ONE of the significant steps taken by Central
Board of Direct Taxes(CBDT to boost investment sentiments among MNCs
is the landmark Framework Agreement signed with the Revenue Authorities
of the USA in January, 2015. This agreement was finalised under the Mutual
Agreement Procedure (MAP) provision contained in the India-USA Double
Taxation Avoidance Convention (DTAC). The agreement seeks to resolve
about 200 past transfer pricing disputes between the two countries in
the Information Technology (Software Development) Services [ITS] and
Information Technology enabled Services [ITeS] segments. More than 100
cases have already been resolved and some more are expected to be resolved
before the end of this fiscal.
Prior to resolution of disputes under the Framework Agreement the US bilateral
APA programme was closed to India. The success of the Framework Agreement in
short period of one year has led to the US Revenue Authorities opening up their
bilateral APA programme to India. The USA is expected to begin accepting bilateral
APA applications shortly.
The MAP programmes with other countries like Japan and UK are also
progressing well with regular meetings and resolution of past disputes.
The CBDT is confident that a combination of a robust APA programme and a
streamlined MAP programme would be helpful in creating an environment
of tax certainty and encourage MNCs to do business in India.
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