THE
Bilateral Competent Authority Mutual Agreement Procedure (MAP) / Advance Pricing
Agreement (APA) meeting between India and USA was held in Washington DC, USA
during the last week of October, 2016. 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.
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 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 (both BPO and KPO services), etc. and
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.
Further, during the meeting, the two Competent Authorities reached an
agreement on the terms and conditions of the first ever Bilateral APA involving
India and USA. Though India started its Bilateral APA process with the USA by
accepting applications from the Indian taxpayers from FY 2012-13, the USA
started its Bilateral Process with India only in February 2016 by way of
accepting applications from US taxpayers. Within a short span of 8 months, the
agreement has been reached upon in the first ever Bilateral APA involving India
and USA.
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 really be a positive factor in creating a
conducive atmosphere for investments and business by US Companies in India.
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