New Delhi: India and the US have resolved over 100 cases of tax disputes involving Rs 5,000 crore under the Mutual Agreement Procedure (MAP) and have finalised the terms and conditions of the first bilateral Advance Pricing Agreement (APA), an official statement said on Thursday.
The bilateral meeting between India and the US to discuss the tax issues was held in Washington D.C. in the last week of October, 2016.
“During the meeting, 66 MAP cases relating to transfer pricing issues and 42 MAP cases relating to treaty interpretation issues were agreed to be resolved successfully. The total amount that was locked up in dispute in these cases is approximately Rs 5,000 crore and these cases were related to assessment years ranging from AY 1999-2000 to AY 2011-12,” the Finance Ministry said in the statement.
“The discussions in the meeting were focussed on resolving MAP cases pending for a long time and to achieve significant developments in bilateral APA process,” the statement said.
“The resolved cases pertain to various issues like transfer pricing adjustments made to the international transactions in the nature of payment of royalty, payment of management fees, cost contribution arrangements, engineering design services, contract R&D services, investment advisory services, marketing support services, software development services, IT enabled services etc.,” it said.
Treaty interpretative issues in the nature of presence of Permanent Establishment (PE) in India and profit attribution to such PEs, disputes pertaining to royalty income v/s business income of foreign companies, etc. were also discussed, the ministry added.
During the meeting, the competent authorities of India and the US also finalised the terms and conditions of the first ever bilateral APA between the two countries.
Though India started its bilateral APA process with the US by accepting applications from the Indian taxpayers from FY 2012-13, the US started the process only in February 2016 by accepting applications from US taxpayers.
Within a short span of eight months, the agreement has been reached, the ministry said.
“The speedy resolution of cases and agreement on bilateral APA due to effective mechanism of development of mutual trust and cooperation between the competent authorities of two countries would be a positive factor in creating conducive atmosphere for investments and business by US companies in India,” it said.