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If the facts are similar, settlement reached under Mutual agreement procedure (MAP) for one assessment year also applies to other assessment years .
Facts:
The Taxpayer, a US company, was engaged in the business of providing strategic consultancy services. I Co was part of Taxpayer’s group and was set up to provide similar services to customers in India.
For rendering services in India, I Co availed following assistance from the Taxpayer.
• Advice on matters such as prevailing practices in various geographical areas, industries, etc. as may be relevant to the specific client assignment;
• Provision of information/data as may be specifically requested by I Co in areas such as population, GDP, inflation, production capacities, regulations, policy framework, etc., and
• Other advisory support as may be required by I Co for the purposes of executing the client assignments.
On similar facts, but for a different assessment year, Government of India and Government of USA had agreed under a Mutual Agreement procedure (MAP) that the services rendered by the Taxpayer would not fall in the category of fee for included services (FIS), and hence such fees will not be taxable in India.
For the year under reference, The Tax Authority held that services were chargeable in India as FIS and the MAP proceeding relating to a different assessment year is not applicable for the relevant assessment year.
Held:
India –USA DTAA provides the Taxpayers to approach the competent authorities of its resident State, where an action of the other State results in taxation not in accordance with the DTAA. The competent authorities are required to endeavour to resolve the issue through mutual agreement procedure. Any such agreement reached is implemented notwithstanding any time limits or other procedural limitations in the domestic law of the Contracting States. Accordingly, even the Tribunal was bound by the settlement arrived under MAP proceedings. Hence services rendered by the Taxpayer are not taxable in India.
