Washington, DC: The meeting of the bilateral competent authority for Mutual Agreement Procedure (MAP) and Advance Pricing Agreement (APA) between India and the US was held in Washington, DC, 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), etc.
The treaty interpretative issues in the nature of the presence of permanent establishment in India and profit attribution to such PEs, disputes pertaining to royalty income versus business income of foreign companies, etc were resolved, too.
Further, during the meeting, the two sides reached an agreement on the terms and conditions of the first-ever bilateral APA involving India and the US within a short span of 8 months. Though India had started its bilateral APA process with the US by accepting applications from the Indian taxpayers from FY 2012-13, the US started its bilateral process with India not before February 2016 by way of accepting applications from US taxpayers.
The speedy resolution of cases and agreement on bilateral APA due to an effective mechanism of development of mutual trust and cooperation between the two countries will be a positive factor in creating a conducive atmosphere for investments and business by American companies in India.