CBDT resolves Rs 5,000-cr tax dispute with foreign cos under MAP

New Delhi: The tax department has resolved disputes involving Rs 5,000 crore with foreign companies in sectors like software and consultancy under the MAP scheme in past two years, a development that could provide comfort to overseas investors over taxation issues.

"Since April 1, 2014, till date, the CBDT has resolved 180 cases under Mutual Agreement Procedure (MAP). The total amount of income locked up in dispute in these cases is approximately Rs 5,000 crore," the Finance Ministry said in a statement.

As per Central Board of Direct Taxes (CBDT), the statement said, the tax cases have been resolved with companies based in countries like the US, Japan, the UK and China.

"Disputes resolved under MAP shall provide the much needed comfort to the foreign investor coming into India," Nangia & Co Managing Partner Rakesh Nangia said.

Under the Double Taxation Avoidance Agreement (DTAA), MAP is an alternative tax dispute resolution mechanism available to authorities and foreign investors.

"Its use to resolve disputes has provided comfort to foreign investors and also reduced the number of cases under litigation. This is one of the actions taken by CBDT to ensure a fair and judicious dispute resolution regime to encourage foreign investment," said the statement.

The resolved cases pertain to sectors like software, IT enabled, manufacturing and consultancy services, among others, it said.

Nangia said: "Reviving the slack investment environment in India was seen as a milestone for the government boasting of a pro-business approach... We need to think smart when it comes to attempting to solve disputes".

Tax treaties signed by India with various countries contain an article to relieve taxpayers from double taxation through an MAP. Internationally, the MAP is an important mechanism to resolve tax disputes between countries.

The MAP programme is led by one or more competent authorities designated by the signatory countries to resolve tax disputes under the provisions of each treaty.

"In the last two years, increased focus on MAP has resulted in resolution of large number of disputes relating to double taxation," the statement said.