A non-conventional mode of dispute settlement which is used to
address the grievances of the tax payers.
 In a global economy, various countries enter into BITs and MLIs.
 In interpretation of said treaties, dispute arise and the treatise
provide for the settlement of the same.
 It is also known as ‘Competent Authority Procedure’ as it entails
resolution of dispute through the intervention of Competent
Authorities of each contracting party.
 3
MAP FRAMEWORK AND EVOLUTION
 Most incisive ADR tool in cross border dispute resolution.
 Manual for Effective Exchange of Information (MEMAP), 2007.
 Article 25 of OECD and UN model conventions provide for MAP.
 Post BEPS, the international tax policy landscape has changed
dramatically.
 OECD’s action plan on Base Erosion and Profit Shifting was published
in 2013.
 Elaboration of Article 25 of OECD Model Convention.

Continued....
 4
 Introduction of clause 5 to article 25 of OECD Model, making
arbitration mandatory.
 After the introduction of clause 25(5) to the Article 25, a strong debate
was witnessed.
 MAP proposes mutual settlement of disputes but making a clause
mandatory was seen as a hindrance.
 India being a non-member of OECD did not have to provide and purport
to the obligation of them.
 In BRICS countries as well the condition of map settlement was not on a
significant rise.
 Exclusion of various dispute to be dealt with under map by the domestic
laws of India.
 5

INDIA’S POSITION AND EXPERIENCE

 Indian Domestic laws allow Indian government to lay down procedure
for MAP proceeding under section 295(2)(h) of Income Tax Act, 1961.
 The procedure has been given in Rule 44G and Rule 44H of Income Tax
Rules, 1962.
 In addition to the aforementioned provisions, MAP is governed by the
provisions of DTAA entered into by India with other contracting State.
 6

Number of cases
Number of cases
Cases filed in 2016 Cases settled in 2016 pending at the end of
pending before 2016
2016

622 78 55 645

FIGURE:1 INDIA’S MAP INVENTORY 2016

 7
ADVANTAGES OF MAP
 Remedy under MAP is available irrespective of remedy under domestic
law.
 Domestic Appeal option is still available if no acceptable resolution.
 MAP decision is not binding on the taxpayer unless accepted.
 Resolves issue by Competent Authority of the two countries. No scope
of double taxation.
 Decision of Competent Authority is binding on tax officer.
 Time effective as it has a time span of 2-3 years in which the dispute is
to be settled.
 DISADVANTAGES OF MAP 8

MAP has not been successful globally and its efficacy has been questioned
for following reasons:
 It places no obligation on the competent authority to arrive at an
agreement.
 It does not impose a time limit in which the agreement is to be
completed.
 Procedural inadequacy in the framework and increase in the volume of
cases. Resultantly a considerable delay in the conclusion of maps.
 It has been accused of being non-transparent and giving limited access
and rights to the taxpayer as the taxpayer is not involved directly.
 A tussle between the domestic law and the settlement under maps.
 9

REASONS FOR NOT ADOPTING MAP

Numerous countries do not intend to adopt the mandatory arbitration clause
after the 2008 amendment for the following reasons:
 Loss of sovereignty.
 Confidentiality and transparency.
 Time and money.
 Lack of experience on talent building in developing countries.
 Enforceability of arbitral awards.
 10
BEPS ACTION PLAN 14
 An attempt to improve MAP framework and make the dispute
resolution mechanism more effective.
 For achieving the said goal action plan 14 was adopted in June, 2012.
 Aimed to address the lack of consensus among countries relating to
mandatory arbitration provision.
 It came up with the concept of:
• Minimum practices
• Best practices
 It required transparency regarding implementation of ‘minimum
standard’ under AP 14.

Continued......
 11
 The minimum standard of Action Plan 14 are:
• To see MAP is implemented fully and in good faith.
• To ensure timely resolution of treaty related dispute.
• To ensure that taxpayers that meet the requirement of Article 25 have
access to MAP.
11 Best Practices were prescribed.
 Applicability of the mandatory arbitration was aimed to be restricted
to a particular variety of cases.
 28 states committed to introduce mandatory arbitration. However,
India has still not accepted to adopt the same.
 12
PROSPECTIVE SOLUTIONS

Even though MAP is not very effective but some

solutions which could make it more efficacious are:
 Provide for possibility of using non-binding
supplementary methods.
 Ensuring that administrative process promotes the
prevention and resolution of treaty related dispute.
 Ensuring that the taxpayer can access MAP when
eligible.
 Ensuring that cases are resolved once they are in
MAP.